The Market Ticker
Commentary on The Capital Markets- Category [Banking System]

I'm tired of the lies.  Regulation is only effective if you actually do it, and threatening something for years but failing to act doesn't fall within that category.

WASHINGTON—In a sweeping rebuke to Wall Street, U.S. regulators said 11 of the nation's biggest banks haven't demonstrated they can collapse without causing broad, damaging economic repercussions and ordered them to show "significant" progress by July 2015.

The Federal Reserve and the Federal Deposit Insurance Corp. said bankruptcy plans submitted by big banks make "unrealistic or inadequately supported" assumptions and "fail to make, or even to identify, the kinds of changes in firm structure and practices that would be necessary to enhance the prospects for" an orderly failure.

That's because there aren't any.

At its core the problem is that we allow banks to literally counterfeit our currency; they are "privileged" (even though there is zero statutory or constitutional justification for it) to "create money", especially through derivatives.

How do you "unwind" such a situation if the firm fails?  You can't, because the credit extended was unbacked by anything, and the entire reason the firm failed in the first place was that someone stood up and called "BeeESS!" on the balance sheet.  The problem is that these firms are not a "little insolvent" when that happens they're grossly insolvent all the time, and so when someone does that they're underwater by an utterly ridiculous amount and nobody is going to rescue them (other than by force, such as the government.)

Witness Colonial Bank that went under during the crash.  This was a firm without any hinky derivative deals and was a public company besides.  Somehow it managed to "lose" something like 40% of its asset value between the last quarterly report and failure (about 2 months time)!  Do you believe that actually happened, or is what actually happened that the asset values claimed were fictitious while the liabilities were, as they always are, real?

If the latter then you must also admit that this state existed for a very long time before the market stood up and called them on it, and that means that the same situation existed then and probably exists now with essentially all of these firms.

That's the root of the problem, and it goes back to what I've been talking about now for years.

We either solve that, which means One Dollar of Capital, accepting whatever disruption comes from ending this charade, or we keep trying to pretend we can paper over gross, notorious and outrageous insolvency.

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