Posted on 10/31/2015 4:00:34 PM PDT by aimhigh
The largest United States banks would face a US$120 billion (S$168 billion) total shortfall of long-term debt under a Federal Reserve proposal aimed at ensuring their failure would not hurt the broader financial system.
The rule on total loss-absorbing capacity, or TLAC, is a key part of regulators' efforts to avoid another financial crisis. If US banks were to fail, investors in their stock would lose everything, but the debt would be converted into equity in a new, reconstituted bank under the plan.
(Excerpt) Read more at straitstimes.com ...
Interest rates chronically at zero, while borrowing is still relatively low, leaves an excess of underperforming liquidity in the economy. Having some of that reined in might give the inflation they’re so fond of a tickle. Or not. What do I know?
Remember how Paulson and Bernake forced BoA’s shareholders to take on Merril Lynch, “or else”? This is the same damned thing. Treachery... the whole thing... END THE FED.
Who would hold that equity? The original investors?
Friends of Obama.
The TLAC should consist of instruments that can be written down or converted into equity in case of resolution: capital instruments (CET1, AdT1 and T2), together with long-term unsecured debt subordinated and senior debt.
Full article: http://www.euromoney.com/Article/3408580/TLAC-what-you-should-know.html?copyrightInfo=true
Visit http://www.euromoney.com/reprints
Uhhh... this sounds like a good thing to me.
I was stunned that the government (i.e., taxpayer) made the debtholders, and even the preferred shareholders, of the banks whole.
If a normal business goes belly up, the bondholders wind up owning the business, because the equity has been wiped out, and the bondholders have not been paid. How is this differnt?
The economy cannot function for long when government suppresses the time value of money to nearly zero.
The moral hazard of banks engaging in reckless or dishonest behavior is guarded against by regulatory oversight and loan loss reserve requirements. The Fed proposal makes sense because it is easier and cheaper to raise such reserves by borrowing instead of by issuing new equity and having Wall Street pocket a large slice of the proceeds in underwriting fees and share allocations.
New G-20 Rules Authorize Global Seizures of Public Deposits and Pensions
When the next crash comes, they will seize IRAs, 401Ks, pensions, TSP accounts, and anything else they can steal.
New Laws That Allow The Government to Seize Savings Deposits During a Crisis
Per the 2015 budget agreement, taxpayers are also liable for all derivative exposures of banks.
New law means taxpayers must back banks' 'incredibly risky' derivatives deals, Rep. Mark Pocan says
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