U.S. Says Ailing Banks Need $75 Billion

[villager]

Source: NY Times

Federal regulators told the country’s 19 largest banks that they must raise $75 billion in extra capital by November, a more upbeat verdict on the health of the financial system than the industry had feared just two months ago.

Ten of the 19 bank holding companies deemed “too big to fail” by the Obama administration will be required to raise additional capital, according to the results of the government’s stress tests, released late Thursday afternoon. But the 10 banks will have to raise much less capital than some analysts had expected as recently as a few days ago.

Citigroup must raise $5.5 billion in new capital, on top of converting $45 billion in rescue funds into ordinary stock, which would give the United States ownership of 36 percent of Citi.

Bank of America must raise $34 billion, but it is likely to resist achieving all or some of that by converting its $45 billion in bailout money into common stock. Instead, the bank is expected to fill its capital hole by selling off smaller divisions, a stake in China Construction Bank and other asset sales.

The stress tests are aimed at estimating how much each bank would lose if the economic downturn proved even deeper than currently expected. Under the worst-case scenario — an unemployment rate of 10.3 percent, an economic contraction of 3.3 percent this year and a 22 percent further decline in housing prices — the losses by the 19 banks could total $600 billion this year and next, or 9.1 percent of the banks’ total loans, regulators concluded. Losses to the banks’ loan portfolios alone could total $455 billion this year and next.

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Read more: http://www.nytimes.com/2009/05/08/business/08stress.html

[OhioChick]

1. And in a few months, they'll need another 75 Billion. n/t

[villager]

2. of your money -- so they can stay in the business of taking your money...

n/t

[OhioChick]

3. Yep.....pretty screwed up racket. n/t

[avaistheone1]

14. Butttttttttttttttt they are too big to fail.

:puke:

[angstlessk]

4. Thought the stress test was the WORST CASE SCENARIO...hell in my worst case scenario

I need 50,000...only I do not live in the case of the WORST CASE SCENARIO??? WE ARE GIVING OUR CASH...JUST IN CASE? IN CASE OF WHAT...THE CEO CREATES A WORST CASE SCENARIO??? HELL WHY THE FUCK NOT? THEY ARE INSURED..AND WE INSURED THEM!!! :grr:

[Zhade]

5. Sure, it's just money - it's not like it's hard to come by.

I have to remember to buy a truck so I can haul my cash around when I go grocery shopping...

[sallylou666]

7. RIch?

You can afford a truck? You must be rich! Are you a bankster? :silly:

[Lucky Luciano]

6. Keep in mind that much of this money is concentrated in four banks

BAC - $33.9B
GMAC - $11.5B
WFC - $13.7B
C - $5.5B

Citi is converting its preferred to common and will be done with it, BAC - still awaiting what they are going to do - listening to their conference call right now - talking asset sales, converting some preferred shares to common, issuing common stock here and there, etc - much more complicated being so much bigger than all others - just said they may convert TARP preferred shares as a last resort, but does not expect to do that and is not addressing it further. GMAC - Not sure what they will do - probably a BK. WFC is raising $6B in common shares as we speak - I listened to their conference call already and it was bullish - the stock is trading very well in afterhours markets - practically unch-ed around $24.60 - the issuing will price from $20.50 to $22. The way it is trading it will be heavily heavily oversubscribed and will price at $22 - there will eb a lot of pissed off investors putting i for a million shares who might only get 200K shares given the apparent demand based on after hours prices. On the call, they said they would not raise $13.7B in common shares because they do not see the need given that they have cut their dividend, which will save them enough money to cover the balance in several months time. MS also is raising $2B in common equity and selling $3B in notes NOT backed by the FDIC - by not being backed by the FDIC, this will help allow MS to pay back TARP (A good thing, right?).

[2Design]

8. so start paying interest of !8% on savings and they will get plenty of money n/t

[MasonJar]

9. NO more money to banks!!!!!!!!!! If there has to be, it must come out of the

military industrial complex.

[Lucky Luciano]

10. All new money will be private....and some will pay back TARP this year. nt

[Earth_First]

11. Nope.

No more.

[RedCloud]

12. River, eye, blood, sperm and word banks need bailout too.

Spread the taxpayers' love.

[SOS]

13. 15 years of children's health insurance or another Wall Street bailout?

In the United Banks of America, we know who comes first.

[dmosh42]

15. They need more money to buy oil futures......

Since they don't have to tell anyone how they use the money, they can invest in futures and drive up the prices on the fuel markets.