Banks in Midwest and South may have underwhelmed in stress tests
News has begun to leak out that the government is leaning on some of the 19 banks that went through the "stress test" designed to predict what will happen to them if the economy gets worse. Banks that fail will be asked, not politely, and perhaps pressured, to raise private money. If they cannot, the government will make larger investments and get a bigger ownership position.
According to The Wall Street Journal, experts think that they may know the regions were some of the banks are based. The paper writes, "Analysts believe they likely include regional banks with large exposures to commercial real estate in the Midwest and Southeast."
If this "educated guess" about the regions is right, it may be good news. Most of the largest banks in the country are not located in these regions, which means that the government's investment could be restricted to institutions that are not big enough to require tens of billions of dollars.
Since the TARP only has $110 billion left, that's a good thing.
Douglas A. McIntyre is an editor at 24/7 Wall St.