11 Banks Still ‘Too Big To Fail’


Via HuffPo:

Eleven of the nation’s largest banks have failed to convince federal regulators they could safely be wound down if they neared failure, government authorities said Tuesday, reinforcing the idea that they are too big to fail.

The Federal Deposit Insurance Corp. said October blueprints submitted by banks, including JPMorgan Chase, Goldman Sachs and Bank of America, detailing how they think they’d be resolved in bankruptcy if they neared collapse were “not credible.” The Federal Reserve, another bank regulator, said the so-called living wills need significant improvement by July 2015 or the government may force them to shrink.

…The phenomenon known as too big to fail is based on the notion that government officials will always rescue a failing financial company when it believes the failure would cause financial chaos. Since investors in the company believe they’d be bailed out, they accept a lower return for funding the company’s operations. That in turn enables the too big to fail company to enjoy a taxpayer-provided subsidy unavailable to its smaller rivals.

Tuesday’s announcement by federal regulators that the 11 banks’ living wills were inadequate strikes at the heart of the argument that the banks are no longer too big to fail.

TBTF means bailouts and bonuses for billionaires and corporate execs, and nothing for the ever-shrinking American middle class.

  1. #1 by brewski on August 6, 2014 - 4:56 pm

    There is no reason at all that any bank is ever bailed out and that any executive or shareholder would benefit from such a bailout. Obama, Geithner and Lew all lie when they say that the only choice is between bailouts and another Great Depression. That is a lie and just plain false. Obama is a corporatist and the OWS people should be protesting at the WH and not in NYC.

  2. #2 by Nathan Erkkila on August 6, 2014 - 7:19 pm

    As much as I think that what banks are doing is criminal, the truth is that they have society by the throat. They always have been ever since the Renaissance. The last time these too big to fail banks failed, we went into a great depression. When they were close to failing, then we had the great recession. Banks have always been inoperable tumors that society has to live with.

  3. #3 by Larry Bergan on August 6, 2014 - 9:10 pm

    I hope my credit union is too big to fail.

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