Philly Fed's Plosser Speaks: Too Big To Fail Must End

Tyler Durden's picture

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Hondo's picture

Tell this bozo to shut the F*** up unless he is going to vote against the king bozo Bernake.

Anonymous's picture

I simply can't agree with him about increasing the FRB powers. Examination of their actions over the last two years shows they haven't increased their ability one iota, merely used powers that were dormant. Something tells me they have more than enough at hand to make sure capital markets operate fluidly without having to become supreme ayatollah of the financial world.

bingaling's picture

These bureaucrats are so behind the curve it amazes me . Post crisis????what the hell is he talking about ? They are barely holding this piece of Sh*t market together and the economy is just whitewashed gov't reports and spin from the MSM .Don't tell me these guys actually believe their own lies. The changes he is talking about should have been made about a year ago or b4 . This would be funny if my blood and flesh weren't involved .

Boop's picture

ZOMG - they believe their own propaganda? Bloody 'ell.

bugs_'s picture

Nobody expects the philly fed!

deadhead's picture

Fisher from Dallas said same thing today/yesterday.

The ONLY thing I believe from the Fed is that they will keep ZIRP going until the end of mankind.

Cognitive Dissonance's picture

They are trying to create reality by changing perceptions. As silly as it might sound when you hear it said or see it written, perception is, or does become, reality.

It follows the concept of the big lie. Tell enough people a lie enough times and it becomes fact simply because it is now firmly planted into the public mind. This is well documented and the purpose of propaganda, advertising etc.

I understand that we all like to believe we are sentient creatures who can tell the difference between lies and truth. And for the average ZH reader, that might be so. But for the great unwashed masses who go through life without ever seriously engaging the thought process and questioning what is around them, they are definitely affected by the mind control.

I can't tell you how many people (including clients) who are doubtful of this so called "recovery" BUT the market is up, unemployment doesn't seem to be getting worse, they are still employed, the news and the leaders are telling them things are better so why fight it.

Let me repeat that. Why fight it. So they begin to spend a little more, buy that new car, go out to eat and generally begin to change their behavior, becoming less frugal. And this behaviour change actually helps to improve things in the economy, making perception (to a certain extent) reality.

I'm not saying things are as good as we're being told. And the fundamentals are terrible and trending backwards. But there's a lot to be said about the big lie creating an altered reality.

percolator's picture

CD, excellent comments to which I agree, but this will make the next collapse all the greater.

dnarby's picture

People always leave out the last part of the Quote by Goebbles.

“If you tell a lie big enough and keep repeating it, people will eventually come to believe it.

The lie can be maintained only for such time as the State can shield the people from the political, economic and/or military consequences of the lie.

It thus becomes vitally important for the State to use all of its powers to repress dissent,

for the truth is the mortal enemy of the lie, and thus by extension, the truth is the greatest enemy of the State.

Anonymous's picture

Lip Service

they must be getting ready to really shank us

the old kiss and shank routine

Anonymous's picture

Oh, these guys are all completely on-message. They know all that's standing between them and the abyss of history are nice, cheap, calming words.

doublethink's picture


"The last duty of a central banker is to tell the public the truth."  -- Alan Blinder, [then] Vice Chairman of the Federal Reserve, on PBS's Nightly Business Report in 1994

SV's picture

...the FDIC has demonstrated its ability to resolve these institutions quickly (usually over a weekend) and at relatively low cost to the taxpayer...

Ohhh, I don't know about that - OneWest keeps coming to mind and if this is low cost well...

faustian bargain's picture

yeah, and not only that, the cost to the taxpayer is supposed to be 'zero', as far as I can understand. The DIF is in the red, so with every new bank closure/transfer, we're backstopping the eff-dick.

Joanito's picture

Too big to fail is too big to fail until proven otherwise.  I actually think that eventually the bond market will dictate the failure of the too big to fails, but so far I've been plenty wrong.  All these neutered fed imbeciles can do is talk.  They are powerless.  These statements just make these guys look even more moronic and powerless.  The black hole is too big.... to fail. 

dumpster's picture

even the fed .. is not to big to fail

Anonymous's picture

One proof that Bernanke is a stooge is that he hasn't embraced too big to fail. this is a letter I sent to the ft today.

All commentators regarding banning naked cds miss the point. The real issue is breaking up the large financial firms into much smaller units. There is nothing wrong with speculating with a naked cds. there is something very wrong when a large financial firm (Goldman) knows it is hiding the true financial position of Greece through a credit default swap and receiving fees. the problem is compounded when the prop desk may be then trading long Greek debt on ever decreasing volumes via an algo trade, and at the same time Goldman is writing bespoke derivative contracts behind closed doors that pay off when that debt fails. It is clear this has been an accepted practice in the industry and must not be allowed. The same thing happened with sub prime.

break the firms up so they can't do this. You receive payment from writing the bonds, you can only hedge what you have physical possession of. Lets be clear this is what the Volcker rule is really about. Getting rid of the prop desk would make this practice very difficult for the big firms and that's why they are fighting it so hard. the prop desk rule is about market manipulation and the big firms do not want to give up this very profitable advantage.

This also relates to your story on page 20 regarding Goldman and JP Morgan entering metal warehousing. the income stream from the operation is secondary to the gains to be made via trading. Goldman knows when there is large amounts of product in storage, and can even put it there itself. the prop desk on open exchanges can push up the price, while at the same time the firm can write bespoke derivative contracts off an exchange knowing they have a huge stockpile in inventory. When it suits Goldman they can then release the stockpiles into he market. the public sees the price rising, while the insiders who control supply demand functions are making bets with insider knowledge they control.

When are you folks going to start to wake up to this abusive practice. You break up these firms so they can't do this sort of thing. Or their trading books have to be open and transparent. One thing for sure you can't have the people writing the debt/bonds be able to take naked positions against it.

This isn't that hard to figure out. I accumulate a large position in a firm all the way up. I then buy puts (maybe for even more shares than I own. via the prop desk I start to sell the shares, When there is a potential rally I dump shares into the market. I've made money on the way up, and then push the market down when I want.

I truly wish all you commentators started to abandon this talk of "free markets" the destruction on many hedge funds, and wall street banks has allowed excessive concentration in global finance making a mockery of the true purpose of the capital markets. That's the real reason we need to break up these big firms, perhaps have a transaction tax, and get the Volcker rule in place. It's isn't just about stability, it's about restoring both confidence and purpose to the markets.

Anonymous's picture

It's up to the fed players to step outside from behind the curtin and force bernake to actually do his job.

Mark Beck's picture

Contingent Capital, an unneeded non-solution, which is as unworkable as Mr. Plosser's remarks. If you work at the FED you can come up with any new structured whatever, and call it effective. To propose such a thing, and not provide a small doc to explain how it will really work, is highly irresponsible. But, I have to say, a common occurance at the FED.

Some questions:

Why do we need to complicate capital requirements? What is so difficult about a capital requirement for banks or the banking part of BHCs?

By providing a Contingent Capital mechanism are we not interlinking firms at yet another level, if so then, does this not increase systemic risk?


Perhaps the people who benefit most are the ones writing the Contingent Capital option deal and making their fees up front.


I lot of what he says is public relation non-sense.

"We should not underestimate the power of the market and its adaptability."

Through the purchase of real estate MBS you are directly manipulating the market. Not only that you own a lot of the market. Really, you are the market (1.25T worth), until the time you attempt to sell it to someone else.

Mr. Plosser wants the bankruptcy process to work. But it was the TREASURY/FED that provided capital to prevent BHC insolvency. It is easy to let to big to fail, fail. Don't prop them up.

He would be well served to just keep his mouth shut.

Mark Beck


Anonymous's picture

He is just a talker. If the Government wanted to end the TBTF it would have done it by now.

Ned Zeppelin's picture

Having a number of contrasting views publicly expressed by Fed talking heads helps create the illusion that policy is crafted by thoughtful discussion, rather than by the dictat from behind the curtain that is the true practice.   Pay no attention to this. 

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