Small Banks May Need More Fed Aid

The Treasury may have to expand its toxic asset programs and repeat stress tests, particularly for smaller banks, a US bailout watchdog panel finds. While larger banks have begun to recover, smaller financial institutions remain exposed to billions in losses from outstanding commercial property loans and are still unable to raise capital, the report concludes.

"A continuing uncertainty is whether the troubled assets that remain on bank balance sheets can again become the trigger for instability," said the Congressional Oversight Panel. It warned that the department must "turn its attention to small banks in crafting solutions to the growing problem of troubled whole loans." (More Treasury Department stories.)