Friday, April 24, 2009

The Federal Reserve says the government is prepared to rescue any of the banks that underwent "stress tests" and were deemed vulnerable if the recession worsened sharply.

The Fed said the 19 companies that hold one-half of the loans in the U.S. banking system won't be allowed to fail — even if they fared poorly on the stress tests.

Critics say that policy has put taxpayer money at risk on behalf of banks that have received billions in government bailouts and guarantees.

Separately, bank executives were briefed on the results. By law, the banks cannot publicize the results without the government's permission.

Wall Street buzzed with anticipation and most financial stocks rose. The Dow Jones industrial average added more than 119 points to 8,076.

Fed officials say that banks will be required to keep an extra capital buffer in case losses continue to mount.