US stress tests force government control on banks

Author: | Published: 1 Jun 2009

Federal Reserve stress tests are allowing the US government to take voting stakes in 19 of the country's largest banks.

In stress tests released in May, Bank of America, Wells Fargo and Citigroup were among the banks deemed insufficiently capitalised. The Federal Reserve now requires them to raise Tier 1 capital. In-house counsel say they have two options: raise private capital or convert government-owned preferred shares to common.

"Most banks are going to convert,"...