The oversight panel — led by Harvard law professor Elizabeth Warren — acknowledged the difficulty confronting Paulson and his team.
The report said while 18 of the 19 large institutions that underwent “stress tests” by the Federal Reserve in the spring probably are prepared to handle a downward turn in the economy, smaller banks would have a substantially more difficult time.
Those banks may need to raise an additional $12 billion in capital to guard against mortgage loans going bad, the report states.
Banks face continued stress from the billions of dollars in toxic mortgage assets still on their balance sheets, a congressionally appointed watchdog said Tuesday, something that could prompt the Treasury Department to expand its rescue programs. [Read More]
