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Fed Tests Show 17 of 18 Banks Weathering Severe Slump

The Federal Reserve said 17 of the 18 largest U.S. banks could withstand a deep recession and maintain capital above a regulatory minimum, a sign of how higher standards and supervisory prodding are strengthening the financial system.

Only Ally Financial Inc., the auto lender majority-owned by U.S. taxpayers, fell below a 5 percent Tier 1 common ratio, a regulatory minimum and measure of financial strength, according to data released today by the central bank in Washington. Morgan Stanley showed a minimum Tier 1 common ratio of 5.7 percent in the test and Goldman Sachs Group Inc. a ratio of 5.8 percent.