So much for green shoots: Financial crisis could last until 2013, S&P says

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The stress tests may be over, but banks "are far from a recovery, and the banking crisis has merely entered a new phase," credit rating firm Standard & Poor's says. And the problems that have pushed financial institutions to the brink and roiled global markets may last until 2013.

If that prediction is even close to correct, it suggests the faint signs of economic recovery that have popped up recently -- the rallying stock market and "less bad" unemployment and housing figures -- may be illusory. After all, the economy probably won't strengthen as long as major banks are cutting back on lending.

One conundrum: With banks dependent on government support to survive, what happens when the bailouts end? The FDIC's program to guarantee bank debt played a huge role in restoring banks' ability to borrow affordably and easing the credit crisis. But unwinding that program may prove tricky, S&P analyst Scott Sprinzen said, since it has resulted in "a mountain of refinancing that they will have to contend with at some point" when rates are higher.

Many of the banks deemed not to need more capital after the Federal Reserve's stress tests are already wading back into the markets to borrow without that guarantee. JPMorgan Chase (JPM) and American Express (AXP) became the latest to do so yesterday, according to the Associated Press.

Interestingly, S&P sees banks as needing much less capital than the Federal Reserve to deal with their immediate problems. The stress tests placed that figure at $75 billion, while S&P put it at just $18 billion.
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