Tag Archives: TBTF

Fed’s Kashkari Unveils His Plan to End Too-Big-to-Fail Banks

Federal Reserve Bank of Minneapolis President Neel Kashkari proposed a series of new rules for banks and non-bank lenders that he said would eliminate the threat posed by financial institutions whose failure could wreak havoc in the global markets.

The plan centers on significantly increasing the capital cushion banks must hold to protect against losses in a crisis. It also calls on the U.S. Treasury to determine which banks are “too big to fail” and face higher capital requirements. Finally, the plan would impose a tax on debt for large non-bank lenders and reduce the regulatory burden on community banks.

Read on.

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Maxine Waters: I’m going to move forward to break up Wells Fargo

Throughout Wells Fargo CEO John Stumpf’s rough day in front of the House Financial Services Committee, multiple representatives called for the bank to be broken up, suggesting that the megabank is simply too big to manage effectively.

But as the five-hour hearing neared its conclusion, the ranking member of the committee, Rep. Maxine Waters, D-Calif., went beyond her fellow representatives’ calls to break up Wells Fargo, stating that she is going to actually move to break up the bank.

“I’ve come to the conclusion that Wells Fargo should be broken up,” Waters said. “It’s too big to manage and I’m moving forward to break up the bank.”

According to a represenative from Waters’ office, Waters told reporters after the hearing that she plans to pursue legislation to break up the bank.

Read on.

Why the Government is Getting Fed Up with Wall Street All Over Again

The next president could face another financial crisis unless the big banks get their act together. So far, they haven’t.

Democrats and Republicans agreed on almost nothing at their conventions except this: Both party platforms signaled support for resurrecting a version of the Depression-era Glass-Steagall law, a move designed to show they are willing to break up the big banks. In fact, such a law is unlikely to be enacted by either a President Hillary Clinton or a President Donald Trump. But major Wall Street firms still have reason to be concerned that the feds are getting fed up with them. And in the end the banks could get broken up anyway, even if the next president does nothing about it and there is no new Glass-Steagall act.

The new mistrust of the Street by regulators in Washington comes down to one main issue: The Federal Reserve and Federal Deposit Insurance Corp. are growing impatient with the banks’ failure to explain why they should remain so big. Eight long years after the financial collapse that almost took down the global economy, JPMorgan Chase, Bank of America, Wells Fargo, Bank of New York Mellon and State Street have failed to provide satisfactory “living wills,” or credible plans for how they would keep serving clients and markets if they ever needed to be reorganized in bankruptcy. Regulators handed down failing grades to the banks in April.

 

That’s the second time in two years that major banks have fallen short of regulators’ expectations in one of these tests. The banks must decide how much they are willing to sacrifice by an Oct. 1 deadline, when FDIC Chairman Martin Gruenberg says he wants to see “concrete changes.”

If they fail again, the government would have the authority to ratchet up regulation of the firms—which could make investors impatient, forcing the banks to divest more assets and make themselves smaller. And if that doesn’t work, the banks could simply be broken up. Regulators, in other words, don’t necessarily need another Glass-Steagall; they have the authority to do it now.

The bottom line is that regulators are not optimistic about how the U.S. economy would fare, even now, if one of these giant firms went through bankruptcy. And that is an option that the government and the banks will be expected to entertain under laws enacted after the unpopular 2008 bailouts. To satisfy the government, the banks must simplify their still mind-bogglingly complex businesses and do a better job of showing that they can tap liquid assets that can be turned into cash during a crisis.

“It requires the will to do so,” the FDIC’s Gruenberg told Politico. “These are not necessarily easy things to do. They require hard decisions by the firms.”

Read more: http://www.politico.com/magazine/story/2016/08/2016-elections-dnc-rnc-glass-steagall-wall-street-214131#ixzz4GIhZmCnj

No, a New Glass-Steagall Is Not Good News For Citigroup, JPMorgan, Bank of America

For a while now KBW’s Frederick Cannon and Allyson Boyd have been urging big banks likeCitigroup (C), Bank of America (BAC) and JPMorgan Chase (JPM) to break up. A new Glass-Steagall, something backed by both Democrats and Republicans, would not be the ideal way to accomplish that, however. They explain why:

We along with others in the marketplace have shown that there is potential shareholder value creation from the breakup of some of the largest financial institutions, including Citigroup. Investors should not view the reinstatement of Glass-Steagall as a potential way to unleash value in large banks, however. A Congressional approach to breaking up the banks would not be based on economic value creation, but be based on the politics of applying penalties to the largest banks. Therefore it is difficult to develop a positive view on potential regulations for the shares of the largest banks, specifically JPMorgan Chase, Bank of America and Citigroup…

Read on.

The Elephant in the Room – Why no TBTF Prosecutions?

Now this is a topic of discussion for who ever becomes the next President…

The elephant in the room is still why there have been no criminal prosecutions of the banks, executives and Wall Street traders who were primarily responsible for the 2008 financial crisis. There has been no obvious answer, although our Department of Justice continues to dance around the question.
In his most recent article, my friend William D. Cohan, author of the newly released bookThe Price of Silence, and several  outstanding books on the financial crisis, gives us a clue and poses some thought provoking questions.  A former investigative reporter for the Raleigh Times, he worked on Wall Street for seventeen years as a senior mergers and acquisitions banker.
In this recent post, he states “One of the enduring mysteries of the 2008 financial crisis has been why the Justice Department made so few attempts to prosecute the individuals responsible for it, given the abundance of tangible evidence of wrongdoing by Wall Street bankers, traders and executives in the years leading up to the great unwinding.”
A mystery indeed.
Regards,
Richard

Glass-Steagall: Wall Street is not happy with Donald Trump

Traders at the New York Stock Exchange watch Donald Trump speaking on TV.

I bet they are pissed.. lol!

CNBC:

After the surprise announcement, which came on the first day of the Republican National Convention, Wall Street sources sounded off on the idea that a Republican would reverse course on policies nearly 20 years old and now taken for granted by big banks.

One lawyer, who works with financial institutions on behalf of a white-shoe firm in New York, called the idea “scary.” Even Wilbur Ross, one of the Trump campaign’s biggest supporters from the finance industry, called it “surprising.” Others on Wall Street who spoke to CNBC used stronger language that can’t be printed.

The Republican Platform’s Surprise Revival of Glass-Steagall Legislation

THE LAST-MINUTE DECISION to include in the Republican platform a call to restore the firewall between commercial and investment banking comes as a surprise, because Donald Trump himself has never publicly addressed or endorsed such a reform in his year-long presidential run.

Trump did once say at a debate in New Hampshire, “nobody knows banking better than I do,” but a review of the transcripts of all 12 Republican debates shows that he never endorsed restoring Glass-Steagall, legislation first passed in 1933. Websites devoted to detailing Trump’s positions find no record of him having any opinion on the Depression-era law. The issues pages of Trump’s presidential website steer clear of anything related to banks or finance.

In fact, Trump campaign manager Paul Manafort, who first leaked word that the platform would endorse the reintroduction of Glass-Steagall, ran a campaign consulting firm in the 1980s that helped elect to Congress Phil Gramm, co-author of Glass-Steagall’s repeal. (Gramm supported Ted Cruz in the GOP primaries.)

The measure is haphazardly attached to the end of a paragraph decrying regulatory overreach by the Environmental Protection Agency, National Labor Relations Board, Federal Communications Commission, and more. Tacking on a call to restore a law that prevents private corporations from particular lines of business suggests that there wasn’t much thought put into it before Monday.

To the extent that Trump has expressed anything about financial reform, it’s been a desire to roll it back. He told The Hill last October that the Dodd-Frank law is “terrible” and “the regulators are running the banks.” Dodd-Frank’s repeal is also in the Republican platform.

Read on.