Banks Need at Least $65 Billion in Capital

Discussion in 'Wall St. News' started by ASusilovic, May 7, 2009.

  1. The Federal Reserve directed at least seven of the nation's biggest banks to bolster their capital levels by $65 billion while effectively blessing the stability of six others, marking for the first time a bold line between some of the nation's stronger and weaker banks.

    As a result of the government's two-and-a-half-month examination of the U.S.'s 19 largest financial institutions, at least half a dozen -- J.P. Morgan Chase & Co., Goldman Sachs Group Inc., MetLife Inc., American Express Co., Bank of New York Mellon Corp. and Capital One Financial Corp. -- won't be told to raise additional capital, won't be told to raise additional capital, according to people familiar with the matter.

    By contrast, regulators have told Bank of America Corp. it must take steps to address a roughly $34 billion capital shortfall, the biggest gap among its peers. Wells Fargo & Co. needs to find $13 billion to $15 billion; GMAC LLC, $11.5 billion; Citigroup Inc., $5 billion; and Morgan Stanley, $1.5 billion. Also in need of more capital: Regions Financial Corp. and State Street Corp. of Boston. Results for the remaining six banks couldn't be learned, but analysts and investors expect several of them to face sizable capital holes.

    Financial markets seemed to shrug off news of the capital shortfalls. Stocks of banks under duress rose dramatically and the Dow Jones Industrial Average rose 101.63 points by 4 p.m. trading to close at 8512.28, a four-month high. In Tokyo Thursday morning, stocks were up 4.2%, boosted by financial shares.

    Some investors said the news was less negative than many feared. Others held out the idea that many banks would be able to boost their capital without having to seek fresh government funds. The stress tests -- designed to examine individual banks' ability to withstand future losses -- helped alleviate the near-panic that investors felt at the beginning of the year as many worried some banks might have to be nationalized. One possible impediment to luring back private capital is lingering unease about the tests' rigor. Perhaps adding to such jitters, the Fed backtracked from its early estimates of some banks' losses.

    In addition, it isn't clear what happens to hobbled regional banks that could have a hard time finding extra capital. Many are facing a deluge of bad loans to finance residential and commercial properties.
  2. So extremely bullish I can't even contain myself. I am going to buy every bank in the morning.
  3. S2007S


    This is very bullish, I'm buying every bank this morning, sold every short and inverse etc and going long, I hope this isn't the top and that we could see another 200-300% gain.


    Unlimited gains here I come, freeeee monopoly money for all.


  4. bidask


    if you know that the government will always bail out the banks, then why shouldn't you be buying banks?