Do the Stress Test Results Scuttle PPIP?
By Stacy Kaper and Joe Adler

 

The stress test results are raising doubts that the government’s next financial stability project — a plan to let banks get rid of toxic assets — is still needed. Until last week, most expected that the stress tests would reveal a need for significantly more capital at the nation’s 19 largest banks — capital holes that could be filled in part by forcing those institutions to sell assets through the public-private investment program. Instead, the results showed that, of the 10 banks that do need more capital, only a few need to raise sizable amounts, casting doubt on whether they will need to participate in the asset sales program. Karen Shaw Petrou, the managing partner of Federal Financial Analytics Inc., said PPIP is still needed because the stress test parameters might guide regulators in examining the rest of the industry, too, putting pressure on banks beyond the top 19 to raise capital.

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