(Reuters) – America’s big international banks may have to restructure and downsize their operations now, unless they can prove they will be easy to dismantle in another financial crisis, said U.S. regulator Sheila Bair.
Uh huh. How about this Sheila?
Why don’t you talk about the fact that starting with Continental Illinois the FDIC has bailed out not depositors but bondholders?
You know, that “no disruption” model, despite the FDIC being called The Federal DEPOSIT Insurance Corporation.
Where do you see “bondholder insurance” in there?
I can’t find it.
“If they can’t show they can be resolved in a bankruptcy-like process… then they should be downsized now,” said Bair, chairman of the Federal Deposit Insurance Corp.
“There is no reason in the world why they should get some special treatment backstop that other businesses in this country don’t have,” Bair said.
NOW you say this?
This isn’t a 2008 story folks. It goes back, again, to Continental Illinois.
That’s where this idiocy began. It is also, not coincidentally, where the utter stupidity in leverage growth – that is, unsupported (and unsupportable) credit expansion began.
Gee, I wonder why when those who enable the leverage through being bondholders of financial institutions are told by the explicit actions of the US Government that they won’t lose their money if the institution does something stupid – or even worse?
Bair is now in the final months of her five-year term heading the FDIC, which she led during the tumult of the financial crisis. Her term ends in June.
Bair said she hopes to have major aspects of new capital requirements and the liquidation regime in place before she departs.
She’s not going to do jack and neither will her successor.
That you can take to the bank.