Federal officials announced today that 10 of the country’s largest banks will need to raise $75 billion in capital. Banks that are required to raise new capital have been given a month to tell regulators their plan to raise the capital and six months to finish their plans. Treasury Secretary Tim Geithner discussed that after the completion of these stress tests “banks can get back to the business of banking” and “should result in a more efficient, stronger banking system”.
There are a few ways that the big banks can raise capital including selling assets or issuing new shares. Wells Fargo said it would raise $6 billion through the sale of common stock while Bank of America will try to raise part of its $34 billion by selling off smaller divisions.
While $75 billion is a sizable amount to us small folk, many analysts predicted numbers as high as $200 billion for banks to raise to get themselves out of this mess. Let’s hope its enough.