Fed deems several major banks healthy enough to pay dividends

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Source: The Washington Post

The nation’s large banks have made major progress rebuilding capital levels that had been depleted during the financial crisis, the Federal Reserve said Friday, as it gave many of the firms the green light to pay dividends to their shareholders.

Fed regulators applied a “stress test” to the 19 largest U.S. banks, similar to the one performed in the spring of 2009, to establish whether they would continue to have enough capital even if the economy went back into recession. The Fed examined what would happen to the banks’ finances if unemployment rose to 11 percent by the end of this year, up from 8.9 percent last month.

The banks added more than $300 billion in common equity, the most basic form of capital, from 2008 to 2010, the Fed said. This gave the firms a greater cushion against future losses than they had during the financial crisis.

Although the Fed did not detail the finances of individual firms, several major banks were deemed healthy enough that they immediately announced plans Friday to pay higher dividends to shareholders or buy back stock, either of which would reduce their capital levels.

Read more: http://www.washingtonpost.com/business/economy/fed_deems_several_major_banks_healthy_enough_to_pay_dividends/2011/03/18/AB7XzBs_story.html

[boppers]

1. 300 billion seems about right.

245 billion of TARP went to banks.