Nouriel Roubini: 'Too Big To Fail' Revisited

forbes.com:

Although the G-20 finance ministers pledged stronger prudential regulation and financial oversight of systemically important firms at their September meeting, there is no consensus yet among regulators, lawmakers and academics on how best to proceed.

Read the whole story: forbes.com

Comments

[sonofsamphm1c]

It's not the size of the banks, it's the size of the threat. A systemic threat is big - huge. In terms of banking, a systemic threat would threaten to take out a major percentage of the industry. Interconnectedness means there really is no firewall. Whether the percentage threatened with death is made up of four banks or 100 banks, the outcome will be the same: without a bailout, a major percentage of the sector is going to collapse in the first wave. In the aftershock, a major percentage of the survivors will go down.

Federal bailouts are going to be with us forever. They are the only alternative to economic death.

As Elizabeth Warren said today, the bailout worked well and it has stabilized the economy. To suggest never doing again is lunacy.

[Stop the bail]

Woo hooo I love job less recoveries..10.2% unemployment and the stock market is up anyway. I'm sure all the millions of unemployed would feel relieved to know the economy is finally growing even if there won;t be any jobs available to them due to outsourcin­g/insourci­ng technological efficiency, or greedy employers.
http://financeopinionss.blogspot.com

We need a 2nd stimulus devoted only to JOBS

Stupid re.pukes and Milton Friendmanism keeping it from happening

[JackRusselTerrier]

Philip are you there?

[PhilipTaylor]

DYLAN’S FOUR STEPS TO FIX US BANKING SYSTEM + TOO BIG TO FAIL:

Stop Wall Street Casino Speculators selling cheap insurance to hedgsters, food &energy companies for huge Bank/Insurance fees and laying $23.7Trillion on taxpayers while Geithner, Frank, &D0DD allow doubled-down bets!

Four Step Regulation:

1. FORCE $600 Trillion in crooked insurance hidden "Off-Balance-Sheet” be put on exchanges!
Force FULL Transparency of secret insurance fraud taxpayers subsidize!

2. Demand Investor capital for each swap on exchange guaranteeing against possible losses! Vegas requires real money to bet but Wall Street places leveraged bets using FDIC insured depositors’ money + FED “OUT-OF-THIN-AIR” money. Banks take $Billions for infinite Transferred Risk for near ZERO down! Then Bonus themselves!

3. Enact Tax to encourage long-term (vs. short term) investment.
G0LDMAN relaxes while (PhD developed software) extracts VALUE from Markets automatically in nanoseconds while others simply click all day to extract VALUE from Casino (mouse Bandits). Taxed this Short-Term Theft Heavily!

Investing/Risking (adding) Value to private businesses in REAL ECONOMY over 6+Months should pay Near ZERO taxes!

4. Break up “Too-Big-T­o-Fail-Ban­ks!” G0LDMAN+JPM to start! No one can compete with Government Backed and Subsidized Mega Banks that make Massive Rewards taking limitless risk subsidized by FED+Government! = How Banks created $600 Trillion in “Off-Balance-Sheet” secret Derivatives!

[MarcusT]

Repeating this ad-nauseam doesn't make it any more intelligible.

[PhilipTaylor]

Marcus you certainly are one unhappy person!

Glad you noticed! Sorry you can NOT understand! Maybe some more college would help!

[Lorianne]

Why Tom Woods Set Off Mel Watt's Voltage
http://www.economicpolicyjournal.com/2009/09/why-tom-woods-set-off-mel-watts-voltage.html

Did the Testimony of Tom Woods Come Too Close to Home for Barney Frank?
http://www.economicpolicyjournal.com/2009/09/did-testimony-of-tom-woods-come-too.html

[PhilipTaylor]

THINK LIKE THE RICH: Belief #1!

20 Somethings can afford investment risk because they can move in with their parents!

So that is how Banksters got the CASINO idea as they can rely on Taxpayers!

[PhilipTaylor]

THINK LIKE THE RICH of WALL STREET:

1. I Deserve More Because I am Better and Smarter than Others.
2. Always appear to be adding value for other people. Best sales pitch there is!
3. Never be the V1CTIM! Always be the V1CTIMIZER = Defines Exceptionally R1CH.
4. Calculated schemes add more to wealth as "there is a sucker born every second."
5. Guilt+Work +Rules+Sur ving are for Losers. Rich focus on Smarter Scams+Schemes
6. Hide as much of your wealth as possible 0ff-Shore or in other TAX shelters.
7. Do "whatever it takes" as long as NOT Caught. Helps owning a Senator(s) or President.
8. Wealth+Usu ry+TRICKS+ Edges+Insi der Information+Tech Speed =Massive Wealth
9. Never complain but instead concentrate on manipulating Masses for Profit.
10. Get others to take your RISK = Too big to FAIL+Use Taxpayers+CDS's
11. Manage investments like they're your CHILDREN. They are! Care for them.
12. Focus on Opportunities, Rewards, Profits everywhere -Tomorrows another K1LLING
13. Play Money Game to Win=Always Play Offense regardless of RULES.
14. Wealth on hand is needed to take advantage of advanced FED guided Busts.
15. Hire Smart f1unkies to front your businesses - stay hidden.
16. Always ask, “What is in it for ME?” It's impossible to be too Wealthy.
17. Only spend money if it will make you more. Fun should make you more money.
18. Inherited wealth must multiply.

[jerrypl]

This nation's government is controlled by the financial crime syndicate and Obama has not objected to it. This corporate oligarchy is not too big to fail, but this government does nothing. Professor Roubini wrote a great piece in the Financial Times of London talking about the carry trades made as a result of the Fed's giveaway lending practices. It looks like the economy is doomed by spring.

http://eye-on-washington.blogspot.com

[Carolab]

Excellent piece, Jerry.

[MarcusT]

Not exactly a professional piece of journalism but the point on the carry trade is spot on. The market has been reacting inversely to the dollar for two weeks leading me to think it's ready to unwind. That should result in a huge spike in the dollar as the shorts bail followed by a huge crash and the FED having to raise the funds rate significantly. With some $30T in play from the fed this is a hyperinflation formula. Hyperinflation with an insolvent banking system and 20% unemployment is pretty much the end.

[DosGatos2]

I would argue that too-big-too-fail and interconnectedness are the same thing because the big banks are an oligopoly. Their size coupled with the fact that there are so few competitors is what drive the interconnectedness and therefore, increases systemic risk.

Since it appears that the U.S. government will do little or nothing to break up or properly regulate too-big-too-fail financial institutions, perhaps stricter EU regulations will have some effect. These banks have large international business operations after all.

For example, if the EU prohibits companies which have both commercial banking and investment banking operations in the same company from doing any business there--or if a country allows a bank with both types of operations to operate there, but forces the bank to pick only one of the two, then coupling commercial and investment banking becomes significantly less attractive.

Here's hoping the EU will create stricter regulations on financial institutions. There are certain risks (retaliation).

P.S. Wondering how EU countries could impose their regulations on U.S. companies? It's called jurisdiction. If you want to do business in a EU country, you follow its rules, not those of the U.S. If you don't like the rules in a particular jurisdiction, do business elsewhere.

[racetoinfinity]

Typically disappointing that the Obama in bed with Wall St. team is against breaking up the too big to fail behemoths that got us into this mess.

It's actually heartening and a bit surprising that Alan Greenspan, who originally favored The Gramm-Leach-Bliley Act of 1999, which un-did Glass-Steagall, removing the firewall between commercial and investment banks now favors reinstating that firewall.

What Must be Done (and Undone):

Repeal (or pass new legislation undoing) these toxic laws that enabled the great Wall St. bank/investment houses consolidation and ushered in the casino speculation which caused a near meltdown and now a lingering great recession worldwide (and the enrichment of the fat cats/banks­ters/fraud­sters at the top levels of these financial behemoths):

- The Gramm-Leach-Bliley Act of 1999
- The Commodities Futures Modernization Act in 2000

Reinstate the firewall between commercial banks and investment banks, and reinstate strong transparent regulation of all "exotic" betting speculative financial instruments including derivatives and other new schemes.

[KingBatguano]

To big to exist . Down with the Federal Reserve , the Bank of America and the Globalists.
Up with Thomas Jefferson .

[hypnotoad72]

"Too big to fail"...

I wonder when "Too small to succeed" will ever get the limelight...

[siasina]

Off topic, but very important and has not been reported in the MSM. Recently Mel Watt completely took apart Audit the Fed bill. Contact Mel Watt and let him know about his decapitation of HR1207. I wrote this template for anyone who wants to contact him and I strongly suggest everyone to do so.

Here is his site: http://watt.house.gov/
Here is the contact form: http://www.house.gov/formwatt/IMA/issue_subscribe.htm
Zip code: 28201-8209
Address: You can just put the city or county. The county is Mecklenburg
Opensecret: http://www.opensecrets.org/politicians/summary.php?cid=N00002328&cycle=2008

Representative Watt,

I am appalled that you have gutted any teeth that HR1207 had. Over 75% of the American people want a full comprehensive audit of the Federal Reserve, and you took all that out of it.

We the people have demanded a full audit of the Federal Reserve. We cannot continue to print money to inflate the next bubble.

I strongly urge you to reconsider your decision and vote for a real audit.

Thank you.

[rf-hawaii]

This might help explain things:

http://www.john-f-kennedy.net/thefederalreserve.htm

[Lorianne]

Why Tom Woods Set Off Mel Watt's Voltage
http://www.economicpolicyjournal.com/2009/09/why-tom-woods-set-off-mel-watts-voltage.html

Did the Testimony of Tom Woods Come Too Close to Home for Barney Frank?
http://www.economicpolicyjournal.com/2009/09/did-testimony-of-tom-woods-come-too.html

[tradethefed]

Goldman and Bank of America run the markets along with Geithner, and beagle boy Ben. There is no free markets, only welfare capitalism and socialism for capitalism.
http://financeopinionss.blogspot.com

[BurtonOerney]

There is no free markets, indeed. There is also no verbs agreeing with their plural objects in your spamming.

[hypnotoad72]

Well, grammatical laxity aside, he does have a point. The "free market" claim is often used only when it benefits certain people, and then often used to justify the decimation of peoples' lives. And that's happening worldwide, too.

http://chinadigitaltimes.net/2009/10/india-china-stand-off-over-separate-visas/

http://www­.2point6bi­llion.com/­news/2009/­10/02/indi­a-issues-w­arning-as-­china-lgno­res-visa-p­rotocols-2­450.html

Like I said, these things are happening worldwide... that's the one market everybody's in: Failing. Pity those who set up the stage for making everyone else fail get bailed out, thanks Bush... http://www.youtube.com/watch?v=mn4daYJzyls