Wednesday, November 23, 2011

Bank of America, Five Other Banks Will Be Put to Meltdown Test

Posted By on Wed, Nov 23, 2011 at 8:46 AM

The Federal Reserve is about to put six of the United States' largest banks to the test—a hypothetical tabletop exercise to see how well they would manage an ever-widening global financial meltdown.

The Federal Reserve has chosen Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley and Wells Fargo for the test. The exercise will be based on a continuing deterioration of the European debt crisis. Under the hypothetical stress scenario, U.S. unemployment would spike as high as 13 percent while the nation's gross domestic product would fall by as much as 8 percent. The Fed will use the stress tests to determine whether the lenders are strong enough to raise dividends or repurchase stock, or whether they would need to obtain additional capital to weather the hypothetical storm.

The results of the tests are expected to be published early next year.

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