Banks Need 75 Billion

And they are calling it good news:

Federal regulators told the country’s 19 largest banks that they must raise $75 billion in extra capital by November, a more upbeat verdict on the health of the financial system than the industry had feared just two months ago.

Ten of the 19 bank holding companies deemed “too big to fail” by the Obama administration will be required to raise additional capital, according to the results of the government’s stress tests, released late Thursday afternoon. But the 10 banks will have to raise much less capital than some analysts had expected as recently as a few days ago.

“With the clarity today’s announcement will bring, we hope banks are going to get back to the business of banking,” Treasury Secretary Timothy F. Geithner said during a news briefing on Thursday afternoon.

Mr. Geithner noted that banks had a long way to go to restore the nation’s confidence in the financial industry, and that they could get a start in generating good will by lending more.

Regulators and bank executives alike predicted that most of the institutions will be able to build up the necessary capital from private sources — either by selling off assets or by converting shares of nonvoting preferred stock into nonvoting shares of common stock. Bank of America, Wells Fargo and Morgan Stanley said Thursday that they would raise capital by selling common stock.

Allegedly the banks will use more private resources then government money. Of course the adamant opposition to another bailout played a role in any "stress test", whether they admit or not. Citigroup was 5.5 billion short, Bank of America a cool 34 billion, and GM's financing 11.5 billion.

The Stress Tests:

The stress tests were aimed at estimating how much each bank would lose if the economic downturn proved even deeper than currently expected. Under the worst-case scenario — an unemployment rate of 10.3 percent, an economic contraction of 3.3 percent this year and a 22 percent further decline in housing prices — the losses by the 19 banks could total $600 billion this year and next, or 9.1 percent of the banks’ total loans, regulators concluded. Losses to the banks’ loan portfolios alone could total $455 billion this year and next.

Allegedly they didn't call for scalps, but they left the door open:

In a joint statement on Wednesday evening, federal regulators pointedly noted that they reserved the right to shake up the top management and boards of banks that have to rely on the government for their additional capital.

In an interview on Wednesday on “The Charlie Rose Show” on PBS , Mr. Geithner tried to emphasize the government’s willingness to oust top executives if necessary.

“This crisis was deeply damaging in part because of this great loss of confidence in the quality of leadership at America’s financial institutions across the board,” Mr. Geithner said in the interview. “These institutions, all of them, have a long way to go to rebuild that sense of confidence and trust that’s necessary for any financial system to run well.”

Does it mean anything or was it all window dressing, according to the IMF the banks still have 2.3 trillion in losses tied to toxic assets. We shall see.