Free Republic

More than five years after the financial crisis struck, the biggest U.S. banks are better able to withstand a severe recession than at any time since the meltdown, the Federal Reserve has determined. Results of the Fed’s annual “stress tests” showed Thursday that all but one of 30 top banks passed muster with sufficient capital buffers to keep them lending through an economic crisis. Only Zions Bancorp fell short. The results showed continued improvement in banks’ financial positions since the 2008 crisis, the Fed said. That built on positive results from last year’s tests. “The industry is stronger and more...

Apparently The European Bank Tests Weren't Too Stressful Tim Iacono July 23, 2010 I’ve yet to do a whole lot of reading on the results of the just concluded European bank stress tests that commercial banks passed (surprise!) with flying colors. Whether or not others have delved into the details or not hasn’t stopped a couple hundred of them from responding to this WSJ poll that clearly comes down on the side of the stress tests being more like an afternoon stroll than anything that would raise one’s blood pressure. When you think about it, like the modern day currencies,...

Rumors Flying That Some Spanish Banks May Have Failed The Stress Test Joe Weisenthal Jul. 23, 2010, 5:30 AM We're going to get several of these reports in the next few hours. This one focuses on Spain, specifically the Cajas -- the regional, non-listed savings banks -- that have been the subject of so much attention. El Pais, via Dealbook, reports that a number will have failed under the scenario of a worsening economy. Remember, it's all about the various scenarios: a worsening economy is just one. Others may include the possibility of a sovereign default. In fact, moreso than...

WASHINGTON (AFP) – US Treasury Secretary Timothy Geithner said Wednesday that the financial system "is starting to heal" as a result of massive efforts to rescue banks and steady the housing market. In a speech to community bankers, Geithner said the adjustment in the financial system has largely been accomplished as a result of government rescue efforts. "The financial system is starting to heal," he said. "Concern about systemic risk has diminished. And overall lending conditions have started to improve." Geithner said this is reflected in easier borrowing conditions for corporate bonds and interbank lending as well as for mortgages,...

Just normal give and take, though. Don't call it lobbying. One reason the final stress test tab for the banks was lower than expected was that the banks persuaded the Fed to drastically reduce its estimate of capital shortfalls. Bank of America saved $20 billion this way. Citigroup saved $30 billion. The other reason was that the regulators ended up using "Tier 1" capital as the solvency metric instead of Tangible Common Equity. According to some estimates, this saved the banks $70 billion. The effectiveness of the outcry from the banks looks bad: Yet another example of wimpy Washington being...

Delays, leaks and high drama. The Stress Tests had Wall Street waiting with bated breath. But did the tests really deserve all the hoopla? Did the fact that the banks 'passed' mean that we can all breath a sigh of relief? In spite of the fact that the Bulls have taken the test results as an 'all clear' for another run up on the markets, I tend to be more skeptical. Why? Because a test isn't a test if you can negotiate your own results. To be honest, the fact that all the banks would pass was a foregone conclusion....

Fed Cut Billions Off Some Initial Capital-Shortfall Estimates; Tempers Flare at Wells The Federal Reserve significantly scaled back the size of the capital hole facing some of the nation's biggest banks shortly before concluding its stress tests, following two weeks of intense bargaining. In addition, according to bank and government officials, the Fed used a different measurement of bank-capital levels than analysts and investors had been expecting, resulting in much smaller capital deficits. The overall reaction to the stress tests, announced Thursday, has been generally positive. But the haggling between the government and the banks shows the sometimes-tense nature of...

The financial world seems upside down to me. On the day it was leaked that Wells Fargo, Citigroup, and Bank of America had failed their stress tests each of their stocks was up. The market was up nearly three percent. That day, the leak said that six banks had failed their stress tests. Today, that number rose to ten and the market was down just slightly.

The big debate about President Obama’s financial rescue plan has centered on whether he’s been right to avoid nationalizing the country’s biggest banks. But there is another, more pressing question about the plan that has received considerably less attention. After the Federal Reserve’s stress tests identify the country’s sickest banks next week, who will bear responsibility for shoring up their balance sheets? Will it be solely the government? Or will the government force institutions that lent money to sick banks in better times — their creditors — to take a hit by forgiving some of the loans? Timothy F. Geithner,...

Do Pres. Obama and Treasury man Geithner want to control the banks, just as they have taken over GM? Will the government assert political direction of the financial system in place of market forces, or in place of the rule of law as enforced by bankruptcy judges? These hot topics have been discussed in a recent Politico story, a Wall Street Journal op-ed by my friend Stuart Varney, and an IBD editorial called “Federal Takeover.” Much of the discussion centers on bank paybacks of TARP money. In particular, banks in Louisiana, New York, Indiana, and California (four in all) have...