CNN Financial News Producer
Reports out today indicate the government will direct about half of the 19 banks undergoing “stress tests” to boost their capital reserves, a move that officials hope will quell fears about the solvency of the financial sector.
Regulators reportedly plan to brief the nation's largest banks today on the final results, with a public announcement scheduled for Thursday afternoon. The “stress tests” are meant to determine whether the banks in question have sufficient reserves to weather the recession.
Preliminary results are said to show that firms including Bank of America, Citigroup, Wells Fargo and several regional banks may be required to take remedial action.
Wall Street retreats
Stocks slumped today as investors slammed on the brakes after pushing the major gauges to multi-month highs in the previous session.
Stocks rallied Monday on bets that the economy is closer to stabilizing. The Nasdaq ended at a 6-month high and the Dow and S&P 500 ended at nearly 4-month highs.
Swiss bank’s outlook cloudy
Also on Wall Street’s radar today… Swiss banking giant UBS, one of the hardest-hit banks in the global financial crisis, confirmed that it posted a net loss for the first quarter, illustrating that it continues to struggle with write-downs even as rivals show signs of business picking up.
UBS said its net loss for the three months was $1.75 billion, and cautioned that it may have to raise credit provisioning in coming quarters. The bank announced last month it would cut nearly 9,000 jobs.
Bernanke says recovery will begin this year
Fed Chairman Ben Bernanke says that the economy is stabilizing and will begin to rebound later this year, but the recovery will be slow and cautious.
At a hearing of the Joint Economic Committee of Congress, Bernanke said consumer sentiment, the housing market and spending have begun to show signs of life.
But he expects the economy will continue to shed jobs and credit will remain tight for some time. He said the recent frugality trend will continue due to deflated household wealth, and business spending will be slow to bounce back as well.
Bernanke also fielded questions from lawmakers on the bank “stress tests,” Bank of America's controversial purchase of Merrill Lynch last year and whether the huge increase in the Fed's balance sheet will create an untenable situation by the end of the year.
Deal on 'cash for clunkers' bill
The Obama administration has signaled its support for a congressional effort that aims to boost the troubled car industry by subsidizing new cars sales for consumers who scrap old ones.
Congressional Democrats, emerging from a meeting at the White House today, say they’ve struck a deal on a bill to establish a one-year program to encourage the purchase of 1 million new cars and trucks that get better gas mileage.
Under the so-called “cash-for-clunkers” legislation, consumers with old, gas guzzlers could get $3,500 or $4,500 in government vouchers to use toward the purchase of new cars that get gas mileage than exceeds the old car's by four miles per gallon.
Chrysler sets new incentives
Finally, with bankruptcy threatening to further weigh down the carmaker's sales, Chrysler is expected to announce a new incentive program today.
Chrysler's "Employee Pricing Plus Plus," program ended just days after the carmaker declared Chapter 11 bankruptcy. That program combined cash rebates with price reductions and cut-rate financing for qualified customers.
The new sales program is expected to rely heavily on giving dealers cash incentives, which means that customers will see big price reductions at the dealership, said Jessica Caldwell, an industry analyst with the automotive Website Edmunds.com.
Filed under: Andrew Torgan • auto bailout • Economy • Finance • Gasoline Theft • Wall St.
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