WASHINGTON (AP) -- The government's "stress tests" of 19 large banks take a harsher view of loans than of other troubled assets. That approach favors a few Wall Street banks while potentially threatening major regional players.
A Federal Reserve document obtained by The Associated Press shows regulators will focus on the risks of bad mortgages and other loans to determine which banks are healthy and which might fail if the recession worsened.
The regulators' focus could spell trouble for big regional banks undergoing the tests. Their portfolios have more individual loans and fewer of the big pools of securitized loans that Wall Street giants specialize in.
The Fed is scheduled to detail its methodology for the tests on Friday and release the results May 4.