On April 13, the FDIC issued a new report from a study they made regarding the ability of major U.S. banks to deal with a systematic financial collapse. And in their findings, the FDIC is reporting that 5 of the 8 ‘too big to fail’ banks do not have feasible plans in place to stave off a crisis, and in fact are geared towards the expectation that the government and taxpayers will bail them out once again.
Despite the fact that the 2010 Banking Reform Act specifically placed bond and equity holders as the entities which would bail out a financial institution during the next crisis, major U.S. banks have summarily ignored the new laws and are sure that fear and panic will cause the government to give in and bail them out as they did eight years ago.
The agencies have jointly determined that each of the 2015 resolution plans of Bank of America, Bank of New York Mellon, JP Morgan Chase, State Street, and Wells Fargo was not credible or would not facilitate an orderly resolution under the U.S. Bankruptcy Code, the statutory standard established in the Dodd-Frank Wall Street Reform and Consumer Protection Act. The agencies have issued joint notices of deficiencies to these five firms detailing the deficiencies in their plans and the actions the firms must take to address them. Each firm must remediate its deficiencies by October 1, 2016. If a firm has not done so, it may be subject to more stringent prudential requirements.
The agencies jointly identified weaknesses in the 2015 resolution plans of Goldman Sachs and Morgan Stanley that the firms must address, but did not make joint determinations regarding the plans and their deficiencies. The FDIC determined that the plan submitted by Goldman Sachs was not credible or would not facilitate an orderly resolution under the U.S. Bankruptcy Code, and identified deficiencies. The Federal Reserve Board identified a deficiency in Morgan Stanley’s plan and found that the plan was not credible or would not facilitate an orderly resolution under the U.S. Bankruptcy Code.
Neither agency found that Citigroup’s 2015 resolution plan was not credible or would not facilitate an orderly resolution under the U.S. Bankruptcy Code, although the agencies did identify shortcomings that the firm must address.
The deadline for the next full plan submission for all eight domestic, systemically important financial institutions is July 1, 2017. The agencies will evaluate all eight of the full plans submitted in 2017 under the statutory standard. – FDIC
It should not be surprising that criminal entities like the too big to fail banks are expecting their paid legislators to protect them from their own speculatory failures in the instance of a new financial crisis, especially since under the Obama administration no banker was ever indicted, and where criminal activity was either condoned, or addressed with simple fines.
For years, many in the alternative media have believed that the banks run the government, and in fact, they write much of the financial legislation that is passed by Congress. But perhaps what is surprising today is that the FDIC would publicly announce how unprepared the major banks are to deal with a new crisis since it validates the belief that banks have no worries about collapsing since they always have their ace in the hole with the U.S. taxpayer.
Kenneth Schortgen Jr is a writer for Secretsofthefed.com, Examiner.com,Roguemoney.net, and To the Death Media, and hosts the popular web blog, The Daily Economist. Ken can also be heard Wednesday afternoons giving an weekly economic report on the Angel Clark radio show.