CALIFORNIA BUSINESS MINUTE
Results of Stress Test on Banks
05-07-08
Hi, I am Tim Johnson and welcome to the California Business Minute.
Federal Regulators revealed today the outcomes of their ‘stress test‘on 19 of
the major banking institutions in the nation to identify whether they could
withstand whatever recessionary stresses may impact them.
“There are very significant cushions in these institutions today, and all
Americans should be confident that these institutions are going to be viable
institutions going forward,” said Secretary of the Treasury Timothy Geithner
in an interview with PBS television’s Charlie Rose program.
The government appears primarily interested in the banks raising common equity.
This action is seen as the first line of defense against credit losses, ahead
of preferred shares, which are paid out before common stock in a bankruptcy.
This could be accomplished in a number of ways, including raising new capital
from the government or private investors, converting existing preferred shares
into common shares, or selling businesses or assets.
The nineteen banks examined include: American Express, Bank of America,
Bank of N.Y. Mellon, BB&T, Capital One, Citigroup, Fifth Third, GMAC, Goldman
Sachs, JPMorgan Chase, Keycorp, MetLife, Morgan Stanley, PNC Financial Regions
Financial, State Street, SunTrust Banks, U.S. Bancorp and Wells Fargo.
I am Tim Johnson and this has been the California Business Minute.
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