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Thursday, May 7, 2009

Stress Day for Banks

Items of Interest:

Federal Reserve:
Press Release at 5:00 p.m. EDT -- The results of a comprehensive, forward-looking assessment of the financial conditions of the nation’s 19 largest bank holding companies (BHCs) by the federal bank supervisory agencies were released on Thursday.

The exercise–conducted by the Federal Reserve, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation–was conducted so that supervisors could determine the capital buffers sufficient for the 19 BHCs to withstand losses and sustain lending–even if the economic downturn is more severe than is currently anticipated. In a detailed summary of the results of the Supervisory Capital Assessment Program (SCAP), the supervisors identified the potential losses, resources available to absorb losses, and resulting capital buffer needed for the 19 participating BHCs...

Stress Test Losers: BofA, Wells Fargo, GMAC --
  • Bank of America Corp. needs: $33.9 billion
  • Wells Fargo & Co. needs: $13.7 billion
  • GMAC LLC needs: $11.5 billion
  • Citigroup Inc. needs: $5.5 billion
  • Regions Financial needs: $2.5 billion
  • SunTrust needs: $2.2 billion
  • KeyCorp needs: $1.8 billion
  • Morgan Stanley needs: $1.8 billion
  • Fifth Third needs: $1.1 billion
  • PNC needs: $600 million
  • total requirement: $74.6 billion
Currently no need for additional capital:
  • American Express
  • BB&T
  • Bank of New York Mellon
  • Capital One Financial
  • Goldman Sachs
  • JPMorgan Chase
  • MetLife
  • State Street
  • U.S. Bancorp
Edmund L. Andrews / New York Times:
U.S. Says Ailing Banks Need $75 Billion -- Federal regulators told the country’s 19 largest banks that they must raise $75 billion in extra capital by November, a more upbeat verdict on the health of the financial system than the industry had feared just two months ago.

Ten of the 19 bank holding companies deemed “too big to fail” by the Obama administration will be required to raise additional capital, according to the results of the government’s stress tests, released late Thursday afternoon. But the 10 banks will have to raise much less capital than some analysts had expected as recently as a few days ago...
Tim Geithner / NY Times:
How We Stress Tested the Big Banks -- We have not reached the end of the recession or the financial crisis, but the bank stress tests should advance the process of repairing our financial system and provide a better foundation for recovery.

Noam Scheiber / The New Republic: Why Were Bank Stress Tests Leaked?
Bmaz / Emptywheel: Stressing Teh Kitty
John Cole / Balloon Juice: Also, We'll Be Greeted As Liberators
Frank Partnoy / Blogs and Stories: Geithner's Stress Test Sham

Calculated Risk: Fed Releases Stress Test Results
Robert Reich's Blog: What Will Happen to Banks that Fail the Stress Test?
NY Times: As Investors Circle Ailing Banks, The Fed Sets Limits
gangster government describes Team Obama’s bullying threats against the senior bondholders in the Chrysler bankruptcyLarry Kudlow / Kudlow's Money Politic$:
Gangster Government: An Interview with Tom Lauria -- Hat tip to my friend Michael Barone, who coined the term “gangster government” to describe Team Obama’s bullying threats against the senior bondholders in the Chrysler bankruptcy, where constitutionally backed contract rights have been overturned. It shows the corruptive nature of the whole TARP program and the government’s control along with it. This is corroding the animal spirits of democratic capitalism, which rely on the rule of law...
Larry Kudlow / Kudlow's Money Politic$:
Larry Kudlow Resists Obama's War on Capitalism -- Interview
National Review: You specialize in finding signs of recovery -- “mustard seeds,” as you call them. Did the 6 percent GDP percent drop or any of the other events of this week dent your overall optimism?

Larry Kudlow: No. There are cross currents. The best part of the story is the economic statistics coming out of Washington are looking better...
Paul Kedrosky / Infectious Greed:
The Mustard Seed Problem -- Just to unburden myself of something that has been bothering me, people promoting economic "mustard seeds" need to be a little more careful in their metaphors. Here in southern California mustard is an invasive species, one that was uncommon fifty years ago and is now everywhere, crowding out indigenous plants, like wild flowers...

So, to the extent that people are arguing that we are seeing new non-native species take over markets, and those species are making markets more conflagration-prone, then keep right on with the whole "mustard seed" thing.

Calculated Risk

MishTalk - Mike Shedlock

Paul Krugman - NY Times

The Big Picture - Barry Ritholtz

naked capitalism - Yves Smith

Pragmatic Capitalism

Washington's Blog

Safe Haven

Paper Economy

The Daily Reckoning - Australia