Bank of America and Citigroup Approved
The 2008 financial crisis forced many bailouts of banks with taxpayer’s money and to protect against future occurrences, Congress has mandated annual stress tests of banks to see if they can withstand future possible economic/financial turmoil. Although banks want to reward their shareholders by increasing dividends and buy back shares, the Federal Reserve wants to make sure that the banks have enough capital just in case something happens, and regulators now have the ability to stop banks from paying out capital.
During the 2008 financial crisis, Citigroup and Bank Of America were two of the nation’s most troubled banks. However, as of today, their positions are reversed with Goldman Sachs and JP Morgan Chase, who emerged from the crisis in a strong position, in terms of their ability to bounce back after future market shocks. Federal Reserve regulators have given their approval to Citigroup and Bank of America’s capital plans, while Goldman Sachs and JP Morgan Chase have plans that “exhibited weaknesses” that were “significant enough to require immediate attention.” If they don’t address these issues by September, then the Fed can halt their capital plans. The approval of Citigroup and Bank of America’s capital plans is an important stepping stone for their recovery due to their previous capital plans not being approved by the Fed.
Written by: Kevin Zhang
Eavis, Peter. “Regulators Question Goldman and JPMorgan’s Capital Plan.” The New York Times. The New York Times, 14 Mar. 2013. Web. 14 Mar. 2013. <http://dealbook.nytimes.com/2013/03/14/regulators-question-goldman-and-jpmorgans-capital-plans/?ref=business>.