Thursday, Aug 27, 2009
Blackmail
Zero Hedge: Bailed Out Banks Threaten Systemic Collapse If Fed Discloses Information
The Clearing House Association, another name for all the banks that were bailed out over the past year with the generous contributions from all of you, dear taxpayers, are now threatening with another instance of complete systemic collapse if Bloomberg's lawsuit is allowed to proceed unchallenged, let alone if any of the "Audit The Fed" measures are actually implemented.
As a reminder, The Clearing House Association consists of ABN Amro, Bank Of America, The Bank Of New York, Deutsche Bank, HSBC, JP Morgan Chase, US Bank and Wells Fargo.
Posted by devo @ 04:54 PM (1056 views) Add Comment
22 Comments
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1. charlie brooker said...
The never been a better time to turn bull - obviously. (Rolls eyes)
2. taffee said...
the market told us there was a serious problem and we stuck two fingers up with more of the same
imho we face a systematic collapse of the banking system
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4. icarus said...
What they're saying is not that any 'collapse' resulting from disclosure will be systemic but only that certain banks will weaken while others strengthen (gain a competitive edge). What's wrong with that?
5. Icarus said...
They talk of 'failures of financial institutions whenever information about their funding difficulty has been disclosed'. Would it not be the funding difficulty itself that led to failure?
6. devo said...
4. icarus said... What they're saying is not that any 'collapse' resulting from disclosure will be systemic...
Consider this:
"significant harms could befall not only private companies, but the economy as a whole if the information were disclosed."
Source: Reuters, Thu Aug 27, 2009 12:32pm EDT
7. quiet guy said...
This will strengthen the hand of those who believe in the 'banking holiday' theory. Even if the banks threats are accepted and there is no public disclosure, the damage to the Clearing House Association's reputation is done.
8. flashman said...
icarus is quite rightly pointing out the desirability of the disclosures, setting off a process of natural selection. The bailouts denied us the beneficial process of the weaker banks dying-off, so if the disclosures reinstate the 'natural order' of things, it can only be good. We would end up with no Zombie banks and a handful of strong banks.
9. devo said...
7. flashman said... icarus is quite rightly pointing out the desirability of the disclosures
Who doubts the desirability of disclosures? I don't - but these do...
The Fed
The Clearing House Banks (see above)
The US Treasury
A fairly influential group, don't you think?
10. flashman said...
devo: You have to also quote the second part of my sentence ('setting off a process of natural selection') to get my meaning.
I doubt there is any danger of systemic risk. The zombie banks could fail while the strong banks get stronger
11. devo said...
9. flashman said... I doubt there is any danger of systemic risk.
You doubt it, but these don't...
The Fed
The Clearing House Banks (see above)
The US Treasury
cf. this list with my previous one - spooky!
12. flashman said...
We are all agreed that the disclosures are a good thing but even the banks in question do not mention systemic risk
13. icarus said...
devo - a reading of the text of the banks' own submission leads to the interpretation I made @4. "Competitors can use the disclosure to adverise...that they are financially stronger". Nowhere in the text (or that part of it reproduced in this article) is there a mention of systemic risk (here I'm thinking of the financial system rather than the economy as a whole) as opposed to risks to individual institutions.
The Reuters quote about 'the economy as a whole' is truly risible - these disclosures would send the economy down???
Anyway, I thought it was well known who got what. Didn't Citi and BofA get about $45 bn each and Wells Fargo $25 bn of bailout money, while Citi has a $200bn guarantee and BofA a £118 bn guarantee?
14. devo said...
12. icarus said... The Reuters quote about 'the economy as a whole' is truly risible - these disclosures would send the economy down???
It isn't a Reuters quote, it's a US Federal Reserve quote relayed via Reuters. They should know what they're talking about, surely?
15. devo said...
icarus: "Nowhere in the text (or that part of it reproduced in this article) is there a mention of systemic risk"
Granted, but it is implicit throughout. The reference to Lehman Brothers (point 8) being particular pertinent. Both the sender and recipient of the letter are only too aware that a systemic, global financial collapse was only narrowly avoided (by a matter of hours) in September of last year.
16. devo said...
Re: 14. typo 'particularly'
See also:
Rep. Kanjorski: $550 Billion Dollar Bank Run - Collapse Of The Entire World Economy In 24 hours
http://www.youtube.com/watch?v=-xKPcyvlfnc
17. icarus said...
devo @13 & 14 - please indicate when you post where the quote is from. Gosh, if I'd known it was from the Fed I'd never have questioned it.
The premise of point 8 is that Lehman and Northern Rock were financially sound !!!!!!!! Then rumours (mostly true) caused their collapse.
18. devo said...
@ icarus: The premise of point 8 is that Lehman and Northern Rock were financially sound !!!!!!!! Then rumours (mostly true) caused their collapse.
So if the rumours were mostly true, then Lehman and Northern Rock obviously weren't financially sound!
The Clearing House banks know this. They also know that they themselves are insolvent, hence their determination not to disclose the truth about their financial state.
19. kruador said...
The whole point of a run is that banks don't have the funds to cover them. That's what makes it a run rather than just ordinary withdrawals. You have to get in first to pull out your money.
This is particularly dangerous when running zero cash reserves, as the Basel accords permit. The bank then has to cover withdrawals by selling assets. With the 'assets' not fetching anything like their marked-up prices in a distressed sale, the bank's financial position gets steadily worse and worse. However, even with cash reserves, deposits are still multiple times actual reserves: our financial system *depends* on people not all asking for all of their money back all at the same time.
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