Geitner crafting new excuse to raid taxpayers: Substantually reduced capital in Major Banks

The case is being made to take more of your money - the transfer of wealth from the public to the banks. Can we say we didn't see this coming? Is this not the reason for the obscured 'stress test'?

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Fed Says Capital at Some Major Banks Is ‘Substantially Reduced’
By Craig Torres

April 24 (Bloomberg) -- The Federal Reserve said the recession and market turbulence have “substantially reduced” reserves at some of the 19 largest U.S. banks, while most of the firms hold capital “well in excess” of regulatory standards.

“Losses associated with the deepening recession and financial market turmoil have substantially reduced the capital of some banks,” the Fed said today in a description of stress tests of the companies. “Most U.S. banking organizations currently have capital levels well in excess of the amounts required to be well capitalized.”

The paper, part of a federal effort to restore public confidence in banks by gauging their capital strength, doesn’t reveal which banks need capital or specify their total shortfall. The Fed used qualitative terms such as “some” and “more,” typical of other central bank documents.

The central bank described methods used by dozens of regulators examining the strength of the banks’ portfolios under two economic scenarios over the next two years. Final results of the capital tests will be released the week of May 4.

“Lower overall levels of capital -- especially common equity -- along with an uncertain economic environment have eroded public confidence in the amount and quality of capital held by some firms,” the Fed said. A bank’s capital buffer assessment is “not a measure of the current solvency or viability of the firm.”

Stress Tests

The document, detailing stress tests assuming a decline in output of as much as 3.3 percent, is partly aimed at answering critics who said the government would whitewash the banks’ weaknesses.

The 19 banks in the test hold two-thirds of the assets and more than one-half of the loans in the U.S. banking system, the study said. A team of about 140 Fed officials coordinated the so-called stress tests. The central bank is the primary regulator of bank and financial holding companies.
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