Big U.S Banks May Be Forced to Raise More Capital Soon

[steven johnson]

Source: ABC News

(Reuters) - Most big U.S. banks may be forced to make public offerings soon if the Treasury demands payback of the funds it issued under the Troubled Assets Relief Program, veteran banking analyst Richard Bove said.

The U.S. Federal Reserve this month asked banks that were part of its "stress tests" to submit plans to repay government money, if they have not already repaid it.

"Virtually all of the banks can easily redeem their TARP preferreds from current cash holdings. However, it may be that only 3 of the top 30 would have an adequate Tier 1 Capital ratio if they redeemed these preferreds," Bove said in a note to clients.

The Rochdale Securities analyst said burgeoning fiscal deficit, which is expected to touch 9.5 percent this fiscal, and a plunging dollar are forcing the U.S. government to obtain money from wherever it can find it. Repayment of the TARP funds would be one available source, Bove wrote.



Read more: http://abcnews.go.com/Business/wireStory?id=9188702

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The number of banks at risk of collapse spiked by a third last quarter, while the outbreak of bank failures that began two years ago has driven the Federal Deposit Insurance Corporation $8.2 billion in the red. Standard & Poor's reported that most of the very big U.S. banks lack sufficient capital under the credit-ratings agency's new “risk-adjusted capital” measurement.

Are we going to enter anothe 'Socialism for the Rick' cycle? Damned inconvenient, these 'too big to fail' dinosaurs.

http://www.crainsnewyork.com/article/20091124/FREE/9112...

[clear eye]

1. This is exactly why Stiglitz's planned break-up of troubled "too big to fail" banks

was such a good idea. If you don't get things under control in a planned manner, they're going to come undone in an unplanned way that sends shockwaves through the whole economy, including leaving the U.S. Treasury dangling.

[saigon68]

8. Don't worry the "Present Occupant" through Geithner will just Print more $$$$

[Odin2005]

10. And breaking them up into many smaller banks simply makes economic sense.

a sector with many smaller companies is more flexible, is able to recover better from economic downturns, and any one company going under disturbs things less.

[endless october]

2. what, they aren't making enough by driving up the price of oil? nt

[Catshrink]

4. and upping interest rates?

[clear eye]

5. Their executives are looting it faster than they can get more.

They know the big banks are shaky so they are grabbing everything they can, hand over fist. Driving people and businesses into bankruptcy is a strategy of limited longterm value.

BREAK THEM UP. http://www.anewwayforward.org/

[girl gone mad]

6. Most of what they earn in profits from speculation gets paid out in bonuses..

and other forms of compensation. Why buoy your reserves when mama Fed has your back?

[nc4bo]

3. Haven't they been attempting to do this already w/raising interest rates, decrease LOC and

creating new fees and penalties?

Sounds like things will only get worse.

Edit for sentence structure

[dixiegrrrrl]

7. You DO realize he just said only 3 of 30 big banks are solvent?

However, it may be that only 3 of the top 30 would have an adequate Tier 1 Capital ratio if they redeemed these preferreds," Bove said in a note to clients.

It is the Tier 1 Capital ratio violations that have been the problem.
he is saying only 3 of 30 banks have enough cash to cover losses.

[classysassy]

9. A true democracy

If we lived under a true form of democracy,all of the crooked bankster would be serving time at a federal country club, aka jail.

[Odin2005]

11. Like Sanders said, too big to fail means to big to exist.

BREAK THEM UP!

[RUMMYisFROSTED]

12. I'll follow this story.