Stress Tests Look Good, So The Obama Administration Will Wind Down Bank Aid

[ClarkUSA]

Stress tests find that 18 out of the 19 largest banks studied can now absorb losses without collapsing while nine of of 19 are healthy enough to begin repaying taxpayers.

The government signaled yesterday that its financial rescue efforts may have reached their high-water mark, announcing that the much-anticipated "stress tests" of 19 large banks showed that only one, GMAC, was likely to need additional taxpayer aid and that it would begin to unwind assistance for the healthiest firms.

Despite a deepening recession and projections that banks will continue to lose money, the government will require the firms to increase their combined capital by as little as $9.5 billion. The government will require the banks to further strengthen their capacity to absorb losses by adding $74.6 billion to the portion of their capital that comes from common equity. Banks are likely to raise some of that money from investors and some by converting other forms of capital.

The announcement at the Treasury Department yesterday culminated a three-month process designed to show that banks are returning to health after a crisis that left much of theindustry dependent on federal aid... banks continue to hold vast quantities of ill-considered loans and could suffer losses totaling $600 billion over the next 20 months as the borrowers default. But in showing that the banks can absorb those losses, the administration hopes to restore investors' confidence. If banks can start raising money again, they can increase lending to consumers and small businesses, a critical piece in the government's broader strategy for renewing economic growth.

While the banking industry will remain on federal aid for the foreseeable future, officials also said they would now allow some of the healthiest banks to repay the government's initial capital investments. Nine of the 19 banks were found to have sufficient capital reserves.

[phleshdef]

1. Man. If we get a recovery here soon, Obama has cemented a second term all ready.

[ClarkUSA]

2. Bernanke said he feels the recession will be over by year's end.

When folks start spending their stimulus $$ (extra $100/month UI, one-time $250 to 50M retirees, food-stamp boost,
$2700 middle-class tax cut) it should help revive the economy also.

[DrToast]

5. I'll do you one better...

Because this recession was very deep and because the recession won't be over until roughly a year into Obama's Presidency (give or take a few months), it's very likely that the economy will still be humming along for the 2016 Presidential election, which should provide a favorable setting for Dems. The next recession will probably occur in the first term of the next President.

Am I looking too far ahead? Perhaps, but remember this prediction!

[Arkana]

12. The economy was humming along at the end of the last Democrat's term as well.

Remember how that happened?

(And please, for fuck's sake, no snark about HURRR BILL KLINTON'S NO DEMOCRAT HURRR).

[DrToast]

15. No it wasn't...

The economy was teetering on the verge of recession in 2000. The market crashed in March. And GDP in the 3rd quarter was negative.

[CoffeeCat]

3. I hate to see a conspiracy behind every tree...

...but is it possible that Obama understood very well that the banks were stealing from the taxpayers--and those
stress tests were the only way to get them to stop???

I remember that the banks were very upset about being forced to cooperate with the stress tests. They didn't
want to open their books to the public.

Obama made the stress tests a contingency for getting any bailout funds.

The banks had two choices: 1.) Participate in the stress tests and show the American public that they're all insolvent
and in deep do do--because they all failed. This would surely destroy any bank who did this. Their stock price
would be in the toilet. 2.) Participate in the stress tests, and put their best face forward (somewhat fudging the numbers)--but this
would force them to solve their own self-created problems--on their own. This second option impedes these powerful
banks from stealing any more of our money.

I dunno. I think it's possible that this is what happened. If so, then Obama is a damn genius. I doubt McCain would
have required those powerful banks to disclose their finances, nor would he have orchestrated a scenario that made it
impossible for them to beg for taxpayer funds in the future.

Interesante....

[ClarkUSA]

6. We'll never know but the banks sure can't wait to repay their loans.

;)

[Canuckistanian]

14. The banks are now exiting the building yelling "START THE CAR!"

Carrying large bags under their arms.

[ClarkUSA]

16. All banks are repaying their loans plus 5% interest, which is 2% higher than my HELOC terms

I call that a fair return on capital investment for American taxpayers.

[Zynx]

17. The money we won't recover is the AIG bailout money, but that's alright.

We never were going to make money off that.

[depakid]

4. Well, since they're able to charge exhorbitant interest to ordinary folks

while borrowing money for next to nothing- I suppose one can see that as an avenue to increase capitalization -provided that their loan portfolios don't continue crashing at an even greater rate.

One way or another- that's a bailout on the backs of people who can least afford it.

[ClarkUSA]

11. Next week, Pres. Obama will have a NM townhall on reforming credit card practices

You might like to tune in. More here: http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=102x3868918

[high density]

7. So does that mean we won't even see PPIP?

Everybody was whining so loudly about that a couple of months ago.

GMAC is another Cerberus private equity screw-deal, just like Chrysler.

[PBS Poll-435]

8. Most of this we should have knew all along

Instead, people insisted on buying into the doom/gloom of Krugman.

[FrenchieCat]

9. If you can catch the last two Charlie Rose shows......(Wednesday and Thursday)

a lot is explained there!

Sec. Geithner was on Wednesday, and Neel Kashkari was on Thursday.

Tells a lot about what occurred, and why what is being done is the way to go.

Here's where you can see some of either shows! http://www.youtube.com/user/CharlieRose

[PBS Poll-435]

10. Thanks for the link!

:D

[Zynx]

13. This is still a very open question and I say this as someone on balance who has been

far too optimistic. Krugman's concern is not so much that we continue to contract throughout the next three years. His concern is that when we hit bottom that we fail to grow due to a moribund banking system.