WASHINGTON — All but four of 19 major U.S. banks got a green light Tuesday to boost dividends and buy back shares after the Federal Reserve declared them strong enough to survive another serious recession.
J.P. Morgan, Wells Fargo and other large bank holding companies that passed the Fed’s so-called stress tests announced they would return capital to shareholders, igniting a late-day rally on Wall Street.
“It’s clearly good news. The U.S. banking system can now withstand a quite severe recession without falling over,” said Douglas Elliott, a fellow at the Brookings Institution.
One notable exception was Citigroup, the nation’s third-largest bank. It was among the companies the Fed said lacked enough capital to withstand another severe economic and financial crisis. Its stock price fell 4 percent in after-hours trading.
The other three that did not pass the rigorous, hypothetical stress tests were Ally Financial, SunTrust and MetLife.
The Fed can stop those banks from paying stock dividends or buying back their own stock. It also can force them to raise money by selling additional stock or issuing debt.
After the first round of tests, in 2009, the Fed ordered 10 banks to raise a total of $75 billion.
