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Tag Archive: Too big to fail


Its been while not posted about the regulatory stuff as in the past I’ve frequently expressed concern that the legacy of Dodd-Frank will be to Googlepromote artificial consolidation of the banking industry by driving small banks out of business and making large banks even more “Too Big to Fail.” This is for two reasons.

The first reason would be if Dodd-Frank perpetuates the so-called TBTF subsidy. This is the idea that being designated too big to fail creates an implicit government guarantee for creditors that permits large banks to access capital markets more cheaply than non-TBTF banks. Whether there is a continued subsidy, and if so, how large, seems to be still somewhat undetermined at this point. Continue reading

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There are a lot of things you can read about the Brown-Vitter bill recently, though it’s a really nice day out and you Aprobably shouldn’t. It’s not … it’s not like a real thing is it? When the text of the bill, which would raise the equity capital requirements on big banks to ~15% on a non-risk-weighted basis and forbid U.S. regulators from implementing Basel rules, first leaked, I sort of assumed it was a temper tantrum not intended to become law, and the fact that its official title is the “Terminating Bailouts for Taxpayer Fairness (TBTF) (Get It?) (GET IT?) Act of 2013″ doesn’t exactly change my mind.

Continue reading

Looking at the current market scenario and the past these are very common lines from the sales team of the various

Market Crowding (9/365)

Financial firms and let’s try to observe what is the reality behind those statements :-

Statement: As a Leading dealer with a global platform, we are the major player in the market.

Translation: We have spent a fortune to build this business and are now prepared to spend millions more subsidizing your requirements.

Statement: We have one of the most talented teams in this space.

Translation: Our staff are vastly overpaid and on huge guaranteed bonuses. Continue reading

The straightforward strategy of buying companies that have recently been spun off from their parent has generated very

Embarrassing parents - swan duckling

good results. The forces of divestiture and conglomeratization eternally wrestling with each other like gravity and energy in the cosmos.

How about this for a rational explanation:

Spin-offs generally result in more “pure play” stocks which then become more accurately valued in the marketplace. When the pre-spun-off business are tied Continue reading

Fixing the Wall Street

Occupy Wall Street

I like this short list of fixes from Sheila Bair:

1. Break up the “too big to fail” banks
Giant institutions and untested “living wills” is make financial system unstable. When the Fed is artificially keeping lending rates at near zero, that’s a flaw.

Solution: Make ‘em smaller

2. Publicly commit to end bailouts
Market must punish the boneheads.” We should learn from post-2008 bailouts Continue reading

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