Sunday, May 10, 2009

Stress Test Follow-Up

I could not find a solid answer on the basis of whether quarterly results were included in the anticipated capital calculations. However Friday morning on Squawk Box it was mentioned that the results included estimated normal profits. So the question becomes, is the estimate reasonable? If it's too low, banks will need more, if it's too high banks will need less capital. Fortunately from the accounting standpoint, the Fed is requiring the capital raising plans to be delivered within 30 days and with a timeline not to exceed 6 months, which takes pressure off of the reporting of the bank's financial results (at least for now).

A couple different views- thinks the capital levels may have been set too low.

The Wall Street Journal has an article on the back and forth that occurred to keep the stress tests from being worse and requiring banks to raise additional capital.

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