by Calculated Risk on 4/19/2009 12:55:00 PM

From Bloomberg: Summers Says Banks Must Tap Markets for New Capital (ht jb)

Banks in the U.S. that have received billions of dollars from the government will first have to rely on private markets if they need more money, National Economic Council Director Lawrence Summers said.

“The first resort for more capital is going to the private markets directly to raise equity,” Summers told NBC’s “Meet the Press” program ...

His comments signal that banks deemed in need of capital at the conclusion of government-run “stress tests” may not get additional funds automatically ...

David Axelrod, a senior White House adviser, said some banks “are going to have very serious problems, but we feel that there are tools available to address those problems.” The banks want the “market to know” the health of their balance sheets, he said today on CBS’s “Face the Nation.”

This is one of the concerns about releasing the stress test results - since the government will require that the weaker banks try to raise private capital first, there might be a loss of investor confidence and even a run on the banks.