Too Big To Fail

There’s nothing surprising, exactly, about this chart that Fitch sent out today, but it’s still sort of stark:

Once there was a land where bank debt was AA, AAA if it was particularly good or A if it was particularly dicey. Now AA is the new AAA and BBB is commonplace. The idea of risk-free unsecured lending to banks, implicit in things like Libor discounting, is over.

Right? I don’t entirely understand this proposal by House Republican John Campbell to require banks to “hold substantially more capital,” though the gist is basically that there’s a move to require banks to do more of their funding via long-term holdco debt. Here is a puzzling summary: Read more »

  • 07 Jan 2013 at 6:08 PM

Banks Lobbying, Capitalizing Like It’s 2007

They may still be too big and fragile, but banks are throwing their considerable weight around and getting their way. Read more »

  • 11 Dec 2012 at 5:50 PM

It’s Good To Be Too Big To Fail

So, HSBC is going to have to cough up almost $2 billion for, in effect, running a massive money-laundering operation that helped fund such luminary do-gooders as the Iranian government and Mexican drug gangs. But the U.S. has decided not to throw the cuffs on the British bank because, well, that would be pretty hard. And could create an awful lot of collateral damage that no one needs as the country careens off the fiscal cliff. Read more »

One way you could spend this slow week is reading the “living wills” submitted by a bunch of banks telling regulators how to wind them up if they go under. Don’t, though: they’re about the most boring and least informative things imaginable and I am angry that I read them.* Here for instance is how JPMorgan would wind itself up if left to its own devices**:

(1) It would just file for bankruptcy and stiff its non-deposit creditors (at the holding company and then, if necessary, at the bank).

(2) If after stiffing its non-deposit creditors it didn’t have enough money to pay its depositors it would sell its highly attractive businesses in a competitive sale to willing buyers who would pay top dollar.

This seems wrong, no? And not just in the sense of “in my opinion that would be sort of difficult, what with people freaking out about JPMorgan going bankrupt and its highly attractive businesses having landing it in, um, bankruptcy.” It’s wrong in the sense that it’s the opposite of having a plan for dealing with banks being “too big to fail”: it’s premised on an assumption that the bank is not too big to fail. If JPMorgan runs into trouble that it can’t get out of without taxpayer support, it’ll just file for bankruptcy like anybody else. Depositors will be repaid (if they’re under FDIC limits); non-depositor creditors will be screwed just like they would be on a failure of Second Community Bank of Kenosha. Read more »

…if I were in charge I would probably reorganize the movement around a single, achievable goal: a financial boycott of the six “ too big to fail ” Wall Street firms: Bank of America, Citigroup, JPMorgan Chase, Goldman Sachs, Morgan Stanley, Wells Fargo. We would encourage people who had deposits in these firms to withdraw them, and put them in smaller, not “too big to fail” banks. We would stigmatize anyone who invested, in any way, in any of these banks. I’d try to organize college students to protest on campuses. Their first goal would be to force the university endowments to divest themselves of shares in these banks…I think we could create a run on a bank. [TDB]

  • 31 May 2011 at 1:57 PM

How’d You Like Too Big To Fail?

If you watched the HBO version of Andrew Ross Sorkin’s book last week, what kind of tears did you shed while watching? Read more »

  • 17 May 2011 at 2:28 PM

DB At The Movies: Too Big To Fail

If you’ve been keeping up with your HBO original programming schedule, you know that Too Big To Fail, the movie based on Andrew Ross Sorkin’s 2009 book, airs next Monday evening. Last night was the premiere at the Museum of Modern Art and while the trailers looked promising, in order to make sure none of you wasted any of your precious time or DVR space in the event it wasn’t worth it, I attended to see how things turned out and report back. Warren Buffett did the same, though was initially met with some opposition at the door, in an encounter that went like this:

Door girls: Do you have your ticket?
Buffett: Uh…no…
Door girls: You need your tickets.
Buffett: Oh, uh…we were invited..
[One of Buffett's dates]: This is Warren Buffett.
[The group is seated]

Other people in attendance who did have their tickets, included but were not limited to: George Soros (with a entourage of lady friends), Meredith Whitney in a white pinstriped suit, Becky Quick, Rodgin Cohen, Regis Philbin, Michael Douglas and all the actors from the flick (William Hurt, Paul Giamatti, Billy Crudup, James Woods, Bill Pullman, Evan Handler, Tony Shalhoub, Matthew Modine, Ed Asner), though not all the real life people they portray (Jamie Dimon was getting ready for today’s JPM shareholder meeting in Ohio, Fuld was probably busy plotting his comeback).

The movie condenses Sorkin’s 539 page book into about 90 minutes and traces the slightly tense moments that were 2008 just after Bear Stearns was bought to the day Paulson locked the top bank CEO’s in a room and and forced them to accept his capital injections. William Hurt does a pretty badass Hank– who gets the most screen time by far– having spent a few days fishing with him in preparation for the role (during which one would hope HP described what it was like threatening to send Ken Lewis home in a body bag if he backed out of the Merrill Lynch deal). I liked it, you probably will too.** Now let’s get down to the nitty gritty. Read more »