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Last updated at 10:39 BST, Monday, 11 May 2009

US banks fail 'stress tests'


8 May 2009

Ten of America's biggest banks have been told that they need to raise another $75 billion in capital, following 'stress tests' carried out by the US government.

Greg Wood

American dollars


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These stress tests have divided the strong banks, who don't need any extra capital, from the weak, who now have to find new money. The US government has ordered ten of the 19 banks tested to boost their capital. Top of the list is Bank of America, with a shortfall of nearly $34 billion, followed by Wells Fargo, Citigroup and GMAC - the finance arm of General Motors. The Treasury Secretary Timothy Geithner, said the tests had brought reassurance and clarity:

''These actions are critical to help get lending flowing again, to make sure that there's going to be the credit necessary to help support recovery, to help this economy get back on track''.

The stress tests were designed to find out how much extra capital the banks will need to cover their losses if the recession worsens. They can try to raise the money from private investors. Wells Fargo and Morgan Stanley have already announced plans to do just that. But if that doesn't prove possible, then the US government says it will help them.

Greg Wood, BBC News, New York


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stress tests
a way of finding out how banks will cope with further financial difficulties
wealth, especially a large amount of money used for producing more wealth
to boost
to increase, make larger
amount of money which is less than is needed or expected
the finance arm
the division or part of the company which deals with money
actions or words intended to make someone/something (here, the banks) feel less worried
the ability to be understood easily/not be confused
get lending flowing
to encourage people and banks to borrow and the movement of money to start again
back on track
return to a successful way of working, in the same way it was before
cover their losses
pay for any shortfalls which may occur

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