Big Wall Street Banks get a big "F" from Federal Regulators:
Wall Street banks spent two years asking U.S. regulators what they should put in hypothetical bankruptcy plans to prove they aren’t “too big to fail.” The agencies broke their silence today with a grade: Fail.
The Federal Reserve and Federal Deposit Insurance Corp. told 11 of the largest U.S. and foreign banks, including JPMorgan Chase & Co. and Goldman Sachs Group Inc., that they botched their so-called living wills. The agencies ordered the banks to simplify their legal structures and revise some practices to make sure they can collapse without damaging the wider financial system.Cont..
The living-wills exercise was a key check on large banks written into the Dodd-Frank Act, a regulatory overhaul prompted by the 2008 financial crisis. Lehman Brothers Holdings Inc. provided the horror story for what happens when big, complex financial firms land in bankruptcy court. So the regulators today directed the banks to take immediate action to make their holding companies easier to dismantle before their next round of annual filings in 2015.
The current plans “demonstrate little ability to cope adequately with failure without some form of government support,” FDIC Vice Chairman Thomas Hoenig said in a statement. “The economy would almost surely go into crisis.”
Spokesmen for the individual banks declined to comment.
Lawmakers have pressured the agencies to be tough.So, I guess the banks might need another bailout again because they don't know how to run their shit. I dunno, they should try and fix that, it seems against the laws of capitalism or something.
“Too Big to Fail is alive and well,” Senator Sherrod Brown, a Democrat of Ohio, said in an e-mail. “The FDIC’s statement that these living wills are not credible means that megabanks will live on taxpayer life support in the event of a crash.”
At a congressional hearing last month, Senator Elizabeth Warren, a Massachusetts Democrat, pressed Fed Chair Janet Yellen to make the living wills convincing.
“Can you honestly say that JPMorgan could be resolved in a rapid and orderly fashion as described in its plans with no threats to the economy and no need for a taxpayer bailout?” Warren asked at the July 15 hearing.