Stress Tests Show Citi And BoA Need To Raise $10B+ Each

Stress Tests Show Citi And BoA Need To Raise $10B+ Each


It’s almost been two months since Geithner announced the details of how the stress tests would go down, and now the government is set to announce the results for a bunch of banks.

Still, the focus is certainly on the top two.

From Financial Times:

Citigroup and Bank of America are working on plans to raise more than $10bn each in fresh capital, even as they launch last-ditch attempts to convince the US government they do not need to bolster their balance sheets.

People close to the situation said Citi, BofA and at least two other lenders will on Monday attempt to convince the Treasury and the Federal Reserve that the findings of “stress tests” into their financial health were too pessimistic.

But with time running out – the government will present the final test results to 19 banks tomorrow with an announcement scheduled for Thursday – both Citi and BofA are looking at how they could raise extra capital.

Preliminary findings have revealed that Citi, which has already been bailed out three times by the authorities, could need an extra $10bn or more if the economy worsens. BofA, which has had $45bn in government aid, was found to need well in excess of $10bn, people familiar with the matter said.

Here’s the thing…Treasury and the Fed may indeed be too pessimistic, but I’d rather have that so the banks are flush with cash than anything close to what we once had.

In other words, maybe these banks don’t know what pessimism is anymore after two decades of irrational optimism that led to the near collapse our entire economy.

I’m just saying…

  • Trescml

    Well given the fiction that is the bank earning statements, it doesn’t surprise me that they would continue that fiction when it comes to the stress tests.