WASHINGTON – Federal Reserve Chairman Ben Bernanke on Wednesday again spurned speculation that the government may nationalize Citigroup or other big banks.
When asked about Citigroup during a House Financial Services Committee hearing, Bernanke said nationalization "is when the government seizes the bank and zeros out the shareholders and begins to manage and run the bank. And, we don't plan anything like that."
But Bernanke told lawmakers it is possible the government could end up with a much bigger ownership stake in Citigroup Inc. or other banks.
In the case of Citigroup, Bernanke said: "We'll see how their test works out and what evolves."
The Fed chief was referring to new "stress tests" that regulators will start conducting on the biggest banks to judge whether they can hold up if the recession were to worsen.
The tests, which should be completed by the end of April, will help regulators decide whether the banks have sufficient capital — and the right mix of it — to withstand any additional shocks to the economy over the next two years.
The results will help regulators decide whether banks may need additional assistance so they can carry out the critical mission of boosting lending to customers, a key ingredient to the economic turnaround. MORE
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