2nd UPDATE:GMAC Seen Passing Stress Test Via TARP; Other 9 OK
November 09 2009 - 6:42PM
Dow Jones News
The U.S. Federal Reserve said Monday that auto lender GMAC
Financial Services was the only one of 10 bank-holding companies
that hasn't yet met capital requirements under its stress
tests.
However, the central bank and the U.S. Treasury said that GMAC
is expected to meet the capital ratios required by accessing the
Treasury Department's Troubled Asset Relief Program, or TARP,
automotive-industry financing program.
Despite extraordinary help from the U.S. government, including
$12.5 billion of federal funds and access to cheap debt, GMAC is
struggling to return to the black as it takes hit after hit on its
mortgage unit, Residential Capital LLC.
GMAC is in talks with the U.S. Treasury to get a third infusion
of up to $5.6 billion in TARP funds.
"While we still need additional capital to meet the (stress
test) requirement, we have been focused on transforming the
company, restoring financial health and maximizing the investment
for our shareholders," said a GMAC spokesperson.
The Fed said the other nine bank-holding companies that were
found not to meet capital requirements earlier this year had now
raised enough capital or improved the quality of capital
sufficiently.
"In January of this year, there was very little confidence in
the financial system. Financial institutions could not borrow
without guarantees provided by the government, and we faced the
real prospect of having to use taxpayer resources to recapitalize
the banks," said Treasury Secretary Tim Geithner.
Now, the Treasury said it was borrowing less and taxpayer
support for the financial sector had declined because banks were
meeting their needs in the private markets and repaying the
government.
The Fed said the 10 companies, including GMAC, had boosted their
capital by a total $77 billion, mainly by issuing common equity or
other eligible securities.
In May, Bank of America Corp. (BAC), Citigroup Inc. (C), Wells
Fargo & Co. (WFC), GMAC LLC and Morgan Stanley (MS) were told
they need to raise capital. Regions Financial Corp. (RF), Fifth
Third Bancorp (FITB), KeyCorp (KEY), PNC Financial Services Group
Inc. (PNC) and SunTrust Banks Inc. (STI) also were told to bolster
their reserves.
By contrast, JPMorgan Chase & Co. (JPM), Goldman Sachs Group
Inc. (GS), American Express Co. (AXP), BB&T Corp. (BBT), State
Street Corp. (STT), MetLife Inc. (MET), Bank of New York Mellon
Corp. (BK), U.S. Bancorp (USB) and Capital One Financial Corp.
(COF) were told they didn't need to raise additional capital.
In its stress tests of 19 large banks earlier this year, Fed
economists designed dire economic scenarios and measured the
resilience of big banks against those scenarios. Fed officials
expect to make those stress tests a model for future
supervision.
-By Luca Di Leo, Dow Jones Newswires; 202-862-6682;
luca.dileo@dowjones.com
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