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The Banking Stress Test Yields Surprise Results

SUSIE GHARIB: Reassuring news late today from the U.S. Treasury and the Federal Reserve: the American banking system is secure. Regulators said that the results of its bank stress tests show nearly all of the nation's 19 largest banks have enough money to withstand the possibility of a deeper recession. But 10 of those banks need to raise new capital, about $75 billion total. Treasury Secretary Timothy Geithner said now that the two-month stress test process is over, banks can quote, get back to the business of banking. Washington bureau chief Darren Gersh attended that Treasury briefing. He joins me now with details on the test results. Darren.

DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: Susie, I just got off the phone. Bank of America is holding a conference call and they're telling investors they think this stress test was too severe. They think the economy will stabilize later this year, but they are planning to sell some of their businesses to raise about $10 billion in new capital. Now Treasury Secretary Timothy Geithner said late this afternoon he thinks all the extra information from the stress test will reassure investors and make it easier for banks to raise capital. Let's take a closer look at what we learned today. First we learned who is strong and who is not. Before the Treasury was treating all banks pretty much the same. Now they are drawing distinctions. And so we look at Bank of America, that -- America needs to raise another $34 billion, Wells Fargo $13.7 billion, GMAC $11.5 billion, Citigroup $5.5 billion. Now the total amount that banks need to raise by November is $75 billion. And we are already seeing banks react. As we said, late this afternoon Wells Fargo said it is selling $6 billion in stock to raise capital, Morgan Stanley selling $2 billion in stock. Citi is going to swap $5.5 billion in preserved shares for common stock, a little accounting gymnastics there. We also learned more about where banks are losing money. If the recession grows worse, regulators figure banks will lose $600 billion over the next two years, almost half of that on residential mortgages and credit cards. Regulators put the total losses to banks from this crisis at $935 billion. Now the key thing regulators want everyone to know is that banks are not insolvent. Your money is safe they say. Regulators also believe they now have a much better idea of the stresses banks could run into if the economy keeps falling, so they will be better prepared.