US Treasury: 10 Of 19 US Banks Need To Raise $75 Billion In Capital
May 07 2009 - 5:31PM
Dow Jones News
Ten of the 19 largest U.S. financial institutions will be
required to raise a combined $75 billion in capital, as the U.S.
government for the first time divided healthy banks from those
which may need help to weather a worsening economy.
U.S. Treasury Secretary Timothy Geithner, in a press conference,
said he was "reasonably confident" the banks could raise the needed
capital. Federal Reserve Chairman Ben Bernanke said the results
should provide "considerable comfort" about the health of the
banking system.
Bank of America Corp. (BAC), Citigroup Inc. (C), Wells Fargo
& Co. (WFC), GMAC LLC and Morgan Stanley (MS) were told they
need to raise capital due to the results of the government's stress
tests. Regions Financial Corp. (RF), Fifth Third Bancorp (FITB),
KeyCorp (KEY), PNC Financial Services Group Inc. (PNC) and SunTrust
Banks (STI) also were told to bolster their reserves.
By contrast, JPMorgan Chase & Co. (JPM), Goldman Sachs Group
Inc. (GS), American Express Co. (AXP), BB&T Corp. (BBT), State
Street Corp. (STT), MetLife Inc. (MET), Bank of New York Mellon
Corp. (BK), US Bancorp (USB) and Capital One Financial Corp. (COF)
don't need to raise additional capital.
Bank of America must raise nearly $34 billion in capital, more
than any of its peers. All 10 banks will need to raise Tier 1
common capital to bolster their reserves.
The Treasury painted a grim picture of the toll of the financial
crisis on the banking system. It said total losses at the 19 banks
due to the crisis that began in mid-2007 could reach $950
billion.
Meanwhile, losses in 2009 and 2010 at the 19 banks could total
$600 billion under the government's scenario of a deepening
economic downturn. Mortgage loans and consumers loans could account
for 70% of the potential losses.
The directives come after the government's weeks-long exercise
testing how the 19 banks would fare under darker economic
scenarios. Bernanke said the tests weren't "tests of solvency."
-By Jessica Holzer, Dow Jones Newswires; 202-862-9228;
jessica.holzer@dowjones.com