U.S. regulators told top banks on Thursday to raise $74.6 billion to build a capital cushion officials hope will restore faith in financial firms and set a course out of the deepest recession in decades.

The results of bank stress tests -- which involved more than 150 regulatory officials poring over the books of the 19 largest firms -- effectively drew a line between healthy and weak, and quantified exactly how much those institutions struggling under the weight of souring loans must raise.

The bank reviews, led by the Federal Reserve, showed 10 banks needed additional capital to withstand heavier losses that would likely come if the recession worsened. Bank of America Inc had the largest need at $33.9 billion, while Citigroup Inc needed $5.5 billion.

In addition, Wells Fargo was found to need $13.7 billion and GMAC $11.5 billion.

U.S. President Barack Obama's administration hopes the firms can fill the capital holes from private sources, although Fed Chairman Ben Bernanke said the government was prepared to help if needed.

Our government, through the Treasury Department, stands ready to provide whatever additional capital may be necessary to ensure that our banking system is able to navigate a challenging economic downturn, Bernanke said in a statement.

Obama's team appears to have managed financial market expectations well, getting the worst news from the stress tests out two days ago -- that Bank of America needed about $34 billion.

The $74.6 billion amount was smaller than some analysts had estimated before the stress tests were finalized. Regulators had to walk a fine line as they sought to convince skeptical investors the reviews were sufficiently rigorous without unduly straining banks that were already in a precarious financial position.

The total figure also appeared to be small enough to ensure that the White House would not have to approach Congress for more rescue money on top of the $700 billion approved last year -- a request that would likely be turned down because of voter outrage over the bailouts.


But skeptics of the administration's bank strategy still abound.

The American Bankers Association criticized the severity of the stress tests and said there was no evidence banks need to change the make-up of their capital. But it said the test results should end harmful speculation.

Some analysts and investors questioned the credibility of the tests.

At best, the process may have been a waste of time; at worst, it's something that has caused more confusion, said Mike Holland, chairman of private investment firm Holland & Co, speaking before the test results were officially released. It is not clear, for example, precisely how banks will have to increase equity capital, he said.

Banks may cover any capital shortfalls through a mixture of asset sales, share sales and perhaps the conversion of preferred shares into common stock. Regulators have put special emphasis on holding common capital rather than preferred because it can be tapped more quickly if needed.

If a bank raises common equity by converting preferred shares issued under the $700 billion bailout fund, the government could become one of the bank's biggest shareholders.

President Obama's fiscal 2010 budget, unveiled Thursday, includes at $250 billion placeholder for additional financial rescue efforts, but White House budget director Peter Orszag said he hopes it will not be necessary to use this money.

(Additional reporting by Christian Plumb, Elinor Comlay, Jonathan Stempel, Paritosh Bansal, Ellis Mnyandu, Dan Wilchins and Jennifer Ablan in New York, and Mark Felsenthal, Glenn Somerville, Emily Kaiser and Jeff Mason in Washington; writing by Emily Kaiser; editing by Tim Ahmann)