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Bank Stress Test Results: 9 out of 19 Pass

May 7th, 2009

Well the results of the bank stress test are in and according to the results 10 of the largest 19 banks need to raise $75 billion total in order to have a high degree of confidence in surviving the recession. The 3 largest banks needing to raise funds were Bank of America needing $34 billion, Wells Fargo needing $14 billion, and GMAC still needing to raise $12 billion in capital.

banksCitigroup which has been the target of numerous government bailouts is only in need of $5 billion, so it would seem that the bailout program for Citigroup was successful in its mission. The remaining banks that need to raise capital were PNC, Regions Financial, SunTrust, Fifth Third, KeyCorp, and Morgan Stanley.

Federal regulators announced that Goldman Sachs, JPMorgan Chase, American Express, Bank of New York Mellon, Capital One Financial, BB&T, U.S. Bancorp, State Street and MetLife passed the stress test and were not in need of raising any additional captial.

For the banks that didn’t pass the stress test, they have 1 month to submit a plan on how to raise the additional capital and 6 months to carry out their plan. If these banks can’t raise the funds needed to pass the stress test in 6 months, the government will likely convert its preferred stock into common stock for these banks.

Most think that the worst is over for the banking industry with about half of the banks being able to conduct business as usual. I am inclined to agree with this sentiment. What do you think?

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