Fed Orders Banks To Create 'Super Secret, Entirely Useless' Plan To Avoid Blowing Each Other Up

Tyler Durden's picture


Just when you had got over the entirely inane creation of a living-will that purports to solve the taxpayer's dilemma should a large SIFI hit an iceberg; Reuters reports - this time super secret - the Fed, in 2010, asked for a plan from the US' Big 5 Banks for staving off collapse if they faced serious problems - critically emphasizing that the banks can't rely on government help. Read that again and we dare you not to laugh. It seems regulators are trying hard to ensure banks have plans for worst-case scenarios - in order to act rationally in times of distress.

Recovery plans differ from living wills, also known as 'resolution plans'; "Recovery plans are about protecting the crown jewels," said Paul Cantwell, a managing director at consulting firm Alvarez & Marsal. "It's about, 'How do I sell off non-core assets?' The priority is to the shareholders. A resolution plan is about protecting the system, taxpayers and creditors."

The deputy comptroller reassures that:

"Recovery plans required of the largest banks are helpful in ensuring banks and regulators are prepared to manage periods of severe financial distress or instability affecting the banking sector."

Each plan was to address severe financial stress at the firm, as well as "general financial instability." The plans should be capable of being executed ideally within three months, but no longer than six months, the documents said.

The plans should "make appropriate assumptions as to the valuations of assets and off-balance sheet positions," the documents said.

Recovery plans have been mentioned in public before, but only in passing.

Interestingly, Reuters has uncovered an 'Orderly Liquidation of a Failed SIFI' presentation - embedded below  - sponsored by JPMorgan which is reassuringly positive of this end of the world contagion scenario.



Your rating: None

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Fri, 08/10/2012 - 10:51 | 2694071 Abraxas
Abraxas's picture

I don't think they'll blow each other up. They'll cover up. War is the ultimate cover-up.

Fri, 08/10/2012 - 10:53 | 2694085 viahj
viahj's picture

i thought that is what they were doing with LIeBOR

Fri, 08/10/2012 - 10:56 | 2694095 bigdumbnugly
bigdumbnugly's picture

no, that's their super-duper double top secret plan

Fri, 08/10/2012 - 10:57 | 2694098 Pladizow
Pladizow's picture

So before the ship sinks how do you plan to steal as much money as possible!

Fri, 08/10/2012 - 11:01 | 2694108 goldfish1
goldfish1's picture

Gauss: Stuxnet-Linked Cyber Weapon Hits Lebanon ABC NewsBy Lee Ferran | ABC News – 20 hrs ago

A new cyber weapon believed to be linked by code to the infamous Stuxnet worm has been discovered stealing banking information in Lebanon, according to Moscow-based cyber security firm Kaspersky Labs. The new malware, dubbed Gauss for an in-code reference to a German mathematician, is designed to "steal and monitor data from clients of several Lebanese banks," among other nefarious abilities. The code also includes some kind of "special warhead" that is so well encrypted that Kaspersky has been unable to identify it.



Fri, 08/10/2012 - 11:06 | 2694131 knukles
knukles's picture

So what's the big deal?
No different than the City of London within the Empire, remaining central locus of the Anglo-American Banling Cartel.

No surprise.

The money must flow to the law givers.

Fri, 08/10/2012 - 11:09 | 2694142 saturn
saturn's picture

The cartel has exposed itself. Time to clap Big Ben and company in irons. And never let go!

Fri, 08/10/2012 - 11:31 | 2694196 Manthong
Manthong's picture

Just wait until the world figures out that they really, truly just make it all up.

Fri, 08/10/2012 - 11:09 | 2694144 Hype Alert
Hype Alert's picture

What a complete waste of time.  They just proved they can pretend it never happened and print money and stuff it in the bank vaults.  Digitally of course.


No matter what mess the bankers create, we now have a solution.  The Bernanke flyby.

Fri, 08/10/2012 - 11:23 | 2694179 HoofHearted
HoofHearted's picture

"That's great, it starts with an earthquake, birds and snakes...."

It's what I did when that preacherguy said the end of the world was coming. Everyone I was with was just completely floored by my level of sarcasm and the gallows humor. I told them they need to read more ZeroHedge.

Fri, 08/10/2012 - 11:51 | 2694267 pods
pods's picture

So we can officially add another nation that we are actively at war with!

Amerika, Fuck Yeah!

Fri, 08/10/2012 - 12:31 | 2694395 Skateboarder
Skateboarder's picture

Using Gauss' name for a shitty worm? FUCKING DISHONOR is what this is.

Fri, 08/10/2012 - 11:02 | 2694115 This just in
This just in's picture

Boating accident?

Fri, 08/10/2012 - 11:05 | 2694128 old naughty
old naughty's picture

No need asking...You'll never know it in time.

Fri, 08/10/2012 - 11:21 | 2694174 toady
toady's picture

And, after you've stolen all you can, how do you convert it to gold, guns, etc. without raising suspicion?

Fri, 08/10/2012 - 10:59 | 2694096 hedgeless_horseman
hedgeless_horseman's picture



I, Lord Blankfein, do hereby agree to never sell JPM stock.

I, Jamie Dimon, do hereby agree to never sell BAC stock.

I, Brian Moynihan, do hereby agree to never sell C stock.

...et cetera and so forth...

Fri, 08/10/2012 - 11:00 | 2694104 malikai
malikai's picture

We, The Financiers of the State, do solemly pledge..


Fri, 08/10/2012 - 11:34 | 2694191 Daily Bail
Daily Bail's picture


You missed the BEST part of the JPM document.

JPM's $150 Billion FDIC Reality Adjustment

It's easier to see on the PDF:


Go to page 9.  Under the wipeout scenario JPM describes a $50 billion trading loss turning into a $200 billion loss as soon as the fdic takes over.  Why... ? Because JPM says they would expect the FDIC to immediately writedown JPM's assets by an additional $150 billion.

Jamie Dimon just admitted to the world that their assets are overvalued on the books by $150 billion.

It gets better. Go to page 10.  The chart shows that they only have $184 billion in equity, minus the $50 billion loss, minus 'the $150 billion fdic reality adjustment', which leaves them in a negative equity position of (-$16 billion).

So, we can extrapolate that without this phantom loss of $50 billion, JPM's real equity position is just $34 billion currently, not the $184 billion on their books.

Fri, 08/10/2012 - 11:38 | 2694216 fuu
fuu's picture


Fri, 08/10/2012 - 12:30 | 2694290 Daily Bail
Daily Bail's picture

I did a quick story on it.

I included photo-grabs from pages 9 and 10 showing the $150 Billion FDIC Reality Adjustment:

Jamie Dimon Just Admitted To The World That JPM Assets Are Overvalued By $150 Billion


Fri, 08/10/2012 - 14:39 | 2694850 Gadocat99
Gadocat99's picture

Also, if the FDIC is not repaid it will assess the industry to cover any losses.

Might need a derivative to cover this assessment.

Fri, 08/10/2012 - 11:24 | 2694181 slaughterer
slaughterer's picture

SPY trading range for August: 140-141.  A market designed only for "rigged skimming" algos. 

Fri, 08/10/2012 - 11:25 | 2694182 rwe2late
rwe2late's picture


cover up?

But we have been assured there is nothing to cover up.

Fed investigation finds Goldman Sachs innocent of any wrongdoing:


Fri, 08/10/2012 - 10:49 | 2694072 vinu02
vinu02's picture

Even if bank don't make plan government will still bail them out.



Fri, 08/10/2012 - 11:16 | 2694158 JimBowie1958
JimBowie1958's picture

Vinu the government wont be able to bail them out because the government will be broke as well.

Our whole economy is on the brink of destruction. I think we will come through, but everything will change,  mostly for the better, but after several years of chaos and violence of varying degrees, methinks


One member of this team, Chris Martenson, a pathologist and former VP of a Fortune 300 company, explains their findings:

"We found an identical pattern in our debt, total credit market, and money supply that guarantees they're going to fail. This pattern is nearly the same as in any pyramid scheme, one that escalates exponentially fast before it collapses. Governments around the globe are chiefly responsible.

"And what's really disturbing about these findings is that the pattern isn't limited to our economy. We found the same catastrophic pattern in our energy, food, and water systems as well."

According to Martenson: "These systems could all implode at the same time. Food, water, energy, money. Everything."

Another member of this team, Keith Fitz-Gerald, the president of The Fitz-Gerald Group, went on to explain their discoveries.

"What this pattern represents is a dangerous countdown clock that's quickly approaching zero. And when it does, the resulting chaos is going to crush Americans," Fitz-Gerald says.

Dr. Kent Moors, an adviser to 16 world governments on energy issues as well as a member of two U.S. State Department task forces on energy also voiced concerns over what he and his colleagues uncovered.

"Most frightening of all is how this exact same pattern keeps appearing in virtually every system critical to our society and way of life," Dr. Moors stated.

"It's a pattern that's hard to see unless you understand the way a catastrophe like this gains traction," Dr. Moors says. "At first, it's almost impossible to perceive. Everything looks fine, just like in every pyramid scheme. Yet the insidious growth of the virus keeps doubling in size, over and over again - in shorter and shorter periods of time - until it hits unsustainable levels. And it collapses the system."

Fri, 08/10/2012 - 11:37 | 2694210 viahj
viahj's picture

is this why the Mayans were so fond of "pyramids" knowing that they would last for centuries?  it seems that pyramid schemes don't last nearly that long.

Fri, 08/10/2012 - 11:40 | 2694223 adr
adr's picture

The pyramids that last for centuries are built with wide foundations on the bottom. The bottom holds the most material. The pyramids of economic schemes are built upside down. The top holds all the material and overwhelms the support underneath, collapsing all of it into ruin.

If the top falls off a pyramid, it doesn't take much to replace it. If the foundation crumbles the entire thing is destroyed.

Fri, 08/10/2012 - 11:37 | 2694211 adr
adr's picture

Yes, it's called a pyramid scheme and everyone should be aware of what the entire system is by now. You work to give money to those who wish not to work.

King's and Queens and the rest of the royal set, got to the point that they thought riding a horse around and lifting a fork to eat was actual work. Just like the wealthy class today that thinks talking on the phone to a stockbroker or spouting endless bullshit at a conference is actual work.

The insanity will end when those who wish to be wealthy without having to work, are killed by those who work but are forced to be poor.

Fri, 08/10/2012 - 12:24 | 2694367 JimBowie1958
JimBowie1958's picture

What surprized me about the article is that this is not confined to the financial markets, or even the genral economy.

This pattern of front loading all gain and back loading all costs is found everywhere in every industry.

Its almost comically stupid, but the impact will be so severe and so many will suffer and be lost it is truly tragic.

And I am afraid it will be mostly the poor who bear the brunt, once again, and the rich will buy their way through the crisis which will largely be the creation of their own lack of foresight and incompetence.

Fri, 08/10/2012 - 10:51 | 2694078 Ralph Spoilsport
Ralph Spoilsport's picture

I tried not to laugh but this is really fucking stupid.

Fri, 08/10/2012 - 11:05 | 2694127 i-dog
i-dog's picture

This bit brought an extra long chuckle from the London Whale:

"[JPMC's] strong risk management"

Fri, 08/10/2012 - 10:52 | 2694080 BandGap
BandGap's picture

I know this is off topic but will someone please explain this fucking alternate universe, real life event now happening?


Fri, 08/10/2012 - 11:01 | 2694107 magpie
magpie's picture

Bailout ?

Fri, 08/10/2012 - 11:17 | 2694151 Dr. Engali
Dr. Engali's picture

It is purely shorts taking profits on the news. It is an oversold position and a crowded trade. The down trend will continue shortly.

Fri, 08/10/2012 - 10:53 | 2694083 surf0766
surf0766's picture

Why is this being reported now. Why?

Fri, 08/10/2012 - 11:08 | 2694136 knukles
knukles's picture

In adherence with the pledge of openness and transparency of the...


Fri, 08/10/2012 - 11:21 | 2694172 LMAOLORI
LMAOLORI's picture




"Why is this being reported now. Why?"

Election is my guess. I'm not a Gold Bug but I do find this interesting


A Gold Bug as Secretary of State in a Romney Administration?



Game Changer for Gold

Fri, 08/10/2012 - 11:57 | 2694282 slewie the pi-rat
slewie the pi-rat's picture

if either candidate advocated slewnomics' position that US Mint-produced PM coinage is required by theConstitution to be legal tender" and not be "taxed by fiat" i would lead the parade;  even for mittens

the first candidate/party who adopts the slewiePlankTM will win the election

a politician does not want to be "second" of this one, BiCheZ!

imagine!  theUS goobermint in 2012, giving thePeople their REAL money back, an an equal basis with fiatscoes, tax&reporting-wize;  kinda like utah, as i've said these dozen times, now

candidates fighting to implement what theConstitution palinly sez, not what some banksters WISH it said!

Fri, 08/10/2012 - 12:10 | 2694322 fuu
fuu's picture

I nominate Slewie for President of the United States of America.

Fri, 08/10/2012 - 11:47 | 2694252 slewie the pi-rat
slewie the pi-rat's picture

fair question:  who knows why rilly?

my guess is that with the big upcoming FED annuual jacksonHole bankster rodeo and BBQ, the FED is doing some "education of its clientele" regarding some of the applied "stablity plans and procedures" they have generated under their new job-controlling legislation:   the dodd/frank bankster legislation of 2010

"the banks can't rely on goobermint help" under dodd/frank, at least theoretically

the FED haa a "new job description" and since almost no one understands dodd/frank, almost no one understands wtf the FED is actually up to w/ QEZIRP

slewinomics has postulated for months now that they are up to : keeping the checks in the mail + stability;  and i may actually be correct, too!  which is why the "hypno-doomers" here no longer appear quite so reasonable to me as "economic forecasters";  they just don't seem to think stability is possible?

however the markets are showing us stability and fungibility under increased centralBankster cabal co-operation and co-ordination

i have tried to lay out my views here and i thank tyler for listening and starting to follow the crumbs as they become visible

this is part of the FED's educational program about itself as a centralBank imo and this is about the FED's new job under dodd/frank~~not "growth', not "jobs" but "stability"; the purpose for those who may be brain-dead being:  to avoid another 2008 "collapse" incident which resulted in the neoCons and the banksters looting the USTreasury for themselves and their corpo-fascist cronies

the actual present job description of the FED has kept coming up on-line recently~~here on zH, b/c of moi

this at least is not disinformation

if the 2012 elections are gonna be about the "bigBadDodd/frankBanksteringLaw" and why we need to elect mittens to "fix it" then an informed voter should probably understand a bit more about this law, why it was passed, and what it means for "stable regulation the financial syatem by the FED" as a primary goal of the centralBank

in case of severe financial distress, theCongress is apparently unwilling to EmptyTheVaultForThePerpsII, which is why they wrote the law, at least ostensibly

so thx again, tyler! 

Fri, 08/10/2012 - 10:53 | 2694084 Poundsand
Poundsand's picture

And here is the GS plan summary:

"Hello Ben?  Got us a little problem here we need some help with..."


Fri, 08/10/2012 - 11:49 | 2694258 XitSam
XitSam's picture

Ben: That's why the exchange stabilization fund was made. How much do you need?

Fri, 08/10/2012 - 12:37 | 2694406 Sofa King Confused
Sofa King Confused's picture

Ben:  I'll help you out if you want but,  why don't you just use segregated funds it's much easier for both of us.

Fri, 08/10/2012 - 13:30 | 2694552 krispkritter
krispkritter's picture

GS: But using customer funds is illegal! Just look what happened to Corzine! He, he...oh, NOW I get it....

Fri, 08/10/2012 - 10:53 | 2694086 101 years and c...
101 years and counting's picture

1.6 Trillion in excess reserves is a good START.

Fri, 08/10/2012 - 10:53 | 2694087 govttrader
govttrader's picture

Mr. Bernank...I'm TBTF..may i have 2bln please...thanks


Fri, 08/10/2012 - 10:53 | 2694088 Bay of Pigs
Bay of Pigs's picture

"make appropriate assumptions as to the valuations of assets and off-balance sheet positions,"

WTF? LOL...sorry, but it's funny.

Fri, 08/10/2012 - 10:54 | 2694090 Dr. Engali
Dr. Engali's picture

Secret plans to prevent catastrophic failure..... 1)Crash the market  2) warn of the apocalypse 3) collect check.

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