According to the Associated Press, the Federal Deposit Insurance Corporation (FDIC) voted today to approve a rule requiring banks with over $50 billion in assets to plan how they would break up if they are in danger of failing.
The rule, mandated under the financial overhaul legislation passed by Congress last year, is in fact admitting that such banking giants are still too big to fail and must be broken down in order to fail properly.
How does this help in another financial crisis? Isn't this just giving these players time to plan a failure from which they can profit, just as they do every other transaction?
A better question is why not just break them up now? That way all American's can sleep a little easier knowing the "systemic" risk has been preempted.
The semantics of keeping the too big to fail banks too big to fail goes on and on. If there is continuing "systemic" risk, why not get rid of it. Systemic risk is just a code word for out-of-control.
"The FDIC says that 124 financial firms plus will be subject to the requirements," according to the AP report, 26 in the U.S. and the rest are U.S. subsidiaries of foreign banks. They include the usual suspects: Bank of America Corp., Citigroup Inc., Goldman Sachs Group Inc. and JPMorgan Chase & Co.
Remember also Goldman Sachs and Morgan Stanley were not banks until it was in their favor to become banks during the financial crisis in 2008.
AP reports that, "The plans must include detailed information on a bank's businesses and operations, structure, assets and liabilities, capital cushion held against risk, and how much they owe other big financial institutions."
Wow! You might think the FDIC or some other bank regulator might have all this information already. Let's see, who should know this stuff, who should know this? The U.S. Treasury? The Federal Reserve?
Oh, I forgot the Federal Reserve keeps all this information to itself and is really just the too big to fail banks working in cahoots.
The U.S. Treasury doesn't have any authority over the banking or financial system, it just worries about the money the government borrows, with interest, from the Federal Reserve.
Will the too big to fail banks complain about these government regulations interfering with their right to do business unfettered?
Probably not in this case as these regulations are the façade to confuse Americans into thinking all is right in Muddville, while keeping the too big to fail banks big enough to loot and destroy the economy again.
Right now the too big to fail banks and hedge funds are having a terrible time. All those toxic assets are still floating around and without another major market bubble or two how are they ever going to set themselves right and be in a position to make outrageous profits again if we break them up now?
The next international financial crisis can't come too soon. It will be the big squeeze on every dollar, dime and nickel that 99% of the citizens have in the form of any assets they may have left. It's the ticket from big banking's mafia like trading operations that are all but in fact illegal to going legit... for a while.