Stress-test results raise questions: Here are answers

Published on USA today, by Kathy Chu, May 8, 2009.

Regulators’ ambitious stress tests of the nation’s 19 largest bank holding companies are finally finished. But the results, while addressing some concerns about the industry’s health, are reviving old questions. And they’re raising new questions.

Q: What’s the significance of the stress tests?

  • A: The stress tests measure banks’ and the industry’s financial health if the economy severely worsens. The results — showing that 10 of the nation’s largest banks will need to raise capital, while nine will not — “will help replace the cloud of uncertainty hanging over our banking system,” Treasury Secretary Timothy Geithner said Thursday.
  • Regulators hope that the more information investors have about banks’ financial conditions, the easier it will be for the industry to raise private capital. This, in turn, will allow banks to resume lending to consumers and small businesses, easing the credit crunch that has afflicted the nation.
  • (STRESS-TEST RESULTS: 10 big banks need $75 billion).

Q: Were the tests strenuous enough? … (full text on USA today).

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