Should the FED use its authority to break up systemically risky banks? The Dallas Federal Reserve president says yes:
Federal Reserve Bank of Dallas President Richard Fisher said regulators should break up so- called too-big-to-fail financial institutions to curtail the risk they pose to financial stability.
“I believe that too-big-to-fail banks are too-dangerous- to-permit,” Fisher said in the text of remarks given in New York today. “Downsizing the behemoths over time into institutions that can be prudently managed and regulated across borders is the appropriate policy response. Then, creative destruction can work its wonders in the financial sector, just as it does elsewhere in our economy.”
Regulators in the U.S. and abroad have attempted to address the risks posed by such systemically important financial institutions, and if “properly implemented,” the Dodd-Frank overhaul legislation “might assist in reining in the pernicious threat to financial stability,” Fisher said.
Most independent economists agree that the insolvent banking behemoths are too big to save:
- Nobel prize-winning economist, Joseph Stiglitz
- Nobel prize-winning economist, Ed Prescott
- Former chairman of the Federal Reserve, Alan Greenspan
- Former chairman of the Federal Reserve, Paul Volcker
- Former Secretary of Labor Robert Reich
- Dean and professor of finance and economics at Columbia Business School, R. Glenn Hubbard
- Former chief economist at the International Monetary Fund Simon Johnson
- Former president of the Federal Reserve Bank of Kansas City, Thomas Hoenig
- President of the Federal Reserve Bank of Dallas, Richard Fisher
- President of the Federal Reserve Bank of St. Louis, Thomas Bullard
- Deputy Treasury Secretary, Neal S. Wolin
- The President of the Independent Community Bankers of America, Camden R. Fine
- The Congressional panel overseeing the bailout
- The head of the FDIC, Sheila Bair
- The head of the Bank of England, Mervyn King
- The leading monetary economist of the leading treatise on the Great Depression, Anna Schwartz
- Economics professor and senior regulator during the S & L crisis, William K. Black
- Leading British economist, John Kay
- Economics professor, Nouriel Roubini
- Former Wall Street investment bank managing director, Marc Faber
- Professor of entrepreneurship and finance at the Chicago Booth School of Business, Luigi Zingales
- NYU Stern economics professor, Thomas F. Cooley
- Former senior economist at the Economics Policy Institute, Dean Baker
- Former Federal Reserve economist Arnold Kling
- Former City of London investment banker, Philip Augar
- Chairman of the Commons Treasury, John McFall
This is the conclusion that the FT has drawn about Europe's largest banks:
The truth, however, is that, given the level of eurozone government indebtedness and the relative size of Europe’s banks, Europe’s largest banks are now too big to save.
The now inevitable restructuring of eurozone government debt will result in bank capital deficiencies which the International Monetary Fund estimates could exceed €300bn. European taxpayers cannot afford to cover this bill: tapping already thin public coffers will mean higher sovereign borrowing costs and dimmer prospects for growth. Even the strongest European economies now face this constraint.
Ultimately European governments will have to abandon their implicit guarantees for banks to protect their own solvency.
Senior bondholders of Europe's southern nations are facing huge haircuts of as much as 80%:
European policymakers need to take four decisive steps to end the euro zone crisis, including debt restructuring in Greece, Portugal and Ireland with writedowns for private creditors of 75 percent to 80 percent, said the BlackRock Investment Institute.
"Governments are falling, bond yields are zig-zagging by whole percentage points and markets around the world are locking up: the euro zone turmoil risks turning into a global crisis," BlackRock said in a research note on Monday.
Here's the rub: American banks are massively exposed to Europe:
And according to the Bank for International Settlements (BIS), U.S. banks actually increased their exposure to PIIGS debt by 20% over the first six months of 2011.
But the greatest risk is the multiple links most large U.S. banks have to their European counterparts - many of which hold a great deal of PIIGS debt.
"Given that U.S. banks have an estimated loan exposure to German and Frenchbanks in excess of $1.2 trillion and direct exposure to the PIIGS valued at $641 billion, a collapse of a major European bank could produce similar problems in U.S. institutions," a CRS research report said earlier this month.
The Big Five hold 97% of the half trillion in guarantees (being covertly dumped on the public):
As the European financial crisis worsened during the first half of 2011, U.S. banks increased sales of insurance against credit losses to holders of Greek, Portuguese, Irish, Spanish, and Italian debt. Guarantees provided by U.S. lenders on government, bank, and corporate debt in those countries rose by $80.7 billion, to $518 billion, according to the Bank for International Settlements.
BIS doesn’t report which firms sold how much or to whom. Almost all of those guarantees are credit-default swaps, according to two people familiar with the numbers who asked not to be identified because they weren’t authorized to speak. Five banks—JPMorgan (JPM), Morgan Stanley (MS), Goldman Sachs (GS), Bank of America (BAC), and Citigroup (C) — write 97 percent of all credit-default swaps in the U.S., according to the Office of the Comptroller of the Currency.
The global insurrection against banking occupation is being targeted by mouthpieces of the casino gulag state. However, it is well known that the corporate media puppets are subservient to the City of London and Wall Street firms who own them. The vile depiction of the masses on camera only legitimizes the movement, and reinforces the notion that the one percent views democratic expression as little more than an obstacle to depopulation.