Stress Tests: Banks Need to Raise $75 Billion to Stay Afloat


The results of Obama’s stress test on the banks, for which 150 government agencies examined TARP-funded U.S. financial institutions to determine their states of health, are in. The bad news first: 10 of the 19 banks examined will need to raise $75 billion in additional capital to be deemed sufficiently strong to operate under recession conditions: Bank of America needs to raise a whopping $34 billion, Citigroup needs $5.5 billion, etc. (Bank-by-bank breakdown here.) Some institutions, like Morgan Stanley and Wells Fargo, announced even before the government findings were revealed that they would raise capital via new stock offerings.

The (sort of) good news: it could have been worse. The Government originally thought the lenders would need to raise $185 billion.

Treasury Secretary Timothy Geithner has suggested that banks who come up to the stress tests’ snuff will be allowed to pay back their TARP funding from the government and get out from under its onerous conditions. Foes of the stress test think it’s just a con: “These were not designed to gain information from the banks,” says Irrational Doomsday Blog. “They were obviously designed to release a message to the public that the banking sector is stronger than it actually is.”