Regulators have told Bank of America Corp. and Citigroup Inc. that the banks may need to raise more capital based on early results of the government's so-called stress tests of lenders, according to people familiar with the situation.
The capital shortfall amounts to billions of dollars at Bank of America, based in Charlotte, N.C., people familiar with the bank said.
Executives at both banks are objecting to the preliminary findings, which emerged from the government's scrutiny of 19 large financial institutions. The two banks are planning to respond with detailed rebuttals, these people said, with Bank of America's appeal expected ...
This article is behind a subscription wall, but I get the print version of the WSJ at school, so I got to read these final three paragraphs, true journalistic gems that they are:
One question is how the government is projecting banks' revenue streams through 2010. Some bankers are optimistic that the Fed will use their first-quarter numbers to predict their performance for teh enxt two years.
That could inflate the banks' earning potentials--and thus their capital cushions--because many of the companies had strong first-quarter performances.
Analysts, investors and most executives say those results probably aren't sustainable.
Shorter WSJ: Banks want everyone to believe they can sustain first quarter's profitability; everyone thinks that's bullshit. Given that regulators believe Citi and BofA to be undercapitalized by billions of dollars, it's unlikely that they're projecting forward the banks anomalous first quarter results, which are highly suspect as I've written about earlier. So that puts the government in agreement with, apparently, everyone else.
If only there were a "too big to lie about financial performance" corollary to the "too big to fail" maxim. I would also settle for "too big to complain about executive pay caps after destroying the economy." Come on guys, be the bigger banks.
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