It is unlikely that any of the 20 banks scheduled to be stress tested by regulators in the coming weeks will be in a position to fail following the assessment of capital, said Federal Reserve Chairman Ben Bernanke in testimony before the Senate Committee on Banking, Housing and Urban Affairs.
Despite the Obama administration's efforts to allay Wall Street's concerns about bank nationalization, speculation has persisted in recent days that some larger financial institutions – most notably, Citigroup – may end up being nationalized. Bernanke said that the institutions set to receive stress tests (i.e., those with $100 billion or more in assets) are not on the verge of failure.
Bernanke was asked if that would change after the tests were performed, to which he replied, "No, I don't think so."
Further, the Fed chairman said that there is a "reasonable prospect that the current recession will end in 2009 and that 2010 will be a year of recovery," provided government-led initiatives are successful in restoring "some measure of financial stability."
"If financial conditions improve, the economy will be increasingly supported by fiscal and monetary stimulus, the salutary effects of the steep decline in energy prices since last summer, and the better alignment of business inventories and final sales, as well as the increased availability of credit," he testified.
SOURCE: Senate Committee on Banking, Housing and Urban Affairs