CURING “TOO-BIG-TO-FAIL!”
By Daniel at 18 October, 2009, 10:01 am
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[Source: Article by Marshall Auerbach]
“Off-Balance-Sheet” for 5 largest Banks ranges from $32 Trillion - $82 Trillion
“Off-Balance-Sheet” Toxic Derivatives according to 0ffice of Comptroller of Currency, 0CC, quarterly Report:
1 JPM0RGAN $81TRILLION in Toxic Derivatives
2 BofA $78TRILLION
3 G0LDMAN $48TRILLION
4 M0RGAN $39TRILLION
5 C1T1GROUP $32TRILLION
http://www.occ.gov/ftp/release/2009-72a.pdf
Page23!
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Auerbach’s STEPS to UNWINDING “TOO-BIG-TO-FAIL”
1. Bring All bank assets+liabilities onto balance sheet and subject to reserve+capital requirements.
2. Full Balance Sheet receives oversight by regulatory agencies.
3. Assets+Liabilities left OFF balance sheet are declared null and void=unenforceable by US courts
4. All CDSs must be bought+sold on regulated exchanges or declared unenforceable by US courts.
5. Securitization of financial products (life insurance policies) are prohibited =unenforce able by US courts - except approved by Congress
6. FDIC will examine books of largest 25 banks to uncover all CDS contracts held.
7. Net and cancel CDS contracts held on one another + unwind CDS’s on foreign banks.
8. FDIC examine derivative positions and unwinds in the public interest.
9. FDIC determines which banks are insolvent based on current market values.
10. FDIC Resolves insolvent Banks minimizing FDIC cost+impacts on the system
11. FDIC will cover some uninsured losses to equity holders+pension funds
These actions will substantially reduce Size of Financial Sector + Eliminate riskiest assets!
Financial system emerges with healthier institutions and with much less market concentration.
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Alternative is Government becomes Credit Insurer of last resort = floor on value of best collateral
As “Credit Insurer of Last Resort” Gov charges Premiums which mitigate worst behaviors of WS
Gov can Insure freely but at a high premium!
Jackson Andrew
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