* Regulators asked five big banks to make “recovery plans”Reuters
* Banks include BofA, JPMorgan and Goldman Sachs
* Plans outline asset, business sales in times of distress
* Plans differ from living wills, which plan for failure
U.S. Banks Told To Make Plans For Preventing Collapse
Rick Rothacker
(h/t 4closureFraud)
2 comments:
“Banks Told To Make Plans For Preventing Collapse”. Now that’s a stroke of genius.
When a bank’s liabilities exceed its assets, which can easily happen give the leverage under which banks operate (with the approval of regulators) I cannot for the life of me think what “plan” will save it. Any such “plan” will just be a joke as far as banks are concerned. If I were a bank I’d write my “plan” on toilet paper and tell the regulators to put it in the comfort room. Banks know perfectly well that come the next crisis, taxpayers will come to the rescue.
Also, I like the way that Reuters article claims that most banks “are still profitable”. No they’re not. Over the last decade, the TBTF subsidy and other taxpayer funded assistance for banks comes to much more than bank profits. See:
http://www.voxeu.org/article/what-contribution-financial-sector
Banks in their present form are plain simple uneconomic. They’re part of the “socialism for the rich” fraud that the 1% have foisted on the 99%.
The entire banking model needs re-thinking. Depositors who want interest on their deposits (i.e. who want to act in a commercial manner) should face the normal risks inherent in commerce: the risk that you lose out. That’s what Laurence Kotlikoff recommends, and he’s right. That way it’s far less likely that a bank goes bust.
The problem is TBTF (too big to fail) and TBTB (too big to bail). A handful of US banks account for a majority of the sector. The big five are especially problematic. Voters sent a signal, "no more bailouts." So the alternatives are break up the banks, which is not going to happen anytime soon, or put a big bank into resolution as it done with smaller banks all time and is required legally, but it is off the table for the TBTF's because it would amount to "nationalization." So TPTB are trying to figure out an escape between the horns of this dilemma. The thinking is to have a plan to sell assets quickly to raise capital, and if that fails, have a "living will" already prepared. The regulators want to see this in writing. It's all about CYA.
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