FXstreet.com (Jakarta) - Ten of the 19 largest U.S. financial institutions will be required to raise a combined $75 billion in capital, as the U.S. government for the first time divided healthy banks from those which may need help to weather a worsening economy.
U.S. officials stressed that the move to bolster capital needs to occur across the banking industry, not just at the 19 largest firms. Treasury Secretary Timothy Geithner said the department will reopen programs to make capital available to banks of all sizes, suggesting the U.S. government's intervention in the financial markets could go on longer than expected. It's very important that the rest of the system has the access to capital, Geithner said.
The results released today should provide considerable comfort to investors and the public, Federal Reserve Chairman Ben Bernanke said, saying definitively that the tests were not tests of solvency.
Meanwhile, losses in 2009 and 2010 at the 19 banks could total $600 billion under the government's scenario of a deepening economic downturn. Mortgage loans and consumers loans could account for 70% of the potential losses.
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