Dallas Fed's Fisher Rages Against TBTF, Says Only Way To Remove Systemic Risk Is Shrinking The Megabanks

Tyler Durden's picture

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CB's picture

If they'd been left to fail in the first place there'd be no need to talk about shrinking the damn things.

Greater Fool's picture

Indeed. We'd all be too busy waiting in bread lines to wonder about such trivia anyway.

Problem Is's picture

Say... didn't Neel "Down You Bitch" Kashkari officially start at PIMPCO about 6 weeks ago?

The same time Greater Fool got a pass from Tyler?

Hmmmmmm... Maybe it isn't Timmay's Uncle Jamie sock puppet after all...

Greater Fool's picture

Yes. I just awarded myself another couple million in bonuses for my Q1 performance and figured I'd spend a few minutes slumming.

See you in the Hamptons! Or not, sucker.

jeff montanye's picture

whatever.  but you are desperately wrong that the bailout of the tbtf in any way helps the broader economy.  it does not.  a receivership type fdic handling of huge bank insolvency is as effective as for smaller banks.  much more since the alternative, apparently, is this wretched zombie bank/master bank tbtf paradigm.  please investigate the comparison of economic performance of the nordic countries following their banking crisis and of japan's following its.  the evidence is unassailable.

PhattyBuoy's picture

... almost 40 million are in "bread lines" - I mean food stamps !!

cowdiddly's picture

26 million unemployed are waiting for a slice now.

CB's picture

bullshit.  the economy would be recovering instead of continuing to fail

AccreditedEYE's picture

Great piece on this subject courtesy of Whalen (not Smithers) for any who missed it. see: Ideas Have Consequences: The Importance of a Narrative
By Peter Wallison
http://us1.institutionalriskanalytics.com/pub/IRAMain.asp

SilverIsKing's picture

Yet Geith-fuck-ner goes to the G20 to discuss a bank tax for bank bail outs.

Which is it?  End TBTF or more razzle dazzle to keep TBTF going?

 

Problem Is's picture

"Geith-fuck-ner"

LOL.

Timmay G Resembles That Remark
Although I always consider Lil' Timmay the classic Cheese Dick...

Mr Lennon Hendrix's picture

I am waiting for them to slush funds to smaller banks and then forcing the banks to make loans based on some "do or die" appoach by Obama, thus causing hyperinflation of the doelarr.  I am waiting......

tip e. canoe's picture

your wish is my command, sir lennon, said big ben...

http://www.businessweek.com/news/2010-06-03/bernanke-says-u-s-unemployme...

"Federal Reserve Chairman Ben S. Bernanke said he’s concerned about the costs U.S. joblessness is imposing on the economy and that the central bank is telling field examiners to encourage lending to creditworthy businesses."

Mr Lennon Hendrix's picture

Muchos gracias!  I know they want to, will the do it?  Velocity would skyrocket.

buzzsaw99's picture

Prove your outrage - resign.

Crab Cake's picture

+1

Resign, and take as many documents with you as you can.

The Fed must die! Abolish it, or burn it to the ground.

"Gentlemen, I have had men watching you for a long time and I am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter, I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves. I intend to rout you out, and by the grace of the Eternal God, will rout you out." - President Andrew Jackson

E pluribus unum's picture

He's not outraged enough to resign...Just to piss and moan because he knows that what he proposes will never see the light of day. He's "our populist" so remember that when they start hanging the bankers. Complete and utter sideshow.

LeBalance's picture

I am a paid actor, given the scripted part of the character that rales and shakes his fist.  I distract the riled public from doing anything.  That is my function.

tip e. canoe's picture

i'm not really a fed governor, i just play one on tv.

Xibalba's picture

Talk about being a day late and a dollar short.  All this rhetoric and no action is the real moral hazard. 

Greater Fool's picture

The main problem with this argument is summarized in a single counterexample: LTCM. An entity does not have to be big in order to pose a systemic risk capable of crashing the world financial system.

I gather the theory following that event was that allowing publicly traded, federally regulated companies to do the work that would otherwise be done by the LTCM's of the world would make problems easier to spot, prevent, and handle if they arose.

Obviously Fisher does not agree, but I still don't think that the events of 2008 necessarily demonstrate that this idea is incorrect.

jeff montanye's picture

ltcm wasn't bailed out by the taxpayer.  it was bailed out by wall street firms.  it was a hedge fund not a bank or brokerage house.  the hedge funds continued exactly as before; the "federally regulated" (hah!) companies didn't "do the work" any more than they did before.  other than that your argument is cogent.

Greater Fool's picture

You might want to find out what LTCM was actually doing before you reply. Many banks--not all US-based--were brought to the table by the Fed to organize a resolution. Not all signed on: BNP Paribas was holding so much collateral on some vol insurance LTCM had sold them that they preferred to take the collateral. Made a nice amount of money at it, too. Did it ever occur to you to wonder why greedy banks were willing to pay money to sort the mess out?

What hedge funds do is take risk off the books of other entities. In the "small bank / no trading" model being bandied about, there will be lots and lots of money to be made doing just this. The risk will vanish from bank balance sheets in its direct form, to be replaced by "counterparty risk." The counterparties will be unregulated, secretive entities; they will all but inevitably become much larger than the banks. It is easy to imagine a case in which Citadel becomes the largest "bank" in the US if a radical breakup of regulated institutions is initiated.

Thus, the foreseeable result of this legislation is not that no institution becomes TBTF, but instead that all TBTF financial institutions are "off the grid" and subject to essentially no regulation. Sound good to you? Not to me.

AnAnonymous's picture

Too big to fail is too often related to an idea of size.

 

It might be that the too big to fail banks grow even more too big to fail banks after shrinking.

fluorideintapwaterisbadforyou's picture

The Fed must die! Abolish it, or burn it to the ground.

"Gentlemen, I have had men watching you for a long time and I am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter, I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves. I intend to rout you out, and by the grace of the Eternal God, will rout you out." - President Andrew Jackson

Florida Joe's picture

Go Andrew!

 

Where are any such statesmen, and true patriots, today?

Hansel's picture

Fisher: "blah blah blah"

Miles Kendig's picture

Too bad I cannot but hold these comments as suspect.  After all, by serving the fed he is serving the continuation of the TBTF.  If his comments were actually serious and not some preparation to a future point out the "debate" narrative either he would resign, become a Miles Kendig or both.

Weak kneed POS MF'er whom I will still love and push to actually stand and take positive action on his principles, if he actually has any beyond the sociopathic standard of a fed official.

Kali's picture

TD love the "vital going viral" comment.  Like opportunistic pathogens.  They are everywhere in/on the body, don't usually kill the host, till they find a weakness in the immune system.  Sorta like MRSA. And about as useful.  :)

trav7777's picture

Why do the economists seem like fish out of water?

Because they are.  They don't understand the nature of their own product, debt.

Debt-based money is its own systemic risk as a matter of basic mathematics.

faustian bargain's picture

Almost all of our current problems can be seen as rooted in fundamental misunderstandings of risk, especially the systemic risk inherent in attempting to control complexity (chaos?) in a centralized way. As Taleb might say, it's the misapplication of Gaussian models to Mandelbrotian reality.

TooBearish's picture

TBTFs are here to stay as long as the money train is flowing into Barney Franks oft violated hind quarters...also ifn JPM and GS were broken up how the fuk is the FED gunna control prices as it will become very difficult to control rates and commodities while goosing spoos thru eight entities instead of 2.....

Augustus's picture

Once US banks were limited to taking deposits within their own states.   Then it was having a branch within the state.  Intrastate banking seemed to be a good move but it lead to all of the bank roll ups of the local banks that actually knew the borrowers.

Part of the argument in favour of the Very Big Bank was to make US banks able to fund larger loans for InterNational corporations.  Otherwise the business would go to the Euro banks to earn the "profits."  Of course bank profits are always the result of leverage of deposits and spreads

The questions is:
So what if the Euros banks fund larger loans?  And if the larger loans cannot be funded, the borrowerer will only have to come to the deal with their own equity.  Is more equity a bad resriction?  Or is realy a problem if banks only fund lending with greater margins and more profitability?

John McCloy's picture

   Today is an excellent opportunity for someone to open a new bank focused entirely on being the anti-TBTF.  Simple marketing campaign of, "We are with you.Support true American business"

    Make a solemn promise to never engage in the complexities of the markets. Offer basic financial services such as trading for customers, no financial advice and simply a lender. Good ole fashion US of A banking. Propose yourselves as the anti-bailout bank and within 5 years TBTF would lose much of their deposit base.

Bearish News's picture

Fisher talks pretty sometimes. But don't forget he's the dude who emailed Geithner during the heat of the bailout-mania, and said, "Illigitimum non carborundum".

That's a stuck-up Harvard-club assed (Latin) way of saying "Don't Let the Bastards Get You Down".

So Bastards = Those stupid and angry American citizens. Fisher implies that Geithner are the good guys are being unfairly maligned.

Fisher has gotten better over the years, and he and Hoenig do deserve some respect. But based on their history, not a big fan.

faustian bargain's picture

'Illigitimum non carborundum' isn't stuck-up, it's just annoying and dorky. Something someone would say who doesn't get out very much aside from the monthly D&D miniature wargame club meeting.

Brett in Manhattan's picture

It smacks of someone trying a bit too hard to sound erudite.

Apostate's picture

Um... shrinking the TBTFs will do nothing. The problem is the Fed and the post-Bretton Woods currency system.

And the method for collecting taxes, which has been obsolete for decades.

The only thing even keeping payrolls together is legal overhead and - I'm not even joking - CEO patriotism.

You have to be deluded or an America-worshipper to keep significant staff in the US.

lolmaster's picture

oh please this guy is a side show act

funny how he doesnt consider shrinking the mother of all megabanks the FRB

killben's picture

If all this noise among the Fed governors leads to a mutiny at the Fed then that would be great.

 

If at all there is one guy who deserves to be lynched it is Ben Bernanke.. Sooner the better.

AnAnonymous's picture

Participants seeing the too big to fail banks as vital to their national policies/economies are probably the only ones willing to retain a bit of sincerity.

Like telling the US military occupation of the world is vital to the US national US policy.

Mako's picture
"Says Only Way To Remove Systemic Risk Is Shrinking The Megabanks"

The only way to remove systemic risk is to remove the system, I have no idea what these dipshits are talking about. 

It's over.

george22's picture

Resign, and take as many documents with you as you can.

The Fed must die! Abolish it, or burn it to the ground.

"Gentlemen, I have had men watching you for a long time and I am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter, I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves. I intend to rout you out, and by the grace of the Eternal God, will rout you out." - President Andrew Jackson

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