10 US banks fail stress test, need $75 bnMay 8th, 2009 - 4:57 am ICT by IANS
Washington, May 8 (DPA) Government “stress tests” of the US financial industry found that 10 of the 19 largest banks need a combined $75 billion to weather the continuing recession, US regulators said Thursday.
Treasury Secretary Timothy Geithner said that much of the extra capital could be raised from private investors, and many banks would be able to meet the government’s demands by simply converting preferred shares into common equity.
The capital shortages revealed by the stress test review, which was designed to check whether banks have enough resources to survive another dip in the US economy, were lower than many outside analysts had expected.
Bank of America Corp faces the largest task, needing to raise $33.9 billion in extra capital. That could force the bank to make the government a major stakeholder in exchange for extra support.
Geithner would not rule out making management changes at banks that return to the government for more loans. Bank of America chief executive Ken Lewis is considered the most likely casualty.
Other top banks that will be asked to raise new funds: Citigroup Inc needs $5.5 billion, Wells Fargo & Co needs $13.7 billion , GMAC LLC must raise $11.5 billion, and Morgan Stanley must find $1.8 billion.
The stress tests lie at the centre of President Barack Obama’s effort to nurse the US financial system back to health, which is considered the only means of pulling the US out of a wider economic downturn considered one of the worst since the Great Depression.
Geithner said the results would help markets get a better sense of the state of the US financial system.
“I think there is reassurance in clarity,” he told reporters.
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