Tense talks as U.S. bank stress tests near completion

By Emily Kaiser and Karey Wutkowski

WASHINGTON (Reuters) - The largest U.S. banks made the case to regulators on Monday that they have the financial firepower to withstand a deeper recession, as Bank of America denied a report it was trying to raise capital of $10 billion.

Banks and regulators were in tense discussions over the findings of so-called "stress tests" aimed at assessing whether the 19 largest firms have a sufficient capital cushion. Final results are expected to be disclosed on Thursday.

"Today is going to be a very key day in negotiations," a financial industry source said, speaking anonymously because the banks' discussions with regulators are not public. "Things are particularly tense."

U.S. officials are expected to brief banks on Tuesday on the results and on how they will be publicly unveiled.

A source familiar with the plans said the final results will come in a 150-page report on Thursday, and Federal Reserve Chairman Ben Bernanke and Treasury Secretary Timothy Geithner will present the findings.

Banks found to be in need of more capital will have to embark on a recovery plan that could involve converting preferred stock, raising fresh private capital, or accepting government help -- assistance which comes with close scrutiny from Congress that will certainly be unwelcome on Wall Street.

Pouring more public money into banks would also put political pressure on President Barack Obama, whose administration is keen to avoid asking lawmakers to approve more bailout money for shortfalls that some analysts think may reach $150 billion.

White House spokesman Robert Gibbs on Monday said that the administration does not see a need to ask the U.S. Congress for additional funds to support banks, and that the banks will be encouraged to seek extra funds through private sources.