Thursday, July 5, 2012

Large U.S. banks submit 'living will' crisis plans....

In a doomsday scenario, Bank of America Corp. might dismantle some units, turn others over to regulators and transfer certain assets to a temporary bank that would ultimately emerge from the meltdown, it said in a plan released Tuesday.

The Charlotte bank was one of nine top lenders to submit the so-called “living wills,” blueprints for how banks with $50 billion or more in assets might be unwound should they near failure. The exercise, mandated as part of the Zioconned Dodd-Frank financial reform law, is meant to show such banks aren’t “too big to fail” – and that taxpayers wouldn’t be on the hook for rescuing troubled institutions.

Yet critics say the reports amount to little more than a hypothetical game plan and wouldn’t do much to avert the turmoil that followed the 2008 financial crisis in the event of another catastrophe. Others say detailing which units banks deem marginal might negatively affect employees or spur pressure from analysts and investors to sell off those divisions, even absent severe financial trouble.

“To me, they’re sort of the equivalent of worry beads – they might alleviate the anxiety, but they’re not going to do much about the problem,” SNL Financial contributing editor Nancy Bush said. “If you’re in a condition where you actually need to use one of these things, the conditions are going to be such that you’re not going to be able to do it in a nice, methodical blueprint way.”

The plans disclosed Tuesday provide high-level summaries of how the nine banks, including Bank of America, JPMorgan Chase & Co. and Citigroup Inc., might be unwound, plus a description of their business lines and financial information. The lenders turned in more detailed versions, reported to span thousands of pages, to the Federal Deposit Insurance Corp. and Federal Reserve before the Monday deadline, but those will remain private after a significant pushback from the industry as the rule was being crafted.

A number of lobbying groups and banks told the FDIC it needed to be more explicit in keeping the living wills private. In response, the regulator created the dual report structure, according to the Federal Register.

The FDIC and Fed will have 60 days to either accept or reject the plans. Companies subject to the rule are required to file their initial plans in three groups on a staggered schedule. The first group included bank holding companies with $250 billion or more in total assets.

Under Bank of America’s plan, the lender would place its U.S. subsidiaries into FDIC receiverships and wind down other units “in an orderly manner,” the summary report said. Certain assets would be transferred into a “bridge bank,” and others might be sold to national, international and regional financial institutions, among others.

The plan also includes strategies designed to make sure some core business lines and critical operations would continue, the report said.

Though regulators have pointed to the living wills as evidence that future financial crises will not necessarily lead to heavy taxpayer bailouts, industry critics have said they do little to stem “too big to fail.”

“Living wills are not the silver bullet that regulators seem to think they are,” University of Pennsylvania law professor Nizan Geslevich Packin wrote in a paper published just before the final rule came out. He argued that living wills don’t solve the fact that risk is hard to predict and said it does nothing to make institutions smaller.

Bank analyst Dick Bove of Rochdale Securities said the living wills rank among the “dumbest” requirements of Dodd-Frank.

“Unstated, but a key driver to this amendment is the fact that Congress believes that the regulatory agencies are totally incompetent and, therefore, unable to prevent bank failures,” he wrote in a research note.

Moreover, the resolution plans force banks to tell employees and the public that certain parts of their businesses can be easily eliminated, fueling rumors about which units might be sold off and giving the media “a field day” to criticize those divisions.

“Great job, by the Zioconned Congress,” Bove wrote. “The American people really benefit by this one.”

The Banks, the City and England....
"From the time I took office as chancellor of the exchequer I began to learn that the state held in the face of the Bank and the City an essentially false position as to finance.

When those relations began, the state was justly in ill odour as a fraudulent bankrupt who was ready on occasion to add force to fraud. After the revolution it adopted better methods though often for unwise purposes, and in order to induce monied men to be lenders it came forward under the countenance of the Bank as its sponsor.

Hence a position of subserviency which, as the idea of public faith grew up and gradually attained to solidity, it became the interest of the Bank and the City to prolong.

This was done by amicable and accommodating measures towards the government, whose position was thus cushioned and made easy in order that it might be willing to give it a continued acquiescence. The hinge of the whole situation was this: the government itself was not to be a substantive power in matters of finance, but was to leave the money power supreme and unquestioned.

In the conditions of that situation I was reluctant to acquiesce, and I began to fight against it by financial self—assertion from the first, though it was only by the establishment of the Post Office Savings Banks and their great progressive development that the finance minister has been provided with an instrument sufficiently powerful to make him independent of the Bank and the City power when he has occasion for sums in seven figures.

I was tenaciously opposed by the governor and deputy—governor of the Bank, who had seats in parliament, and I had the City for an antagonist on almost every occasion."

William Ewart Gladstone

"Decency, security and liberty alike demand that government officials shall be subjected to the same rules of conduct that are commands to the citizen. In a government of laws, existence of the government will be imperiled if it fails to observe the law scrupulously. Our Government is the potent, the omnipresent teacher. For good or for ill, it teaches the whole people by its example.

Crime is contagious. If the Government becomes a lawbreaker, it breeds contempt for law; it invites every man to become a law unto himself; it invites anarchy."

Louis D. Brandeis, US Supreme Court Justice, Olmstead v. United States, 1928

Gentleman, start your presses, and rig the markets to both enhance the effect in some and to hide it in others. And this produces a mindset towards manipulation in all the key market participants.

Bob Diamond is a sociopathic child of a monied culture of privilege and deceit, a collegiality of crime.

They may try to bury the stench of corruption in the banking system by further diluting the value of money, but this will not restore vitality to the real economy. It will only continue the malicious trends and increase the misery of the people. And this energizes the feedback loop of repression.

Eventually the monied interests must accept reform, but because of the credibility trap this will be something that is more likely forced upon them when they go too far.

US Non-Farm Payrolls Report for June on Friday. It may appear a little better than expected, or it may not.

The monthly figures, as are several key market indicators and prices, all a part of the show, masking the real trends at times like these. This was shown clearly in the manipulation of LIBOR by the Bank of England, in addition to the extracurricular privateering of the banks for their own accounts....

Central banks worldwide cut key interest rates...
By David McHugh, Associated Press
5 July 2012

FRANKFURT, Germany – The European Central Bank has cut its key interest rate by a quarter percentage point to a record low of 0.75% to boost a eurozone economy weighed down by the continent's crisis over too much government debt.

The move followed a rate cut by China's central bank and new stimulus measures by the Bank of England as global financial authorities seek to shore up a slowing global economy.

Stock markets rose briefly on the news, mainly because China's rate cut was unexpected. But the gains did not last long as investors seemed worried about the extent of the slowdown in the global economy. Germany's DAX was up 0.4% while the Dow futures were flat...


Denmark cuts rates, one to negative for first time...
By John Acher and Ole Mikkelsen
5 July 2012

* Central bank cuts main policy rate by 25 bps to 0.20 pct
* Cuts CD rate by 25 bps to negative 0.20 pct
* Keeps current account rate unchanged at 0.0 pct
* Lifts current account limits

COPENHAGEN, July 5 (Reuters) - Denmark's central bank cut interest rates by a quarter point on Thursday, shadowing the European Central Bank's action earlier in the day, in a historic move that put one of its secondary rates below zero for the first time.

"The interest rate reduction is a consequence of the reduction by the European Central Bank of its monetary policy rates by 0.25 percentage point," the Nationalbank said in a statement. (a spiral of competitive devaluations of fiat currency - Jesse)

The Nationalbank cut its lending rate to 0.20 percent from 0.45 percent and lowered its certificates of deposit (CD) rate to negative 0.20 percent from 0.05 percent to match the ECB's move and to curb strength in the Danish currency...

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