Citigroup, Wells Fargo May Loan Less After Downgrades (Update3)
By Mark Pittman, Alan Katz and David Mildenberg
April 8 (Bloomberg) -- Bank holding companies including Citigroup Inc., Bank of America Corp. and Wells Fargo & Co. have the thinnest safety cushion against losses in seven years.
The margin may erode further in coming weeks. Credit ratings on $704 billion of bonds have been cut this year following the collapse of the U.S. housing market. Sheila Bair, chairman of the Federal Deposit Insurance Corp., said last week that downgrades may compromise bank capital ratios ( Banks May Fuel Downturn as Downgrades Slow) enough that some of the largest institutions will no longer be considered well capitalized.
Falling below a regulatory benchmark that is intended to maintain a minimum level of capital to protect depositors against losses would subject banks to more scrutiny from regulators than they have ever experienced.
``This is a nightmare for the country,'' said William Isaac, who was chairman of the FDIC from 1981 to 1985.
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