19th Nervous Breakdown: TBTF Stress Test Banks
You’re the kind of person you meet at certain dismal, dull affairs
Center of a crowd, talking much too loud, running up and down the stairs
Well, it seems to me that you have seen too much in too few years
And though you’ve tried you just can’t hide your eyes are edged with tearsYou better stop, look around
Here it comes, here it comes, here it comes, here it comes
Here comes your nineteenth nervous breakdown-19th Nervous Breakdown
Rolling Stones
>
Barry’s been complaining about a lack of quality time lately.
So here, before anybody else public, our guess about the list of “Too Big Too Fail” banks. Tell me if we are on the right track. (Notice no foreign names).
We’ll be commenting on same tomorrow:
Institutional Risk Analytics‘ TBTF List of Banks
| Holding Company |
| JPMORGAN CHASE & CO. |
| BANK OF AMERICA |
| CITIGROUP |
| WELLS FARGO & COMPANY |
| MORGAN STANLEY |
| PNC FINANCIAL SERVICES GROUP |
| U.S. BANCORP |
| BANK OF NEW YORK MELLON |
| SUNTRUST BANKS, INC. |
| STATE STREET CORPORATION |
| GOLDMAN SACHS GROUP |
| CAPITAL ONE FINANCIAL |
| BB& |
| REGIONS FINANCIAL |
| FIFTH THIRD BANCORP |
| AMERICAN EXPRESS |
| KEYCORP |
| NORTHERN TRUS |
| COMERIC |
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March 12th, 2009 at 9:35 am
“So here, before anybody else public, our guess about the list of “Too Big Too Fail” banks. ”
Chris, “Paul Kiel at ProPublica has compiled a list of the likely 19 banks”: http://www.calculatedriskblog.com/2009/03/stress-test-19.html
March 12th, 2009 at 9:49 am
We have poured 90+% of the bailout money into less than thirty firms. Most to the very largest of those 30. There are 20,000+ lending institutions in the US including CUs. WTF are we doing? These large firms have value. Nationalize them at investor expense, break off the good pieces and sell them back into the market when the economy will support it. What have we received for $10 trillion in backing? A need for another $10 trillion?
Here’s the real rub. The Fed’s current model relies on large banks. And, the US government uses international banks as part of its tool to enforce dollar hegemony and an interventionist foreign policy. It has nothing to do with what is in the best interests of the nation. It’s more than likely to save the power structure in Washington. And of course the massive feedback loop of politicians, banks and money.
March 12th, 2009 at 9:55 am
Excellent piece by David Leonhardt in the NY Times talking about the big banks “looting” America:
http://www.nytimes.com/2009/03/11/business/economy/11leonhardt.html
Very appropriate timing!
HCF
March 12th, 2009 at 10:18 am
bdg123,
the similiar thing occurred in the ’30s..
to consolidate Control, it works like a charm..
March 12th, 2009 at 10:27 am
“Tim Geithner’s still perfecting ways of making sealing wax….”
March 12th, 2009 at 10:30 am
I don’t understand why we wish to save the financial system, which Leonhardt (thanks for the link HCF), after detailing the looting that got us here, nonetheless assumes is the only way.
What if we simply got government out of the business of worrying about the health of banks? Feckless government regulation and interventionism got us here. Why not let the market devise its own system of financial checks and balances? Bank runs aren’t a bad thing if the bank deserves to suffer a run.
It is not altogether clear that the alphabet soup of New Deal agencies have done anything more than exacerbate a problem that was caused by mis-regulation of the one thing that matters most–the availability of money/credit–which was also the easiest to regulate, given the government’s absolute monopoly on its supply.
If we had got that regulation correct, the rest of the looting would not have been so easy, and w/out government providing a backstop to losses, would have been far less probable.
Properly provide a stable currency for the conduct of transactions and the storage of wealth. Everything else will take care of itself.
March 12th, 2009 at 10:36 am
Curmudgeon,
do you mean, like this:
http://www.law.cornell.edu/constitution/constitution.articlei.html
esp. Section 8.
March 12th, 2009 at 10:41 am
The bankruptcy is systemic.
Until we know what caused it (and we do, but in our co-dependent, dysfunctional state, we pretend we don’t), our attempts to reorganize will be for naught.
So, what caused it?
Fractional reserve lending accompanied by a glaring lack of oversight in an already deregulated environment, aided in and encouraged the formation of a continuing criminal enterprise founded on fraud and characterized by skimming of the revenue stream. In short: the largest Ponzi scheme ever attempted, which, by the very nature of such schemes, is prone to collapse over time, as new “investors” become increasingly difficult to find.
About a year ago, we wondered if we’d reached a “Minsky moment”.
We now find ourselves at a “Madoff moment” (don’t forget – you heard it from me, first).
The jig is up.
March 12th, 2009 at 10:45 am
@ Curmudgeon:
Clearly, the New Deal approach, most notably FDIC, relies on there being a sharp line drawn between government and private sector finance. The lesson of our times has got to be that either we go the route you suggest and have government get out of the banking business or create a true firewall between the two sectors.
Trying to keep the New Deal dream alive may be quixotic given the sophistication of 21st-century corporations in having their agendas translated into law and regulations — or the absence thereof. The current state of affairs only reinforces the notion that, to the extent Lincoln’s idealistic words “of the people, by the people, for the people” ever really existed, we’re losing it. Or God forbid, to quote Leonard Cohen:
Everybody knows that the war is over / Everybody knows the good guys lost / Everybody knows the fight was fixed / The poor stay poor, the rich get rich / That’s how it goes / Everybody knows / Everybody knows that the boat is leaking / Everybody knows that the captain lied / Everybody’s got this broken feeling / Like their father or their dog just died.
The catch-22 that we all sense is that “The People” just can’t get no satis-traction into the process because our mothers all neglected us and owe a million dollars tax.
March 12th, 2009 at 10:59 am
@ Transor Z:
“because our mothers all neglected us and owe a million dollars tax.”
he he…Cohen and Jagger/Richards, all in one post. Impressive.
@Mark E Hoffer:
Of course I meant something like Section 8. We could do w/ a little more Jefferson and a little less Hamilton about now it seems.
March 12th, 2009 at 11:23 am
@ Curmudgeon:
he he…Cohen and Jagger/Richards, all in one post. Impressive.
Well I don’t really know shit about high finance and stock trading so I try to bring something to the table to keep Barry from booting my ass out of here. :-)
March 12th, 2009 at 11:42 am
@Transor Z: Nonetheless, impressive total recall from 1966.
March 12th, 2009 at 11:58 am
Curmudgeon,
of course, but I couldn’t resist lobbing that Softball out there, though.. (:
Transor,
I’m not sure which is better, the great lyric, or the funny quip, though, no matter
and, for our friends, far afield, wondering who Jefferson was, here’s the .gov approved version, sure to keep you off, at least one, Terrorist List..
http://sc94.ameslab.gov/TOUR/tjefferson.html
ref. http://thetruthorthefight.wordpress.com/2009/03/12/secret-state-police-report-ron-paul-bob-barr-chuck-baldwin-libertarians-are-terrorists/
March 12th, 2009 at 5:36 pm
The taxpayers can’t possibly be asked to prop up all the firms which you have listed. Clear and simple; some will have to bite the dust! To paraphrase a Queen tune.
March 12th, 2009 at 10:49 pm
Curmudgeon,
“Why not let the market devise its own system of financial checks and balances?”
ummm, haven’t we tried that before?… let me see… yep, thats what got us into this mess! – 20 years of ultra-free market-radicalism – apparently that didn’t work
financial innovation completely outpaced regulators
and free-market-ers thought it was a good idea to break-down glass-steagall, let investment banks grab 30-40x leverage, and thought no money-down mortgages were a good idea
not picking on you crudge, I just obviously have a different view of the solution and think it would be catastrophic to simply let the market determine the fate of our economy at this point
March 12th, 2009 at 10:50 pm
p.s. – I guess its guesswork about who is actually being tested, but Northern Trust only had $88 billion of assets at 12/31/08 – if the cut-off was $100 billion, then they wouldn’t have made the list
not to mention their balance sheet is pretty clean
fwiw