For the last several weeks, we’ve heard a lot of speculation, gossip, insider info, leaks and commentary concerning the Federal Reserve and U.S. Treasury Department’s banking stress test.
So now that both organizations have announced that they can’t deliver the results as promised… that in fact, they won’t be able to release the information until late next week… well, what are we supposed to think?
According to The Wall Street Journal, officials pushed the release date back due to some disputes between the government results and the financials themselves, including Bank of America Corp. (NYSE: BAC) and Citigroup (NYSE: C).
As I mentioned before and you doubtlessly know very well regardless, everybody’s speculating over the reasons. The majority of analysts however, believe the tests will show that at least a few banks need more capital or a higher quality of capital in order to continue lending should the economy take any significant continuation of a downturn during 2009 or 2010.
However, in a round of good news for the banks and shareholders but potential bad news for future American taxpayers, the Obama administration has said that it intends to assist any and all of the nineteen banks that had to undergo the stress test should they need help. In other words, none of them will be allowed to fail.
In addition, the details we do know about the analyses indicates that should they need to, they’ll be allowed to raise capital through a number of standard and newly opened methods. Those include through private investors, borrowing more capital from the government, and converting existing government investments into common stock.
