Federal Reserve Chairman Ben Bernanke gave his most extensive comments on the results of the stress tests during a speech before a Federal Reserve Bank of Atlanta conference on Jekyll Island, Georgia on Monday night:
We have now learned through this process that, if the economy were to track the more adverse scenario, additional losses at the 19 firms during 2009 and 2010 could total about $600 billion. After taking account of potential resources to absorb those losses, including expected revenues, reserves, and existing capital cushions, we determined that 10 of the 19 institutions will require, collectively, common or contingent common equity of $185 billion to ensure adequate capital cushions. Of this amount, the equivalent of $110 billion has already been raised or is contractually committed to be in place, or to a lesser degree reflects first-quarter pre-provision earnings above those assumed in the initial supervisory estimates. Consequently, the remaining common equity buffer that must be raised is $75 billion. The firms that are determined to need an additional capital buffer will have 30 days to develop a capital plan to be approved by their supervisors and six months to implement that plan. We have strongly encouraged institutions requiring additional capital to obtain it through private means, including, for example, new equity issues, conversions, exchange offers, or sales of businesses or other assets. To ensure that all of these firms can build the needed capital cushions, however, the Treasury has made a firm commitment to provide contingent common equity, in the form of mandatory convertible preferred stock, as a bridge to obtaining private capital in the future. Banking organizations will also have the option to exchange their existing preferred stock, issued under Treasury's earlier Capital Purchase Program, for the new contingent common equity. The Treasury has indicated that it expects that any such exchange will be either accompanied or preceded by new capital raises or the conversion of private capital securities into common equity.
