tagged w/ too big to fail
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A senior administration official said on Sunday that after extensive consultations with Treasury Department officials, Representative Barney Frank, the chairman of the House Financial Services Committee, would introduce legislation as early as this week. The measure would make it easier for the government to seize control of troubled financial institutions, throw out management, wipe out the shareholders and change the terms of existing loans held by the institution.A senior administration official said on Sunday that after extensive consultations... more
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The head of the U.S. Federal Deposit Insurance Corp. said on Sunday that she wanted to end the “too big to fail” doctrine and shrink the shadow banking system that operates outside the reach of regulators.
F.D.I.C. Chairman Sheila Bair, speaking to the Institute of International Finance meeting here, said a U.S. proposal to create the authority to shut down failing systemically important financial firms may need to be extended to insurers and hedge funds, Reuters reported.
“We need to end ‘too big to fail’ and this needs to be an overarching policy that applies to everyone,” Ms. Bair said.
Ms. Bair said she believed that bank holding companies with subsidiaries that are shut down by regulators also should be made to pay the price of failure by being subject to the same wind-down process.
“I believe that the new regime should apply to all bank holding companies that are more than just shells and their affiliates regardless or not whether they are considered to be systemic risks,” she said, adding that including only systemically important firms in the shut-down regime could reinforce the ‘too big to fail’ doctrine.
Financial firms subject to systemic risk shutdown authority should likely also be required to publish “living wills” — details on how an orderly wind-down would play out — on their websites to provide more clarity to shareholders and customers.The head of the U.S. Federal Deposit Insurance Corp. said on Sunday that she wanted to... more
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As Congress decides how to reregulate the financial markets, we need to keep in mind the importance of speed. The picture posted to this story comes from the Comptroller of the Currency report - OCC’s Quarterly Report on Bank Trading and Derivatives Activities First Quarter 2009 and it shows that the institutions that were "too big to fail" last year have gotten even larger.
The top four banks alone (JPMorgan Chase, Goldman Sachs, Bank of America, and Citibank) account for $189.6 trillion in derivative contracts, which represents 94% of the total derivatives market ($201.5 trillion). I may not be an economist but if these banks hit hard economic times, how will we NOT be able to bail them out?
We need to start breaking up these banks NOW!
And yes, I did write that the total derivatives market is over 200 TRILLION dollars... to put that into perspective, the GDP of the entire planet is around $46 Trillion (http://www.wolframalpha.com/input/?i=global%20gdp&t=ff3tb01)As Congress decides how to reregulate the financial markets, we need to keep in mind... more
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For months, the U.S. government and financial institutions have been operating in crisis mode, frantically crafting emergency programs designed to forestall a systemic economic collapse.
The steps taken during these times have challenged longstanding assumptions about the operation of modern free-market capitalism and the role of the government in the economy. In the aftermath of the crisis and the inauguration of a new, more activist Democratic administration, U.S. economic thinking seems to be at a historic turning point.
The idea of capitalism as an economic system was explained more than 200 years ago by the Scotsman Adam Smith. In his book The Wealth of Nations, Smith said a free market guides a society to efficiency by bringing buyers and sellers together and stimulating economies to produce more of what's needed and less of what's not.
In the United States, the best known apostle of free-market capitalism was the legendary economist Milton Friedman, who died in 2006. In 1980, Friedman made the case for Adam Smith's capitalism model in a 10-part television series called Free to Choose.For months, the U.S. government and financial institutions have been operating in... more
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Here is the problem: The banks (no wait, lets just call them firms, because this is not limited to the banks anymore) are stuck in the most uncomfortable of positions. They cannot raise the badly needed capital from the private markets because there is a constant fear of nationalization. They’re unable to go into Chapter 11 and liquidate their debts and consolidate their profitable business ventures because the Federal Government will not allow them that option due to their classification as “systematic threats to the system” (aka Too Big To Fail).Here is the problem: The banks (no wait, lets just call them firms, because this is... more
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