The results of the Federal Reserve's much-anticipated "stress tests" conducted on the nation's 19 largest banks have finally been made public after more than a week of delay. The outcome? The nation's financial giants are not out of the woods yet, but they're also not as lost in those woods as many had feared they would be. As projected by the federal government, the 19 banks tested are at a combined risk to lose up to $599 billion through the end of next year should the economy perform worse than expected. As a result, 10 of the 19 banks have been ordered to raise a combined $74.6 billion in capital to cushion themselves. Though $599 billion is still a staggering number, many industry insiders were predicting the potential for losses to be much higher.
 
Treasury Secretary Timothy Geithner called the results of the stress tests "reassuring." In an interview with PBS' Charlie Rose Program, Geithner stated that "There [are] very significant cushions in these institutions today, and all Americans should be confident that these institutions are going to be viable institutions going forward."
 
Federal Reserve Chairman Ben Bernanke also was upbeat about the results of the stress tests, referring to them as "encouraging." However, Bernanke also emphasized that banks should conduct internal stress tests to identify other potential risks, especially risks that the government's tests did not address.
 
"Ideally, the stress tests used in the assessment program should be part of a broader palette of internal stress tests conducted by firms," Bernanke noted last week at a Fed conference hosted by the Atlanta Fed district bank. "Indeed, we do not intend that the capital assessments should be taken as all that those firms need to do."
 
Bernanke's comments mirror concerns that have grown in recent months regarding the health of the commercial real estate sector. According to an article that ran in the Wall Street Journal, regulators are increasingly worried about banks exposed to commercial loans. As projected by the stress tests, losses could be up to 12 percent - or $216 billion - on commercial real estate loans by the end of next year.
 
The results of the Fed's tests are the culmination of weeks of investigations into the banks' lending practices, funding strategies and securities and loan portfolios. After officially announcing the stress test results, regulators set a timetable for banks that need to bolster their capital. These institutions will have until June 8 to develop a plan and until Nov. 9 to implement it.
 
Under the stress tests, each bank was put through two "what if" scenarios by regulators. Under the first scenario, it was assumed that the unemployment level will reach 8.8 percent in 2010 and house prices will decline by 14 percent. In the second scenario, banks were analyzed for what would happen during a worse-than-expected downturn; one where unemployment levels would hit 10.3 percent in 2010 and house prices would drop 22 percent this year