April 09, 2009

For the last eight weeks, nearly 200 federal examiners have labored inside some of the nation’s biggest banks to determine how those institutions would hold up if the recession deepened.What they are discovering may come as a relief to both the financial industry and the public: the banking industry, broadly speaking, seems to be in better shape than many people think, officials involved in the examinations say. That is the good news. The bad news is that many of the largest American lenders, despite all those bailouts, probably need to be bailed out again, either by private investors or, more likely, the federal government.

After receiving many millions, and in some cases, many billions of taxpayer dollars, banks still need more capital, these officials say.The federal “stress tests” that the examiners are administering are the subject of fierce debate within the banking industry.Regulators say all 19 banks undergoing the exams will pass them. Indeed, they say this is a test that a bank simply will not fail: if the examiners determine that a bank needs “exceptional assistance,” the government, that is, taxpayers, will provide it. But the tests, which are expected to be completed by the end of this month, are being conducted out of public view.