Too Bigger To Fail? St. Louis Fed Warns Over Concentration Of Risk In Ever Growing, Ever Fewer "Big Banks"

Tyler Durden's picture

Your rating: None

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Wed, 12/16/2009 - 18:03 | 166568 Anonymous
Anonymous's picture

This simplistic analysis skews things towards the upside by a large scale; many of the contracts cancel each other out. The thesis is still the same though, they probably are too large.

The term "notional value" implies that this amount (generally) does not change hands. If a 500mm contract A and 500mm contract B are entered between the two respective parties, the notional value is 1000mm, but that does not necessarily indicate the amount of money that will change hands, which could be 0.

More conservative institutions use derivatives for risk hedging and to match cash inflows with cash outflows - they do serve a place, to transfer risk.

The key is narrow their scope somehow ...

Wed, 12/16/2009 - 22:28 | 166953 omi
omi's picture

Taxpayer is happy to be on the receiving side.

Wed, 12/16/2009 - 13:52 | 166108 drbill
drbill's picture

Is the Fed TBTF? Whoa, I'm making myself dizzy!

Wed, 12/16/2009 - 14:22 | 166161 Bear
Bear's picture

Is TBTF TBT Succeed?

Wed, 12/16/2009 - 13:57 | 166112 AnonymousMonetarist
AnonymousMonetarist's picture

Didn't they get the memo?

Laissez les bons temps rouler.



Wed, 12/16/2009 - 16:34 | 166411 MarketTruth
MarketTruth's picture

>>>Didn't they get the memo?<<<

i think someone forgot to put the new TPS cover sheet on it ;-)

Wed, 12/16/2009 - 14:00 | 166119 Reggie Middleton
Reggie Middleton's picture

Oh, I forgot "Any objective review shows that the big banks are simply too big for the safety of this country"

This is basically an issue of regulatory capture. I just posted somthing on ZH regarding the issue. The government has been captured by the banking special interests and the livlihood of the populace has, and will come 2nd to the best interests of the concentrated lobby - that is until the resultant (and inevitabe explosion takes enough wealth and capital out to usher in a new regime of concentrated lobby).

Commercial real estate is a perfect example. By regulators allowing "extend and pretend" to occur in the banking industry, the requisite asset value writedowns that need to occur to bring smart, educated money into the real estate market have not occured. The longer you wait to take the writedowns, the larger the writedowns will be.

Regulatory capture in the banking industry is actually suppressing pricing in the commercial (and residential, may I add) real estate industries - and as a result is creating an even more increased incentive for additional capture by artificially prolonging the suppression of the asset values that called for the capture in the first place.

A reflexive, circular, death spiral of I'll rub your back if you put money on mine.

Wed, 12/16/2009 - 14:04 | 166124 A Man without Q...
A Man without Qualities's picture

At this point, it is easier to imagine there is just one bank, which stretches from the Treasury to the Fed to JPM, GS, Citi etc.  It is acting in a concerted fashion, but by transferring the toxic assets from the banks to the Fed and from the Treasury to the banks, with the Fed creating FRNs to plug any gap, there is an illusion that it is a financial system, whereas it has become nothing more than a game of pass the parcel.

Given we have a situation were big banks never fail, because the government won't let them and Treasury auctions won't fail because the primary dealers will always buy using free money from the Fed, the question has to be, were is the breaking point?  It must be the Dollar, surely?


Wed, 12/16/2009 - 14:55 | 166232 Bear
Bear's picture

In Feb of 2008, primary dealers stopped supporting Auction Rate Securities and in an instant they were gone. I think it will be a temporary problem with only one dealer that will bring the house of cards down. What this looks like I don't know. It could also be caused by an external event like Syria/Iran (Hezbollah) attacking Israel. The USD seems to be more easily controllable.


Wed, 12/16/2009 - 15:30 | 166297 Anonymous
Anonymous's picture

You meant Israel attacking Iran.

Wed, 12/16/2009 - 14:19 | 166159 orca
orca's picture

Big banks can't fail, period, because they are big. The fun part starts when they get smaller, of in FED speak when they grow negatively. It's not semantics but please don't ask me to explain, this was just a powerfull flash of insight brought to you by your European friend.

Wed, 12/16/2009 - 14:40 | 166195 bugs_
bugs_'s picture

JPM > The Entire World baby!!

Wed, 12/16/2009 - 14:44 | 166209 chet
chet's picture

Some of the regional Fed banks are waking up.  But they need to start winning votes at the meetings.  Do the Chairman and NY Fed have veto power?  Probably implicit veto power.

Wed, 12/16/2009 - 14:46 | 166214 BG_rulez
BG_rulez's picture

If there is fiat monetary system there is room for abuse, deficits, inflation, fractional reserve lending…

Help dismantle the abomination of today`s governments and gain our freedom back!

Wed, 12/16/2009 - 15:04 | 166254 Selah
Selah's picture

Freedom isn't gained so easily.

History has proven that freedom has a price... blood.

Wed, 12/16/2009 - 15:32 | 166299 BG_rulez
BG_rulez's picture

Not so true. There are many other ways to oppose the system such as:

  1. Avoid the Gmen in general and taxation in particular.
  2. Do not paricipate in the "money creation cycle" (avoid banks and the financial institutions)
  3. Stay off debt and into hard assets
  4. Start growing food if possible
  5. Educate yourself and avoid sedation(entertainment of all kind).
  6. Last but not least - light the truth out and be compassionate with others.
Wed, 12/16/2009 - 15:12 | 166273 Anonymous
Anonymous's picture

The risk lies entirely in your hands, oh little ones.

Play our game by the rules we fluidly deploy or sit and lose either way; we guarantee it.

We own your ass :)

40muleteam borax

Wed, 12/16/2009 - 16:45 | 166433 BG_rulez
BG_rulez's picture

2 Kings (16:17)

“Don`t be afraid” the prophet answered. “those who are with us are more than those that are with them. “

And Elisha prayed, “O LORD, I pray thee, open his eyes, that he may see. And the LORD opened the eyes of the young man; and he saw: and, behold, the mountain [was] full of horses and chariots of fire round about Elisha.

Wed, 12/16/2009 - 16:05 | 166367 Anonymous
Anonymous's picture

Squeeze The People –

Squeeze the People is the most sincere act of patriotism I can offer to my fellow neighbor. It is an album of Freedom Music of the People who are being squeezed to death by Fat Cat Wall Street banksters. Its purpose is to encourage alternative perspective and hopefully a greater sense of things. I invite you to listen. And please know that I am grateful for your time, because time is the most valuable commodity we have to share.

Wed, 12/16/2009 - 17:18 | 166488 merehuman
merehuman's picture

Much discussion on the finances, the banks and lies that glue it all together.

Not much said about many millions having idle hands and little to no income.

Rural and isolated areas like mine  dont expect much trouble.

Cities crowded with an unemployed population and in time of inflating food prices are a  bomb waiting to explode. I would like to think we would all help one another, but todays collage of people are used to instant everything on demand. There  is little patience or humility in todays crowd of man.

How fast we wake up might depend on how many switch from tv to utube!

Without utube i would still be asleep to the nation/world crisis . Because of utube i learned about 1913, cfr, that the fed is private contractor, silver and gold suppression and much more. My utube education led me to zerohedge.

I have seen no site more note worthy than zerohedge and hereby thank its founders and writers, repliers included. I have learned much here, allowing me to intelligently carry on the prevailing  news to my fellow man.

Damn you guys are good . THANKS!!

Wed, 12/16/2009 - 17:34 | 166508 BG_rulez
BG_rulez's picture

Breathe the free air again!


"Cities crowded with an unemployed population and in time of inflating food prices are a  bomb waiting to explode."

If the bomb really explodes no one is safe!

Do NOT follow this link or you will be banned from the site!