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Fed Issues Update On Dodd-Frank Framework, Director Responsibility And Annual Stress Tests

Submitted by Tyler Durden on 12/20/2011 15:19 -0400

The Fed just released its 'framework' for thinking about planning to implement their proposals to take notice of the Dodd-Frank rules. There is little if any detail in here but the main points, via Bloomberg headlines from the 173 pages of admittedly well structured, but unclarifyingly disappointing prose are as follows:

*FED BOLSTERS TOOLS FOR AVERTING COLLAPSE OF BIG FINANCIAL FIRMS

*FED REGULATIONS FOCUS ON CAPITAL, LIQUIDITY, STRESS TESTS

*FED RULES TARGET RISK MANAGEMENT, REMEDIATION, CREDIT RISK

*FED RULES TO LIMIT FIRMS' CREDIT RISK TO A SINGLE COUNTERPARTY

*FED TO IMPLEMENT RISK-BASED CAPITAL RULES IN TWO PHASES

*FED: FIRMS MUST ANNUALLY HAVE STRESS TESTS, PUBLICIZE RESULTS

*FED TO IMPLEMENT LIQUIDITY RULES IN PHASES

*FED RULE REQUIRES BANK DIRECTORS TO APPROVE LIQUIDITY RISK

*FED: FIRMS MUST ANNUALLY HAVE STRESS TESTS, PUBLICIZE RESULTS

*FED PROPOSES `TRIGGERS' TO `EARLY REMEDIATION' OF WEAKNESSES

Does this mean that we won't see bank CEOs on TV saying they do not have liquidity problems an hour before they go BK?

There is much left unsettled, incuding:

*FED OFFICIALS: INTERNATIONAL LIQUIDITY RULES NOT YET SETTLED

*FED OFFICIALS CONSIDERING WHICH STRESS-TEST RESULTS TO PUBLISH

*FED OFFICIALS WON'T FORECAST WHEN FINAL RULES WILL BE ISSUED

The full statement can be read in its entirety here, but we note there are 0 mentions of hypothecation, 453 of credit, 449 of liquidity, and 1 of repo! enjoy...

Fed Dodd Frank Stuff

- advertisements -

Tue, 12/20/2011 - 15:23 | 1998458 GeneMarchbanks

'but we note there are 0 mentions of hypothecation, 453 of credit, 449 of liquidity, and 1 of repo! enjoy...'

Sounds juicy. But it won't stop me from passing... judgement. It all ends in the blink of an eye.

Tue, 12/20/2011 - 15:30 | 1998487 Mr Lennon Hendrix

We don't want the policy putting any silly ideas into anyone's head, do we?

[Backslap]

-Ben S. Bernanke

Tue, 12/20/2011 - 15:35 | 1998512 Hard1

TOOLS FOR AVERTING COLLAPSE OF BIG FINANCIAL FIRMS include safety pins, lying to the public and buying their toxic assets at par.

Tue, 12/20/2011 - 16:07 | 1998631 Nobody special

Yep, doesn't look like much. But perhaps we have a new noun.

Thou shalt not pull a Corzine.

Unfortunately, there's nothing much here of value. Regulators could have stopped the MF Global collapse long ago; they conciously choose not to. Now regulators will have more power. What use is it when they play favorites and respond so well to bribes? This document doesn't address root issues.

Tue, 12/20/2011 - 17:15 | 1998914 Djirk

FED REGULATES CDS AND OTHERS FUTURES MARKETS. ALL LIABILITES MUST BE PRESENT ON BALANCE SHEETS.

FED WILL MARK ALL SECURITIES ON BALANCE SHEET TO MARKET AND WILL REQUIRE BANKS TO DO SO

HAHAHAHAHAHAHAHHAHAHHAAA just having a little pre christmas laugh. Merry christmas, unless you are Jewish or Muslim. If so, just have a nice weekend.

Tue, 12/20/2011 - 18:10 | 1999108 AldousHuxley

laws don't prevent crime. publicizing consequences do.

just let TBTF fail and chop some heads off of banksters. the problems will resovle by itself.

Tue, 12/20/2011 - 17:59 | 1999071 willien1derland

Thou shalt not pull a Corzine*

*Unless you are a former alumni of Goldman Sachs, have contributed more than $200,000 to either the Democratic or Republican National Committees in the latest tax year, have at least a dozen direct contacts at several K Street lobbying firms, or merely requesting loan guarantees from the White House...ohhh sorry requesting loan guarantees from the Department of Energy....

Tue, 12/20/2011 - 15:23 | 1998459 Peter K

Why regulate when Mr. Market can take care of this problem pro bono? Ahhh, it's the pro bono part...........:)

Tue, 12/20/2011 - 15:25 | 1998466 Clam McCain

bullish or bullshit - im so high on hopium i got no idea anymore

Tue, 12/20/2011 - 15:29 | 1998484 SilverIsKing

Pass the pipe please.

Tue, 12/20/2011 - 15:27 | 1998472 Mr Lennon Hendrix

*FED BOLSTERS TOOLS FOR AVERTING COLLAPSE OF BIG FINANCIAL FIRMS

Fed prints more dollars

*FED REGULATIONS FOCUS ON CAPITAL, LIQUIDITY, STRESS TESTS

Fed prints more dollars

*FED RULES TARGET RISK MANAGEMENT, REMEDIATION, CREDIT RISK

Fed lends more dollars

*FED RULES TO LIMIT FIRMS' CREDIT RISK TO A SINGLE COUNTERPARTY

JPM will run this Shitshow

*FED TO IMPLEMENT RISK-BASED CAPITAL RULES IN TWO PHASES

Fed will make all the decisions without any input from anyone

*FED: FIRMS MUST ANNUALLY HAVE STRESS TESTS, PUBLICIZE RESULTS

The Shitshow will go on as long as it has to

*FED TO IMPLEMENT LIQUIDITY RULES IN PHASES

Fed will print more dollars after it prints more dollars

*FED RULE REQUIRES BANK DIRECTORS TO APPROVE LIQUIDITY RISK

With a gun to their head

*FED: FIRMS MUST ANNUALLY HAVE STRESS TESTS, PUBLICIZE RESULTS

Shitshow

*FED PROPOSES `TRIGGERS' TO `EARLY REMEDIATION' OF WEAKNESSES

Fed will print dollars and stash them in a slush fund just in case a bank needs to be propped up

Tue, 12/20/2011 - 15:27 | 1998478 Theta_Burn

Not 100 percent on the particulars here, and most of what expells from Fwank is pure methane, BUT Bank directors having to approve of liquidity risk sounds like a step in the right direction.

I mean someone needs to be held to account right?

Tue, 12/20/2011 - 15:31 | 1998479 Mercury

There is little if any detail in here but the main points, via Bloomberg headlines from the 173 pages of admittedly well structured, but unclarifyingly disappointing prose are as follows:

FED BOLSTERS TOOLS FOR AVERTING COLLAPSE OF BIG FINANCIAL FIRMS

Actually, that's probably all you need to know.

Tue, 12/20/2011 - 18:17 | 1999126 SAT 800

I would say so. I think you cut to the chase accurately.

Tue, 12/20/2011 - 15:28 | 1998480 Muddy1

so we calcualte estimated tax for a 2 month period, recalculate for another extension, the re, re calculate for more bs, or we do it for the entire year of 2012 and call it good.

IT folks will work through Christmas to redo all of the forrmulations

Tue, 12/20/2011 - 15:30 | 1998490 AccreditedEYE

Off Balance Sheet items are about to go hockey-stick-full-retard...

Tue, 12/20/2011 - 17:53 | 1999049 willien1derland

Well you know that the On Balance Sheet stuff has too many regulations associated with it...I mean, balancing...debits=credits...Assets=Liabilities+Owner's Equity..I mean LOOK AT ALL THOSE RESTRICTIONS!!! </Sarcasm Off>

Tue, 12/20/2011 - 15:34 | 1998507 RopeADope

*FED RULES TO LIMIT FIRMS' CREDIT RISK TO A SINGLE COUNTERPARTY

I admit to being confused on this...I thought the FED's sole purpose was to allow JPM to vacuum up all collateral that isnt tied down by regulations, thereby creating the only counterparty in town.

Tue, 12/20/2011 - 15:38 | 1998527 max2205

This is good for a "DUH"

They forgot they lost all credabilty over the last decade

Tue, 12/20/2011 - 15:41 | 1998543 unionbroker

just more rules to be fudged and or ignored

Tue, 12/20/2011 - 15:48 | 1998568 ACP

*FED PROPOSES `TRIGGERS' TO `EARLY REMEDIATION' OF WEAKNESSES

So this basically means a combination of cramming a bunch of cash into the es, tf, and nq, while at the same time ordering the CME to raise margins on everything that evil speculators buy and then threatening to kidnap, er, jail anyone who doesn't comply.

Tue, 12/20/2011 - 17:49 | 1999031 willien1derland

Great point ACP - but I would add one small clause to your statement above --> Or simply allowing 'weak' firms to magically become 'Bank Holding Companies' over a weekend & providing for no cost of capital loans via the Federal Reserve Discount Window

Tue, 12/20/2011 - 15:54 | 1998582 Schmuck Raker

Here is the central problem I have with electronic documents....you can't use them as Toilet Paper.

Tue, 12/20/2011 - 15:58 | 1998599 kralizec

My stress is being tested!

Tue, 12/20/2011 - 16:15 | 1998626 firstdivision

So that is why the 10Y yield moved 630 bps today?

Tue, 12/20/2011 - 16:10 | 1998648 oleander garch

I object strongly to any bank directors being held accountable for anything! Particularly, I am incensensed that the Fed would consider holding us to account for risk management. There is absolutely no risk involved because the taxpayers are there to bail us out.

Tue, 12/20/2011 - 16:17 | 1998679 gwar5

How about just enforcing Sarbanes-Oxley already? You know, the one where Corzine is responsible as the CEO for what happens under him, no excuses, and can't plead ignorance. The one they passed after ENRON and WORLDCOM. Corzine was the most connected insider CEO on the planet, if he can't be nailed with it then nobody can.

Tue, 12/20/2011 - 16:59 | 1998767 swani

Exactly. What's the point of making new rules when the current ones aren't being enforced?

Tue, 12/20/2011 - 16:40 | 1998778 AldoHux_IV

*FED BOLSTERS TOOLS FOR AVERTING COLLAPSE OF BIG FINANCIAL FIRMS

All the shit from there rolls downhill-- it's the only thing that will keep a true recovery from happening as the insolvent financial system will not be corrected. The fed has further committed their own frail survival on this bad bet.

Tue, 12/20/2011 - 16:47 | 1998805 Tunga