Tag Archive: Too Big To Fail


Rand Paul: You’ll Bail Out Detroit ‘Over My Dead Body’

” Why would Mr. Paul be so against another bailout? Hmm, maybe because we don’t have the money. That kind of stuff matters to some of us.

His final piece of advice:

“You don’t set up an implicit promise from the federal government that everybody is getting bailed out,” Paul said. “It’s sort of like too big to fail for banks. If you have too big to fail for cities or for states and they believe they’ll be bailed out they’ll continue to make unwise decisions.

“So, really, the answer is, just like the federal government, live within your means and spend what you have but don’t spend money you don’t have. The problem is so many of our state governments, the politicians are being elected by the public service unions. “

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The Assault On Gold: The Fed’s Attempt To “Scare People Away” From Gold And Silver

 

 

 

” For Americans, financial and economic Armageddon might be close at hand. The evidence for this conclusion is the concerted effort by the Federal Reserve and its dependent financial institutions to scare people away from gold and silver by driving down their prices. 

The Federal Reserve is creating $1 trillion new dollars per year, but the world is moving away from the use of the dollar for international payments and, thus, as reserve currency. The result is an increase in supply and a decrease in demand. This means a falling exchange value of the dollar, domestic inflation from rising import prices, and a rising interest rate and collapsing bond, stock and real estate markets.

The Federal Reserve’s orchestration against bullion cannot ultimately succeed. It is designed to gain time for the Federal Reserve to be able to continue financing the federal budget deficit by printing money and also to keep interest rates low and debt prices high in order to support the banks’ balance sheets.

When the Federal Reserve can no longer print due to dollar decline which printing would make worse, US bank deposits and pensions could be grabbed in order to finance the federal budget deficit for couple of more years.  Anything to stave off the final catastrophe.

The manipulation of the bullion market is illegal, but as government is doing it the law will not be enforced.

By its obvious and concerted attack on gold and silver, the US government could not give any better warning that trouble is approaching. The values of the dollar and of  financial assets denominated in dollars are in doubt.

Those who believe in government and those who believe in deregulation will be proved equally wrong. The United States of America is past its zenith.  As I predicted early in the 21st century, in 20 years the US will be a third world country. We are halfway there.”

 

 

 

 

 

 

 

Resolving Too-Big-To-Fail Banks In The US

 

 

” The issue of size became important in 1984, when the government bailed out Continental Illinois National Bank & Trust (“Continental”), the seventh largest bank at the time. This bailout occurred because of concerns about systemic risk due to the bank’s size. The FDIC infused $1 billion in new capital into the Continental Illinois Corporation, the bank’s holding company, in exchange for preferred stock convertible to 80 percent of the equity. These funds were then downstreamed to Continental as equity capital to recapitalize the bank. When the government bailed out Continental, Stewart B. McKinney, a Connecticut congressman, declared that the government had created a new class of banks, those too big to fail (TBTF).2 Ever since this bailout, there has been a belief that certain banks or bank holding companies are TBTF, which we call the “TBTF problem.”

This belief that some banks are TBTF was behind the regulatory response to the financial crisis of 2007–2009, when the government bailed out the biggest banks in the country. Many individuals consider the biggest banks to have largely caused the crisis, and this belief has focused far greater attention on the TBTF problem. Indeed, the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) of July 2010 created a new federal receivership process pursuant to which the FDIC may serve as the receiver for big banks whose failure poses a significant risk to the financial stability of the United States. The FDIC’s new authority is intended to eliminate the TBTF problem once and for all.

This paper looks at the historical treatment of troubled banks by the FDIC. It examines how the FDIC resolves troubled banks and the sources of funds available to it in the event resolutions are costly. This examination focuses on the treatment of big versus small troubled banks to assess the importance of the TBTF issue. Given the enormous costs involved in bailing out the biggest banks during the recent financial crisis, we discuss the FDIC’s new receivership process to handle troubled big banks. We then assess whether this process will indeed eliminate the problem of large bank failures.”

 

 

 

 

“One of the Biggest and Most Elaborate Falsehoods Ever Sold to the American Pubic” (The Bank Bailouts)

 

 

 

” One thing, which I wish Taibbi had emphasized more is that it looks increasingly like credit would not have “seized up” across the board, for very long anyway had the big banks been allowed to fail. The mid-sized banks and the community banks, which lacked exposure to much in the way of toxic assets (because they sold them off to the big banks which then folded them into Mortgage Backed Securities) would have survived. It would have been bumpy but well run banks just outside of big bank status, BB&T for instance, would have filled in the space.

The bailout was, as David Stockman says, a Wall Street crisis. The bankers all freaked out when their bets turned terrible, and then played the information leverage game with Washington to get the tax payers to pay for their mistakes. They basically said that the entire economy was going down (it wasn’t) and therefore an unprecedented abandonment of what was left of our market based economy was justified. It was a giant con. “

 

 

Illustration By Mike Keefe

 

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