Stop Stressing

The federal government has completed its stress tests of the nation’s 19 largest banks and bank-like institutions and in this era of trillions of dollars, there is good news. The amount of capital deemed to be needed by these banks is a mere $75 billion.

I don’t know about you, but after what we’ve become accustomed to, $75 billion seems to be in the realm of Monopoly money. Or perhaps, it’s that all money has entered the realm of Monopoly money.

In any case, almost half of that $75 billion (or $33.9 billion) is said to be needed by Bank of America. Wells Fargo is said to need $13.7 billion, while the only other institution in the 11-digit category is GMAC, which would need $11.5 billion.

The one insurer in this group of 19, Met Life, apparently does not need to raise more capital. That’s good news for the insurance industry (which certainly can use some).

The results of these stress tests were judiciously leaked over a week’s time, which greatly relieved any stress the stock market had been feeling in this regard. So, BofA needs $34 billion? Man, that’s nothing, chump change.

The announcement of the results of the tests set off a scramble among those banks deemed needy to raise the required capital. In lickety-split fashion, Morgan Stanley and Wells Fargo raised billions within hours.

Just how stressful these stress tests actually were is a good question. A lot of the pressure was on the government, which had to walk a fine line between declaring a lot of the banks zombies, which would have freaked out the market, and letting them all off the hook, which would have looked like a whitewash job. The market seems to have been satisfied that the administration walked that line the way it was supposed to.

The banks also were apparently able to negotiate with the government on certain parameters of stress measurement. It does so much to relieve stress when you can call at least some of the shots, doesn’t it?