"[F]ive of the nation's eight largest banks--including JPMorgan Chase and Bank of America--did not have "credible" plans for how they would wind themselves down in a crisis without sowing panic.
That suggests that if there were another crisis today, the government would need to prop up the largest banks if it wanted to avoid financial chaos.
...The regulators were responding to the so-called living wills that banks must submit to regulators on a regular basis to explain how the banks plan to enter bankruptcy in an orderly fashion in case of crisis...
...In recent weeks, [former congressman Barney] Frank has criticized the financial overhaul proposals by Mr. Sanders. Mr. Frank contends that some of the plans to break up the banks are simplistic because they take a one-size-fits-all approach. In contrast, he said, measures like the living wills allow regulators to press for banks to shrink based on specific conditions at those firms.
The five banks that received rejections have until Oct. 1 to fix their plans.
After those adjustments, if the Fed and the F.D.I.C. are still dissatisfied with the living wills, they may impose restrictions on the banks' activities or require the banks to raise their capital levels, which in practice means using less borrowed money to finance their business.
And if, after two years, the regulators still find the plans deficient, they may require the banks to sell assets and businesses, with the aim of making them less complex and simpler to unwind in a bankruptcy."
http://www.nytimes.com/2016/04/14/business/dealbook/living-wills-of-5-banks-fail-to-pass-muster.html?_r=0
10 comments:
Democrats create a problem that is to big to fix. Who knew.
The government is too big to fail, and yet it does pretty much nothing else day after day. I think we have gotten quite comfortable with failure. How could we get tired of winning when we never got tired of failing?
And those are the ones that will crash. You can only print so many paper towels.
bagoh20 said...
The government is too big to fail
That's what Weimar thought.
Barney was in the House.
Thanks, Guildo.
It makes me feel better that it SEEMS the regulators are moving them in the direction of covering their potential bankruptcies.
This is what bipartisanship gets you.
Dodd-Frank?
There's a variant of too big to fail called too complicated to understand. I remember after one power black out the electric companies didn't understand how it happened, nor how to get the juice back up. When in doubt, blame the nearest Republican..........The Democrats used to have a theory that home ownership promoted middle class values and good citizenship. For the most part, the Republicans agreed with them. In such a way are bubbles formed.......They got the horse before the cart. Middle class people work hard and save up enough money to cover 20% of the mortgage. If the mortgage goes underwater, they keep working and keep paying off the mortgage. What choice do they have. That's the middle class values part of the equation.......,,Putting down 2% of the value and hoping the underlying value of the home increases so you can flip the sale before the mortgage comes due has nothing to do with middle class values. It should be noted, however, that such a system made some people rich. The tide goes out and some swimmers are revealed to be naked, but some swimmers swim out to their yacht before the tide turns. Some predatory borrowers left the banks holding the bag........This wasn't a scam the banks forced upon the people. It was a scam that the people and their reps forced upon the banks. There will be others.
As it is now, and ever shall be. Though I guess the housing market is 'hardened' against abuses for the present.
I think now they should be looking at banks that borrow from the Fed at 0% and give student loans at 6-7%. That should be stopped, especially with the lack of jobs for these graduates.
On the other hand, if a kid is naive enough to take out a loan to study an unusable degree, that's on them.
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