Banks tap equity markets for capital
Well that was easy--Wells Fargo and Morgan Stanley, in response to the stress tests, raised $7.5 billion and $4 billion respectively. Morgan Stanley raised $4 billion via a bond sale, a non-FDIC guaranteed sale at that. Goldman Sachs raised $5 billion before the test results were even announced.
Bank of America, facing a $34 billion shortfall, also laid plans to raise capital via an equity sale. The bank registered to sell 1.25 billion common shares over the next few weeks, which could raise another $18 billion or so. The New York Times notes that the bank "might not have to turn to another possible means of raising money, like converting preferred shares into common equity;" which would certainly make common investors feel a lot better.
The big question mark is GMAC, which might be forced to accept a larger government ownership stake. The mini-rally we've seen in financial stocks has certainly helped. The banks have 28 days to announce their capital-raising plans and until November 9 to implement them.
For more:
- here's the New York Times article
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