Due to the fear for national recession that would cause major banks to default, consequently leading to severe economic damage, the Federal Reserve of the American Government has recently decided to toughen its capital tests for the biggest national banks in U.S. As part of the change, the Fed released a new criteria measuring the 31 largest banks’ ability to withstand a recession with 13 percent unemployment and an 8 percent decline in gross domestic product before they can increase dividends or purchase shares. Due to this government policy change, Citigroup Inc. and Bank of America Corp. along with other largest lenders in the States, may have to temper plans to raise dividends and buy back stock next year. The banks will have to have a strong capital that will allow them to survive the extremely pessimistic scenario posed by the Federal Reserve. This policy will lead to certain issues as the banks will become less likely to return more capital to their shareholders, whose holdings have been decimated. The Federal Reserve also expanded its testing circle to 12 new banks for 2012 in the new policy change. This policy shows how the American government is trying to stricken its banking policies as the past recessions have shown weaknesses in the American banking system; however, the number of banks and the fact that they only test bigger banks show how there are still many problems existing in American Banking policies comparing to the safer Canadian ones.