Former investment banker Carol Roth and Kaltbaum Capital Management President Gary Kaltbaum discuss how markets are reacting to the Federal Reserve’s announcement that banks will no longer have a pause in the amount of capital they need to hold.
In another strong sign that the US economy is recovering, the Federal Reserve plans to remove a rule that prevented banks from raising dividends and repurchasing shares.
The Fed, as long as these financial institutions pass the next round of stress tests scheduled for June, will remove the restrictions, as detailed in a statement.
| Ticker | Safety | Last | Change | Change % |
|---|---|---|---|---|
| JPM | JPMORGAN CHASE & CO. | 152.67 | +2.00 | + 1.33% |
| BAC | BANK OF AMERICA CORP. | 37.70 | +0.81 | + 2.20% |
| WFC | WELLS FARGO & CO. | 39.32 | +1.21 | + 3.17% |
| GS | THE GOLDMAN SACHS GROUP, INC. | 330.55 | +1.90 | + 0.58% |
With the announcement coming after the closing bell, expect major banks like JPMorgan, Bank of America, Wells Fargo and Goldman Sachs to be in focus during Friday’s trading session
In what may have been a harbinger, U.S. Treasury Secretary Janet Yellen earlier this week during her testimony with Fed President Jerome Powell said that banks looked healthy and could start restoring dividends on answer to a question.
JANET YELLEN, JEROME POWELL DE FED TESTIFIES ON COVID-19 RELIEF, ECONOMY
The stress tests, instituted after the 2008 financial crisis, aim to ensure that US financial institutions are well capitalized in the event of a sharp slowdown and are able to lend to consumers and small businesses.
This is the second extension that the Fed has granted banks. Last week, the Fed told banks that the capital level requirements that were eased during the pandemic would return to normal later this month.