Posted on 04/28/2009 4:04:54 PM PDT by ladyjane
Citi, Bank of America Targeted in Stress Tests
By MARY KANE 4/28/09 8:54 AM
The Wall Street Journal reports today that Citigroup and Bank of America may need to raise more capital, based on recent government stress tests of financial institutions. The identities of troubled banks were supposed to remain confidential, but The Journal cites the usual “people familiar with the situation.” Regulators contend the need for Citi and Bank of America to raise more capital does not mean that either bank is insolvent, according to the article, but in Bank of America’s case in particular, the capital shortfall may total billions of dollars.
Executives at both banks are objecting to the preliminary findings, which emerged from the government’s scrutiny of 19 large financial institutions. The two banks are planning to respond with detailed rebuttals, these people said, with Bank of America’s appeal expected by Tuesday.
The findings suggest that government officials are using the stress tests to send a tough message to struggling banks. Bank of America and Citigroup have been the highest-profile problem children in recent months, but it is unlikely that they are the only banks the Federal Reserve has determined might need more capital.
Regional banks that made a lot of commercial real estate loans also are in trouble, The Journal reports. It looks like the coming battle over the financial system will be about defining the difference between a “stressed” bank and a totally insolvent one — if it even exists.
Clearly the White House is angry at Ken Lewis, the CEO of BoA, and want him out of there. Are they being pressured by the unions?
First the White House made sure the CEO of General Motors was fired and now they're going after Bank of America. The unions have tried for years to make inroads in the banks.
If the unions and the White House succeed, Charlotte will look like Detroit in ten years.
BS. Of course that's what it means, and has meant, for many tens of billions per bailout in each of many bailouts over the past year.
Ken Lewis over-reached with his acquisitions. But, Bank of America would still have been in decent shape despite Countrywide if they hadn’t been strongarmed by Paulson and Bernanke into completing the Merrill Lynch acquisition. They took on a lot of risk, to the shareholders’ detriment. Now we are seeing what a great partner the government is.
>> Regulators contend the need for Citi and Bank of America to raise more capital does not mean that either bank is insolvent, according to the article, but in Bank of America’s case in particular, the capital shortfall may total billions of dollars.
Naaah. They’re not “insolvent”. It’s just that they don’t have enough assets and income to service their mountain of debt without a rich uncle to step in and make their payments for them.
We’re entering the age of Newspeak at warp speed, aren’t we?
I doubt BoA is insolvent. They were solvent enough for BoA to take over Merrill - at least Obama thought they were. Lewis spilled the beans by testifying, under oath, that he was forced by the fed to do it. Obama gets his revenge.
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