Four large US banks fail stress tests

Yahoo News ^ | 03/14/2012 | Paul Handley

[SeekAndFind]

Citigroup was one of four large US banks that flunked stress tests aimed at seeing how they would hold up in a new economic crisis, Federal Reserve data showed Tuesday. Three others -- Ally, Suntrust and MetLife -- also failed the tests, while 15 other large bank holding companies passed the exercise, the Fed said.

As a group, though, the 19 came through strongly, said the Fed, thanks to pressure for them to boost capital over the past three years as the financial sector digs its way out of the deep 2008-2009 recession. "In fact, despite the significant projected capital declines, 15 of the 19 bank holding companies were estimated to maintain capital ratios above all four of the regulatory minimum levels under the hypothetical stress scenario," the Fed said.

The exercise opened the door for some of the most capital-flush banks to immediately announce new or higher dividend payments to shareholders, after the Fed prevented or limited such payouts by a number of the banks last year following a similar examination. JPMorgan Chase announced a 20 percent dividend hike and a $15 billion share buyback program, while Wells Fargo also sharply boosted its planned dividend.

Bank shares meanwhile surged in the final hour of trade on the US markets after JPMorgan jumped the gun with its announcement that it had passed the tests and would up its dividend.

The Fed had originally planned to release the results on Thursday.

The central bank's test subjected the banks to another theoretical crash of the economy to see how they would hold up: a US recession marked by a 50 percent drop in stock prices, a 21 percent fall in housing prices, and joblessness soaring to 13 percent, all the while being buffeted by an even worse recession in Europe.

[SeekAndFind]

The test saw the 19 together losing $534 billion over nine months.

[the invisib1e hand]

Hello? 15 others passed but of course that’s not news.

[chrisser]

Isn’t Ally essentially some lipstick on GMAC?

[Buckeye McFrog]

we’ve never addressed the original problem, banks that are “too big to fail” and behave as if they are fully aware of this.

[dfwgator]

we’ve never addressed the original problem, banks that are “too big to fail”

If something is "Too Big to Fail", it needs to be broken up, that's why we have Anti-Trust Laws in the first place.

[Buckeye McFrog]

and for a quarter century, every time two big banks merged you had to ask yourself “where are those anti-trust laws?”

[dfwgator]

and for a quarter century, every time two big banks merged you had to ask yourself “where are those anti-trust laws?”

Yep.

Frankly, GM should have been broken up as well, as part of the bailout. If it's "Too Big To Fail", Break 'Em Up!

[Freddd]

19 came through strongly,——

BWAHAHAHAHAHA

Yeah if you hide the ‘toxic assets’. And don’t count the millions of home foreclosures being stalled on purpose. And the coming student loans that’s gonna be defaulted on. Yeah it’s all good, it’s the age of Obama after all. Kick the can down the road til someone else is President.

[R W Reactionairy]

... well “yes” 15 others passed, but the dividing line between pass and fail was set at 5. Not certain what the scores themselves mean, but a s I remember only Melon and State Street were clearly better than 5 and only Aly [the new name for General Motors Acceptance Corp] was clearly worse.

[R W Reactionairy]

... well “yes” 15 others passed, but the dividing line between pass and fail was set at 5. Not certain what the scores themselves mean, but a s I remember only Melon and State Street were clearly better than 5 and only Aly [spelling ? — the new name for General Motors Acceptance Corp] was clearly worse.