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Fed Orders New Bank "Stress Tests"

The Fed is worried that we are losing confidence, and they want to reassure us. Is everything just fine? By now, surely the banks should be flush with cash? Will these new stress tests show sound banks, like they did before they failed in the past?

Fed orders new "stress tests" for banks
Fed issues plan to let healthy banks boost dividends if they pass new `stress tests'

Jeannine Aversa
On Wednesday November 17, 2010, 3:31 pm

WASHINGTON (AP) -- The nation's largest banks must undergo new stress tests to show they can weather another recession, and the Federal Reserve said those that pass them can boost dividends paid to investors.

Banks would need to show the Fed's bank examiners that they're in good financial health and that they have adequate capital to absorb potential losses over the next two years.

The Fed oversees Wall Street's biggest banks, including Citigroup, Bank of America, JPMorgan Chase & Co., and Wells Fargo.

Banks have to file plans to the Fed showing that they would have sufficient capital cushions to cover any losses under different economic scenarios -- including if the economy were to fall back into a recession, Fed officials said.