Several local bankers say they are glad the Obama administration imposed “stress tests” on the nation’s 19 largest banks to determine their ability to weather tough economic times.

Those tests reveal that 10 of the 19 need a total of about $75 billion in new capital to withstand losses if the recession worsens, the government announced Thursday.

Bank of America alone needs $33.9 billion.

If these banks had already been facing this scrutiny, said one local banker, the nation’s financial standing may not have sunk into a hole that has required a $700 billion bailout.

“Oversight has been the missing ingredient,” said Bill Nesbitt, chairman and CEO of Central National Bank.

Central National Bank is a locally owned, independent bank that answers to the Comptroller of the Currency.

It and other independent banks that dot the landscape in Waco are regulated either by the Comptroller or the State Banking Department.

“Somebody who knows what they are doing is looking over your shoulder to see what you’re doing. Real banks have had that a long time,” Nesbitt said. “It’s a pain in the neck, and we cuss them all the time. But our regulators do know what they are doing, and our banks are a lot sounder because of them.”

Records show that no Waco-based bank has applied for bailout money from the Troubled Asset Relief Program.

Synergy Bank in Waco considered applying for TARP money but changed its mind “because we didn’t know what restrictions might ultimately be placed on us,” President Dana Hassell said.

Waco does have branches of Wells Fargo and Bank of America, for example, which are among the largest banks in the country and have received bailout money from TARP.

Nesbitt said some of the 19 big banks may have faced oversight but simply struggled due to tough economic times.

“But some of the ‘banks’ that are making news are not really banks as most people view them. They are investment banks or brokerage houses, and they are not regulated by bank examiners,” Nesbitt said.

The government is asking these big banks to keep their capital reserve ratios above a certain level so they can continue lending if the economic landscape gets even uglier.

Banks that need more capital will have until June 8 to come up with a plan to raise the additional resources and have the plan approved by regulators.

If they can’t do it, the government will provide money from its $700 billion financial system bailout.

Banks under scrutiny

Willard Still, vice chairman of Waco’s American Bank, said he never felt taxpayer money “should be injected into the banking industry.”

But now that it has been, he said, he’s glad the big banks are getting tested and the results are being made public.

“Waco is very fortunate to have a number of strong, large independent banks,” Still added. “Frankly, regulators would never let a community bank do some of the things these larger banks have done. The risks they have taken not only with depositors’ money but with shareholders’ money would not be tolerated.”

Baylor University economist Kent Gilbreath said he “supports this careful examination of the strength of these banks.”

“Essentially, it is a make-up exam that should have been provided earlier,” he said. “We are just making up for lost time or the lost opportunity to have prevented this problem.”

Gilbreath said he knows there is debate over whether the results of the test should be made publicly available. He said bad numbers “could impose some difficult challenges for banks in terms of raising capital.”

“But by taking federal money, these have become quasi-public institutions that we are supporting,” Gilbreath said. “We the people have a right to know their status so we can make informed decisions on government policy dealing with them. Had they not put themselves in this position, they would not face public scrutiny.”

mcopeland@wacotrib.com

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