May 7th, 2009
12:51 PM ET

Financial Dispatch: ‘Stress tests’ results due & GM posts $6B loss

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Andrew Torgan
CNN Financial News Producer

Today we find out just how safe our banking system really is.

But the results of the so-called "stress tests," due out at 5:00 p.m. ET after the stock market closes, may not offer any stunning revelations. That’s because the results may be the worst-kept secret of all time - there have been numerous leaks in recent days regarding the results of the tests.

Reports say that Bank of America may need roughly $34 billion in capital to weather a more painful economic environment. Wells Fargo and Citigroup have also been frequently mentioned as two institutions in need of capital.

Other institutions, namely American Express, Goldman Sachs, JPMorgan Chase and MetLife, are believed to be in good shape.

As for the banks that need to raise more capital, they’ll have a month to present regulators with a fundraising plan and six months to raise the funds.

And some heads may roll.

Banks will have to review their management and board within a month, "to assure that the leadership of the firm has sufficient expertise and ability to manage the risks presented by the current economic environment," regulators said in a statement. White House spokesman Robert Gibbs indicated Wednesday that the government might lean on companies whose boards and managers aren't seen as up to snuff.

Meanwhile, Treasury Secretary Tim Geithner writes in a New York Times op-ed today that the stress tests will help bring capital into the financial system by lifting the "fog of uncertainty" over the banking sector.

Jobless claims dip

New applications for jobless benefits plunged to the lowest level in 14 weeks, a possible sign that the massive wave of layoffs has peaked, but the number of unemployed workers continuing to get benefits climbed to a new record high.

First-time claims for unemployment insurance fell by 34,000 to 601,000 from the previous week revised figure of 635,000.

But the number of people receiving benefits for one week or more rose by 56,000 to 6.35 million. That’s the highest number on records dating back to 1967.

GM post $6 billion loss

General Motors' financial woes continue as the troubled automaker reported a $6 billion loss during the first three months of the year today.

Excluding special items, GM reported a loss of $5.9 billion. The company has now lost $88 billion since 2005.

Revenue fell 47% in the quarter to $22.4 billion due to a global slump in auto sales. Global sales volume, meanwhile, fell 28% in the quarter, led by a 46% decline in sales in the company's North American market.

GM has until the end of this month to come up with an agreement with creditors, unions and dealers that would cut its costs and debt enough to be viable for the long-term. If it fails to reach those agreements, GM is expected to follow rival Chrysler into bankruptcy.

GM to hosts buyers at spa event

And just weeks before that deadline, GM is entertaining 500 of its biggest customers at a luxury spa and golf course in Arizona.

But the affair is scaled back from previous years, says a GM spokesman quoted in USA Today. Guests have to pay for their own golf outings, he says, and most of the days are packed with informational sessions on GM's 2010 product line.

The guests are GM's fleet and corporate customers, which accounted for nearly 28% of GM's business in 2008. Fleet customers can buy dozens of vehicles at a time.

Filed under: Andrew Torgan • auto bailout • Economy • Finance • Unemployment • Wall St.
soundoff (One Response)
  1. Adachi

    The article is very informative one thing that a jump out at me is despite all the economic doom and gloom (i.e. GM and Bank of America) there is a glimmer of hope in terms of unemployment number dropping. So one day at a time, one day at a time.

    May 7, 2009 at 1:18 pm |