Posts Tagged ‘Federal Reserve’
Fed Chairman Bernanke picks his words carefully here as the US treads that line between economic recovery and much higher interest rates which would produce other unintended consequences such as stifling growth, currency value shifts or inflation.
Ben Bernanke on Wednesday called on Congress to take action now to bring down long term US budget deficits, warning that the bond market was concerned about rising US government debt.
The Federal Reserve chairman said the recent increases in bond yields “appear to reflect concern about large federal deficits” as well as improved optimism about the economy and other factors.
Here is the full testimony before the Committee on the Budget, U.S. House of Representatives, Washington, D.C. June 3, 2009
More analysis here.
Relevance to Bankwatch:
As plans are made, these are additional data points and views that point to a much different 2 – 5 years upcoming than we have experienced.
A US regulator on Friday predicted that chief executives and directors of some of the banks that underwent the stress tests could lose their jobs,
By Francesco Guerrera and Nicole Bullock in New York
Published: May 16 2009 00:10 | Last updated: May 16 2009
A US regulator on Friday predicted that chief executives and directors of some of the banks that underwent the stress tests could lose their jobs, in another sign of the government’s desire to have a say in the running of bailed-out companies.
Sheila Bair, chairman of the Federal Deposit Insurance Corporation, said the authorities could replace management and boards at some of the 10 banks that were ordered to add fresh capital after the tests.
“Management needs to be evaluated,” she told Bloomberg television. “Is this the right skill set? Have they been doing a good job? Are there people who can do a better job?”
Asked whether some chief executives and directors would be replaced when banks present their capital-raising plans in the next few weeks, she said: “Yeah, I think there will be an evaluation process. We’re requesting it as part of the capital plan.”
As predicted yesterday, the amount of capital the banks need is far in excess of the amounts they were negotiating.
This news just in from the NYT confirms what had to be the case. If we do the math based on project bad debts, it had to be in the $20bn + range for the big banks. Similar results will apply to Wells, Citi, PNC and others in the group of 19. Watch out for the stock market tomorrow. Reality bites.
Bank of America Needs $33.9 Billion, U.S. Determines
The government has determined that Bank of America will need
$33.9 billion in capital, according to an executive at the
This is turning into something of a joke. The whole point of the ‘stress tests’ was to objectively assess the capital requirements of the Banks’. Surely no-one could have imagined any outcome other than a requirement to raise more capital. The only debate might be amount and over what period.
In any event there can be no reason to delay the production of the results. The market is living in the false belief that the government will not hold the banks feet to the fire, at least judging by the stock market. If we do not get this over with, and get the facts out, the Governments’ hands will be tied even more to full nationalisation as the only way to avoid another market crash.
Citi, one of the biggest victims of the crisis that has already been bailed out three times by the government, is believed to have been told by regulators that it needs more than $5bn in fresh capital, while BofA might need to convert $45bn in government preferred shares into common equity.
Confusing messages coming out on the timing of the Bank stress tests – now expected May.
The White House on Wednesday pledged “transparency” over the stress tests used to assess the health of the biggest US banks, as officials pushed wary banks and regulators to agree to disclose as much information as possible.
Robert Gibbs, US presidential spokesman, said that “early in May” there would be “transparency of determining and showing to all involved some of the results” of the tests.