Encouraging Bank Stress Tests Quell Financial Fears

May 5, 2009

(ChattahBox)—With the results of the stress tests conducted on the nation’s banks by the federal Treasury, due out on Thursday, details of the results are already leaking out to the media, suggesting the financial health of our banks is better than previously believed.

The Wall Street Journal is reporting that only 10 out of the 19 banks tested may need to boost their capital with billions of dollars, which is better than previously thought. At the start of the stress tests in February, government officials believed that at least 14 banks would need an infusion of capital.

The Obama administration ordered stress tests for all bank holding companies with more than $100 billion in assets. The fed wanted to ensure that major financial institutions had enough of a cash buffer to survive the recession and continue lending through 2010. Financial institutions were concerned the stress tests would lead to nationalization of financially weak banks, but those fears have not materialized.

Some of the banks identified as potentially needing more capital were, Wells Fargo, Bank of America and Citigroup. Government regulators are confident the targeted banks can raise capital from private investors or by selling assets, without needing funds from the TARP program.

As proof of the confidence in the solvency of the nation’s banks, stock prices of the three banks identified as needing a capital cushion, rose on Wall Street today. Wells Fargo’s stock jumped 24 percent, with Bank of America shares rising 19 percent and Citigroup’s up 7.7 percent. In fact, the stock prices of the three banks have tripled since March, which is a good sign.

Goldman Sachs Group and J.P. Morgan Chase are said to have survived the stress tests, with both banks having a healthy cushion of capital to survive the recession.

The government is making it clear to the banks, that they will not be allowed to fail and government capital is available if needed. Additionally, the government treasury officials are expected to caution the public that banks “failing” the stress tests does not mean they are insolvent.

Government regulators plan to meet with the banks needing capital sometime today and will release the results of the stress tests on Thursday.



Comments

2 Responses to “Encouraging Bank Stress Tests Quell Financial Fears”

  1. Topics about America » Archive » Encouraging Bank Stress Tests Quell Financial Fears | ChattahBox … on May 5th, 2009 1:08 pm

    […] Another fellow blogger placed an interesting blog post on Encouraging Bank Stress Tests Quell Financial Fears | ChattahBox …Here’s a brief overviewWells Fargo’s stock jumped 24 percent, with Bank of America shares rising 19 percent and Citigroup’s up 7.7 percent. In fact, the stock prices of the three banks have tripled since March, which is a good sign. … […]

  2. Topics about Stock » Archive » Encouraging Bank Stress Tests Quell Financial Fears | ChattahBox … on May 5th, 2009 3:24 pm

    […] Another fellow blogger added an interesting post today on Encouraging Bank Stress Tests Quell Financial Fears | ChattahBox …Here’s a small readingAs proof of the confidence in the solvency of the nation’s banks, stock prices of the three banks identified as needing a capital cushion, rose on Wall Street today. Wells Fargo’s stock jumped 24 percent, with Bank of America shares … […]

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