‘Banking nightmare over,’ as stress tests show worst is past
May 7, 2009 at 6:14 am by Wayne GarciaCNBC’s reputation-damaged investment show host Jim Cramer just told The Today Show that the “banking nightmare” is over as a result of the stress tests on banks being released today.
His point? That even though a few banks still need billions to shore up their balance sheets, they are making money and likely can raise those extra funds in the market – not from taxpayers.
Bloomberg reports that the market indeed likes the results of the financial stress tests:
Stocks rallied after the news, sending the Standard & Poor’s 500 Financials Index to its highest level in four months. The results are the culmination of weeks of investigations, led by the Federal Reserve, into the banks’ lending practices, funding strategies and securities and loan portfolios.
“The markets are telling us we’re in a recovery and the banks are beginning to heal,” William Isaac, former chairman of the Federal Deposit Insurance Corp., said in an interview today. The end of the stress tests after “three months of water torture” is providing investors some relief, he said.
The regulators put an emphasis in their reviews on tangible common equity, and will give firms needing bigger reserves six months to meet their requirements. Citigroup’s assessment reflects the New York-based bank’s previously announced plan to convert some of its preferred shares into common stock.
