The "stress test" results are in. If accurate, they imply that the nation's banks don't need to raise all that much in the way of new, private capital. The amount might be less than $10 billion, almost all of which would need to go to auto-company relative GMAC:
The nation's largest banks collectively need another $75 billion in equity to ride out potential losses due to the recession, according to long awaited government stress tests released this afternoon.
Nine of the 19 banks do not need any new capital at all, including J.P Morgan Chase and Goldman Sachs. Another eight banks can fulfill their capital needs by raising money privately or, if they can't, by converting existing government investments into common stock. That list includes Bank of America, which needs $33.9 billion, and Wells Fargo, which needs $13.7 billion.
That leaves only two firms that must actually raise more cash. GMAC, the auto finance company that is historically tied to General Motors, needs an additional $9.1 billion in new capital. Regions Financial Corp., a regional bank based in Alabama, needs another $400 miliion.
A specific list of the banks that need to raise more capital can be found here. Treasury Secretary Geithner's statement on the matter can be found here..
The results showed that losses at the banks under 'more adverse" economic conditions than most economists anticipate could total $599.2 billion over two years. Mortgage losses present the biggest part of the risk, at $185.5 billion. Trading accounts were the second-largest vulnerability, with potential losses of $99.3 billion.(...)
Banks that need to raise capital under the government's stress tests will have until June 8 to develop a plan and until Nov. 9 to implement it.(...)
The 19 banks in the test hold two-thirds of the assets and more than one-half of the loans in the U.S. banking system, regulators said.
Examiners used an "adverse scenario" of a 3.3 percent decline in gross domestic product this year, and an average unemployment rate of 8.9 percent this year and 10.3 percent in 2010.
Forecasters see a 2.5 percent decline in output this year, and average unemployment rates of 8.9 percent this year and 9.4 percent next year, according to the median estimates in a Bloomberg News survey.
Overall, the stress test results paint a relatively (compared to the overall economic mood) rosy picture of a financial industry that is on the brink of recovery.
I am not going to pretend to know whether or not the tests are just bullshit. What I do know is that they better not just be bullshit, or there will massively negative political consequences for the entire Democratic Party as a result. If it turns out that way more capital is needed than these tests forecast, and the economy doesn't recover very quickly, then the "stress tests" will be viewed as a blatant case of either administration incompetence and / or mendacity. The result will be Democrats losing in droves--probably even those who opposed the bailouts--pushing our congressional majorities back to around 2007-2008 levels.
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