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Monday, May 04, 2009

WSJ: About 10 of 19 Banks will need Capital

by Calculated Risk on 5/04/2009 09:20:00 PM

From the WSJ: More Banks Will Need Capital

The U.S. is expected to direct about 10 of the 19 banks undergoing government stress tests to boost their capital ...

One big risk worrying industry officials is that the market will view banks on the list as insolvent when the official results are announced Thursday, even though Fed officials have repeatedly said that's not the case.
An initial stress test identified Wells Fargo as among the banks needing a bigger buffer ... It is unclear whether Wells would be forced to raise fresh capital or if regulators would accept the bank's argument that it can earn its way through the losses in future years. Wells expects more clarity Tuesday.
Wells Fargo will probably suffer enormous losses from Wachovia's Option ARM portfolio (originally from Golden West) and from their own HELOC portfolio. The estimated losses will apparently be broken out into the 12 categories listed in the Fed's White Paper, and that should show substantial losses for Wells Fargo in these categories.

Citi, BofA, Wells ... the constant leaks are pretty amazing ...