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Business Briefing / Banking

Fed urges cuts in dividends

February 25, 2009|Times Wire Reports

The Federal Reserve is urging Wells Fargo & Co. and dozens of banks getting bailout funds to consider future loan losses and the need to bolster capital before paying dividends to shareholders.

The Fed told its regional supervisors in a letter that banks should reduce or eliminate dividends when earnings decline or the economic outlook deteriorates.

The guidance may signal that some banks resisted dividend cuts even as regulators grew increasingly concerned about their ability to withstand losses, said Sherrill Shaffer, who served as the New York Fed's chief economist in the 1980s.

A spokeswoman for the Fed declined to comment.

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