If you take a quick trip down memory lane you will recall there was significant debate as to releasing the bank stress test data. When will the government? Should the government? How will they do it?
You get the point.
Anyway, the data is due to be reported this week and the information that is leaking out seems to be a bit disturbing – 10 of the 19 banks will need to raise capital.
The U.S. is expected to direct about 10 of the 19 banks undergoing government stress tests to boost their capital, according to several people familiar with the matter, a move that officials hope will quell fears about the solvency of the financial sector.
The exact number of banks affected remains under discussion. It could include Wells Fargo & Co., Bank of America, Citigroup Inc. and several regional banks. At one point, officials believed as many as 14 banks would need to raise more funds to create a stronger buffer against future losses, these people said, but that number has fallen in recent days.
Looking a bit deeper into the news that is in the press, the really disturbing information starts to find the light of day:
Bank of America Corp(BAC.N) has been deemed to need as much as $34 billion in additional capital, according to the results of a government stress test, a source familiar with the results said on late Tuesday.
Bank of America spokesman Scott Silvestri declined comment
Remember that Bank of America was considered to be surviving institution. While the acquisition of Merrill was significantly more difficult than expected, the government had already provided support due to the situation.
If the information out now is to believed, and Bank of America does need an additional 34B, what does that mean for the financial institutions deemed at risk, such as Citibank? Better yet, what does it mean for the “solid” companies such as J.P. Morgan or Wells Fargo.
The data release date is on 5/7… it will be interesting to see how the market reacts.
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