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Fallout: The Financial Crisis

Banks will likely need cash to make it

Marketplace Staff May 5, 2009
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Fallout: The Financial Crisis

Banks will likely need cash to make it

Marketplace Staff May 5, 2009
HTML EMBED:
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TEXT OF STORY

Bill Radke: The chair of the Federal Reserve told Congress this morning he expects the U.S. economy to bottom out and then improve later this year — here’s a big if — if the financial sector continues to mend. Ben Bernanke said even after recovery begins, unemployment will stay high and economic activity will grow slowly. That’s likely to keep inflation in check, and keep interest rates right down with it.

Behind the scenes today, federal regulators are supposed to tell banks how to get on the stress tests. The rumor mill says at least half of them will need more cash to make it through the fallout. Tamara Keith reports.


Tamara Keith: Along with the names we’ve already heard, like Bank of America and Citigroup, Wells Fargo and Regions Financial of Alabama are also reportedly on the list of banks in need of a better buffer.

Jane D’Arista is a political economist at the University of Massachusetts Amherst, and she has some ideas about how the banks should raise the cash they need:

Jane D’Arista: I think that the government should put the pressure on them to begin selling businesses and parts of their conglomerates in the way that Citibank sold off its Japanese securities operations recently.

She thinks another taxpayer bailout would be a very bad thing.

White House Press Secretary Robert Gibbs said yesterday the administration doesn’t plan to go to Congress for more money:

Robert Gibbs: I think everyone involved will be looking for banks to raise this through either private means or the selling of some assets.

The test results are scheduled for public release on Thursday — after the markets close.

In Washington, I’m Tamara Keith for Marketplace.

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