Business Digest

BANKING

Stress-Test Results Due on Thursday

The government plans to release Thursday the results of stress tests on 19 large banks, showing projected losses for each bank through 2010, officials said yesterday. Many financial analysts expect the results to show that several large banks, including Citigroup and Bank of America, need additional capital to survive such losses. Banks will be given six months to raise the money from private investors before they must accept federal aid.

The Treasury Department has twice postponed releasing the test results, in part because banks continue to contest the government's findings. The disagreements center in part on the depth of likely losses in various loan portfolios, and the ability of the banks to increase earnings in the coming months, according to sources familiar with the matter. The Federal Reserve, which conducted the tests, remains in discussions with several banks and some results still could be adjusted, the sources said.

Also yesterday, the Fed announced an effort to increase the availability of mortgage loans on commercial properties. The Fed said it would offer loans to investors to purchase up to $100 billion of bundled commercial mortgages. The effort expands an existing program, the Term Asset-Backed Securities Loan Facility, or TALF, which previously offered three-year loans to investors in credit-card and auto loans. The Fed now will offer five-year loans, better matched to the terms of commercial mortgages, but also extending by two years the earliest end-date for the Fed's support of such private investment activity.

-- Binyamin Appelbaum

Regulators Close Large Atlanta Bank

Regulators shut down Atlanta-based Silverton Bank, which fell victim to losses on real estate construction and development loans, and set up a temporary government-controlled bank until a buyer can be found.

The federal Office of the Comptroller of the Currency appointed the Federal Deposit Insurance Corp. as the bank's receiver. Silverton Bank had about $4.1 billion in assets and $3.3 billion in deposits.

Silverton provided services to around 1,400 client banks and did not take deposits directly from the public or make loans to consumers. Around 400 institutions, mostly community banks, own stock in Silverton's holding company and will take losses as a result. The FDIC estimated that the cost to the deposit insurance fund from Silverton's failure will be $1.3 billion.

Regulators also closed Citizens Community Bank in New Jersey and America West Bank in Utah. Yesterday's closures brought to 32 the number of U.S. bank failures this year. That compares with 25 in all of last year and three in 2007.

-- Associated Press

INSURANCE

Accounting Change Benefits Hartford

The Hartford Financial Services Group's $1.2 billion first-quarter loss would have been a lot worse if the struggling insurance giant hadn't changed the way it keeps its books. Changes in accounting methods and assumptions produced a pretax gain of $550 million.

Some of those changes also gave a boost to Hartford's capital, the financial cushion that the company is required to maintain to ensure it can keep promises to policyholders.

Hartford's first-quarter earnings report, which the company discussed in a conference call with analysts yesterday, was another in a series by financial companies in which changes in the way they measure their business have made their problems smaller, at least as far as appearances are concerned.

Hartford's woes are so serious that it is considering selling pieces of itself to raise money. The company has been seeking an infusion of taxpayer funds from the Treasury.

The accounting changes Hartford disclosed late Thursday involve judgments the company must make about the value of assets and obligations. One involves the way Hartford measures the market's perception of its creditworthiness. Hartford officials said they consider the new method to be an improvement, but they would not say why they are only now adopting it.

-- David S. Hilzenrath

CONSUMER SAFETY

Popular Dietary Supplement Recalled

Government health officials warned dieters and body builders to immediately stop using Hydroxycut, a widely sold supplement linked to cases of serious liver damage and at least one death.

The Food and Drug Administration said that Iovate Health Sciences, which makes the supplement, has agreed to recall 14 Hydroxycut products. Available in grocery stores and pharmacies, Hydroxycut is advertised as being made from natural ingredients. At least 9 million packages were sold last year. The agency said it has received 23 reports of liver problems, including the 2007 death of a 19-year-old boy.

Iovate said in a statement that the teenager's death was not caused by Hydroxycut, but gave no details.

-- Associated Press