"Living wills" of 5 banks fail to pass muster

Five giant banks — including JPMorgan Chase and Bank of America — failed to fulfill a crucial regulatory requirement that Congress introduced after the 2008 financial crisis to help make large financial institutions less of a threat to the wider economy, federal banking regulators said on Wednesday.

Congress demanded that big banks regularly provide regulators with careful plans, also known as living wills, for how they would enter bankruptcy in an orderly fashion.

But the Federal Reserve and the Federal Deposit Insurance Corporation found that the plans of five banks were “not credible” or “would not facilitate an orderly resolution” under the United States bankruptcy code.

mk and I are wagering that the straw that breaks the camel's back is going to be European CoCo bonds, which will spread contagion throughout finance. From a selfish American standpoint it's likely to smash the shit out of Europe with any damage in the US being largely collateral; the author of your article rips into US regulation more than a little bit but the financial crisis of 2008 left the US in a better position, regulation-wise, than the EU.

mk found an article yesterday - maybe he'll link to it, in which Deutsche Bank basically said "yup - all that garbage we have on our books is going to cause an absolute catastrophe if we don't get rid of it in 12-18 months" and both he and I wagered that they'd just added a year to their projections, based on the way DB has been acting.

Last time we had a meltdown the blogs were talking about meltdowns with dreary regularity for about 18 months prior to it happening. Fatigue had basically set in where everyone couldn't quite believe we were still coasting. Then one fine week in September it just ripped.

A quarter of Europe's capitalization is in CoCos, and half of the interest in the S&P500 is short. When this thing goes it's going to be dramatic.