The US Financial institutions aren't collapsing - thats for now...
After the US Federal Reserve, the Office of the Comptroller of the Currency (OCC), and the Federal Deposit Insurance Corporation (FDIC) came out with a report on May 7 2009 saying that the financial institutions might require to raise another $75 billion - the markets jumped because the news wasn't as bad as it was perceived to be.
Among the banks, Bank of America will need an additional capital of $33.9 billion , Wells Fargo around $13.7 billion , GMAC will need about $11.5 billion and Citigroup will need to raise S$5.5bn.
The good news was that JPMorgan Chase, Goldman Sachs, State Street and American Express won't need any additional capital raising
Tom Geithner who is the the US Treasury Secretary commented in his report
This is just a beginning, however. Even with the recent signs of stabilization in economic activity, the economic still faces significant risks and challenges. The cost of credit remains exceptionally high. We have more work to do, and recovery will take time. But we are starting to see some signs of progress toward financial repair, and we will continue to work to expand the availability of credit and improve the impact our new set of credit and lending programs.
The stress results released should provide comfort to investors and the public given that nearly all the banks that were evaluated have Tier 1 capital to absorb the higher losses envisioned under the hypothetical adverse scenario.
Next quarter results should indeed provide a feeling of how effective these stress tests really are.
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