Much of the hoopla concerning the banks’ stress test centered around which banks will need more capital. Of the 19 banks that were tested, all have already received preliminary results and today is the deadline to appeal the government’s findings.
More specifically, banks received preliminary results last Friday and have until today to appeal. The final results will be sent to the banks this Friday (May 1, 2009) and the results out next week for the public.
The financial institutions are not allowed to talk about the results by law unless they have government permission to do so. Therefore, it’s unlikely that we will get any official announcement before next week on the results. However, the WSJ today published an article that basically says that Citigroup and Bank of America will need additional capital, in the magnitude of billions more dollars, to guard against potential shortfall.
The compnay can try to raise money through an equity offering, or it can get additional capital from the government. However, with the majority of the original $700 billion bailout fund mostly allocated and congress passing more money because of political concerns, the treasury needs to be extremely careful of the remaining use of the capital.
Sure, the government keeps reminding us that banks being asked to raise more capital doesn’t mean they are insolvent, but if I were a shareholder, I’m selling. So if the WSJ’s report is true, Citigroup and Bank of America are in deep trouble.