Skip to comments.Only One US Bank Fails Fed's Stress Test
Posted on 03/08/2013 9:38:30 AM PST by illiac
The Federal Reserve said 17 of the 18 largest U.S. banks could withstand a deep recession and maintain capital above a regulatory minimum. Only Ally Financial Inc., the auto lender majority-owned by U.S. taxpayers, fell below a 5 percent Tier 1 common ratio, a regulatory minimum and measure of financial strength, according to data released by the central bank in Washington. Morgan Stanley showed a minimum Tier 1 common ratio of 5.7 percent in the test, and Goldman Sachs Group Inc. showed a ratio of 5.8 percent.
The nations largest bank holding companies have continued to improve their ability to withstand an extremely adverse hypothetical economic scenario and are collectively in a much stronger capital position than before the financial crisis, the central bank said in a press release.
Since the 2008-2009 financial crisis, U.S. regulators have tried to minimize the odds of another taxpayer rescue, compelling U.S. banks to retain some earnings and reinforce their buffers against possible losses. With the economy in the fourth year of expansion, banks are benefiting from a housing market rebound, falling mortgage delinquencies and record-low short-term interest rates that boost earnings.
Projected losses for the 18 banks under a scenario of deep recession and peak unemployment of 12.1 percent would total $462 billion over nine quarters, the Fed said. The aggregate Tier 1 common capital ratio would fall from an actual 11.1 percent in the third quarter of 2012 to 7.7 percent in the fourth quarter of 2014. The firms represent about 70 percent of the assets in the U.S. banking system.
(Excerpt) Read more at moneynews.com ...
And Ally Bank is an offshoot of the GM bailout
True....GMAC used to be big in the mortgage business in my area....now closed...
yes that’s it
The banking division was split off around 2008-2009 to become Ally Bank. Interest rates are still better than my credit union, but I've always wondered about its overall strength. Then, as part of the GMAC Mortgage bankruptcy proceedings our mortgage was transferred last month to another servicing company. Unfortunately, that company seems to have trouble getting its act together.
Things are getting flaky these days.
I was looking into CD rates a few years ago and found Ally paid a little more, but then I thought about the GM bailout and didn’t go for it. All these banks can borrow so cheaply from the FED now, pay nothing for savers, and still make a killing on credit customers.