Dustbiters To Come 0
Ronald D. Orol and Alistair Barr of MarketWatch analyzes Geithner’s “stress test.”
Note the list of “banks” which may be taken to the lab for the test–it’s almost all the biggies (I use quotation marks because some of them haven’t been “banks” for long):
Treasury is expected to allocate at least $100 billion of the remaining $350 billion from the Troubled Asset Relief Program to a bank bailout fund to buy preferred shares in banks that can be converted into voting common equity “if needed.” According to Treasury, banks can convert securities into common shares in a “worse than expected economic environment.”
(snip)
“Depending on how much capital an institution needs under this program, you could see a high percentage of its common equity, more than half, be issued to Treasury,” said David Brown, partner at Alston & Bird LLP in Washington. (Owning more than half the stock equals government ownership with equals nationalization–ed.)
If needed, the convertible securities will be converted into common shares at a “modest discount” to banks’ stock prices on Feb. 9.
Robert Klingler, attorney at Bryan Cave LLP in Atlanta, points out that most financial institutions were trading at historic low valuations on that date, which means the government stakes could be converted into massive controlling interests.There are 17 institutions, representing roughly three-quarters of the assets in the banking system, which may be required to take the stress test.
These are: J.P. Morgan Chase, Citigroup, Bank of America, Wells Fargo, Goldman Sachs, American Express, Morgan Stanley, State Street , Bank of New York Mellon, U.S. Bancorp, SunTrust Banks, Capital One, PNC Financial , Regions Financial, Fifth Third, and KeyCorp.
