Source:
New York TimesBy ERIC DASH and LOUISE STORY
Published: May 07, 2009
The results of the bank stress tests have been trickling out for days, in drips from Washington and drops from Wall Street, and the leaks seem to confirm what many bankers feel in their bones: despite all those bailouts, some of the nation's largest banks still need more money.
But that does not necessarily mean the banks will get that money from the government. The findings, to released Thursday by the Obama administration, suggest that the rescue money that Congress has already approved will be enough to fill the gaps. If so, the big bailouts for the banks may be over.
The thinking is that some banks will ask the government to convert preferred shares that it bought last year, at the height of the financial crisis, to common stock. As a result, the government would become a significant shareholder in a number of banks.
But under that assumption, no new taxpayer money would go to the banks. The government would merely exchange one investment, its preferred stock, which is much like a loan, for ordinary common shares. The move amounts to shifting public money from one pot to another to ensure that these big lenders - those deemed too big to fail - have enough common stock to cushion their potential losses.
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