Bank exam results should buoy confidence, Fed chief says

WASHINGTON -- The government's unprecedented "stress tests" of the nation's 19 largest banks should bolster Americans' battered confidence in U.S. banking system, Federal Reserve Chairman Ben Bernanke said Monday as he defended the rigor of the exams.

"We hope and expect that the public and investors will take considerable comfort from the fact that our largest financial institutions have been evaluated in a comprehensive and rigorous fashion," Bernanke told a Fed conference on financial markets held at Jekyll Island, Ga.

Wall Street did get a boost last week as the stress tests helped to push prices for bank stocks higher. However, that rally fizzled out on Monday as bank shares dragged the market lower.

While that's a good sign that banks can again turn to Wall Street to raise money by selling stocks, the reality of extra shares pouring into the market weighed on financial stocks.

Bernanke said it would take time to evaluate whether the stress-test process helps to reduce the uncertainty that has hung over investors and the economy about banks' future losses and capital needs.

"However, the initial indications are encouraging," he said.

Each of the 10 banks requiring an extra capital buffer against potential losses has pledged to have this additional cushion in place by a Nov. 9 deadline, Bernanke said.