Bernanke Says Fed's 'Stress Tests' Show Much Healthier Banks
The Federal Reserve's annual "stress tests" of U.S. banks show an industry that has grown much healthier since the financial crisis, Chairman Ben Bernanke said Monday night.
The Federal Reserve's annual "stress tests" of U.S. banks show an industry that has grown much healthier since the financial crisis, Chairman Ben Bernanke said Monday night.
The Federal Reserve will release the final results of its bank stress tests after Thursday's market close. But preliminary results suggest Goldman could lose $25 billion from bad trades in another financial crisis, more than any other bank tested by the Fed.
Vikram Pandit abruptly stepped down as CEO of Citigroup on Tuesday after steering the bank through the 2008 financial crisis and the choppy years that followed. Also resigning: President and Chief Operating Officer John Havens. Citigroup offered no explanation for the sudden departures.
Recent stress tests on America's big banks reveal that the financial crisis is far from over. While the "too big to fails" are in better shape than they were in 2008, there's still "room for improvement at virtually every firm."
The Federal Reserve plans to stress test six large U.S. banks against a hypothetical market shock, including a deterioration of the European debt crisis, as part of an annual review of bank health. The Fed said it will publish next year the results of the tests for six banks that have large trading operations: Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley and Wells Fargo.
The Fed's decision to allow big banks to pay sharply higher dividends makes no sense, and not just because the results of the so-called "stress tests" are secret. Based on facts that are public knowledge, the banks are actually insolvent, and in danger of sinking much further.
As big banks start reporting earnings, JPMorgan CEO Jamie Dimon is the latest exec to talk about dividends. Overall, Wall Street is expecting the big banks to post strong results, including improved credit quality and increased capital.
This week, the Congressional Oversight Panel recommended that the nation's big banks be stress tested again, because if problems with mortgage-backed securities are widespread, the consequences could be dire. Now, the Fed has agreed to run those tests, which it wouldn't do if it wasn't worried.
Although Wall Street anxiously awaited the results of bank stress tests in Europe, the real news is elsewhere: the improving economic conditions across Europe. Can the U.S. learn a lesson from Germany and France?
Banking regulators tested the soundness of 91 European banks this week to see if they could withstand a financial crisis, and only seven failed to pass muster. But some analysts say the tests may have been too easy, and wonder what would happen if a real "worst-case scenario" hit.











