'Stress Test' Results May Require Some Banks To Raise Own Money, Upsetting Some Banks

'Stress Test' Results May Require Some Banks To Raise Own Money, Upsetting Some Banks

Look everyone,a wacky sentence: "WASHINGTON — Federal bank regulators plan to release the much-anticipated results of their 'stress tests' on the nation’s 19 biggest banks next Thursday, several days later than they had originally expected, in part because some of the banks continue to disagree with the government’s initial conclusions." You do remember these things -- the banks, the government bailouts, the stress tests, YOUR LIFE, and that thing that ties them all together, the Economy -- right? They're still "big deals" even if they aren't so much in the news, because now the issue of whether or not we should throw a few dumb ex-government lawyers in jail has become ALL THAT MATTERS, while people continue to starve.

So anyway, for a modest distraction, here's what's happening with the government's plan to give arbitrary amounts of money to banks based on empirical data from the future. It looks like some banks would "disagree" with the government's conclusions if, say, those conclusions are "YR BANK IS SHITTY," and the government had to become a majority shareholder.

Senior officials at the Federal Reserve’s regional banks, especially the New York Fed, are expected to be in discussions with bank executives throughout this weekend and into next week, according to government officials and bank executives.

The goal of the tests is to determine how much additional capital each big bank would need if the economic downturn proves to be worse than expected. Many analysts expect that several major institutions, including Citigroup and Bank of America, will be ordered to come up with billions of dollars in additional capital.

Banks that do get such marching orders will be required to submit a capital-raising plan within one month and will have six months to actually raise the money. In practice, the banks will be under pressure to line up the new capital immediately, and several are expected to announce specific plans on the same day that the results are released.

Bank ‘Stress Test’ Results Due Next Thursday [NYT]


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