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#1629038 - 11/16/11 03:32 PM interesting speech on TBTF
Phoenix Offline
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Phoenix
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southeast
http://dallasfed.org/news/speeches/fisher/2011/fs111115.cfm

"....In short, progress is being made in the direction of treating the pathology of SIFIs and the detailing of enhanced prudential standards governing their behavior. Yet, in my view, there is only one fail-safe way to deal with too big to fail. I believe that too-big-to-fail banks are too-dangerous-to-permit.[26] ....I favor an international accord that would break up these institutions into more manageable size. More manageable not only for regulators, but also for the executives of these institutions. For there is scant chance that managers of $1 trillion or $2 trillion banking enterprises can possibly “know their customer,” follow time-honored principles of banking and fashion reliable risk management models for organizations as complex as these megabanks have become...."
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#1629045 - 11/16/11 03:36 PM Re: interesting speech on TBTF Phoenix
Pale Rider Offline
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under the Lone Star
IDK, not that I am biased in the least, but it seems the toothpaste has been out of the tube far too long to try and put it back now....
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#1629052 - 11/16/11 03:43 PM Re: interesting speech on TBTF Pale Rider
Kathleen O. Blanchard Offline

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My concern with thinking we do not need very large banks is how to replace the very large loans, sophisticated products, and international movement of funds (just for some examples) they offer.
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HMDA/CRA Training/Consulting/Mapping
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#1629190 - 11/16/11 05:53 PM Re: interesting speech on TBTF Kathleen O. Blanchard
EmilyAnn Offline
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Posts: 273
I agree - the tube is out of the toothpaste. What concerns me is that the actions taken over the last few years have made the big banks bigger. Did some of those forced marriages just kick the can down the road?

Higher capital standards for these ever-growing mega banks seems entirely appropriate to me. We'll see what sticks from all of the proposals being floated on capital and related issues. What I do know is that higher capital standards are already in play at community banks. Even if they don't become statutory, they're being enforced by the regulators.

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#1629235 - 11/16/11 06:29 PM Re: interesting speech on TBTF EmilyAnn
Kathleen O. Blanchard Offline

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Very true. The capital and strict risk management would (hopefully) help. I saw where Vikram Pandit at Citi actually proposed published results of risk assessments on a standard set of products...there are opinions in favor of this and others that feel it won't matter. But it gets a discussion going.

Here is one analysis.

http://www.bsnlawfirm.com/newsletter/OP1011_Extra1.pdf
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Kathleen O. Blanchard, CRCM "Kaybee"
HMDA/CRA Training/Consulting/Mapping
The HMDA Academy
www.kaybeescomplianceinsights.com

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#1629256 - 11/16/11 06:52 PM Re: interesting speech on TBTF Kathleen O. Blanchard
EmilyAnn Offline
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Posts: 273
That is a very interesting concept, and one I haven't heard of before.

I thought this comment was very enlightening: "especially in large financial services companies, there is a high degree of professional collaboration across companies and this might lead to outcomes which reflect a collective, rather than a specific firm, view."

If this is true now in how large TBTF financial services firms are completing their risk assessments now, we will continue to have serious systemic risk. They can't all be thinking the same way.

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#1629264 - 11/16/11 06:58 PM Re: interesting speech on TBTF EmilyAnn
Kathleen O. Blanchard Offline

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Posts: 21,281
Yes, if there is a collective view we would see that now, not just under what Pandit proposed.

I used to work with a real estate lender who issued what he called a doomsday scenario analysis for commercial real estate in the region. He was scoffed at...he was right.

The mentality that "that won't ever happen" has to go by the way side and be replaced with plans for "what if it does".
_________________________
Kathleen O. Blanchard, CRCM "Kaybee"
HMDA/CRA Training/Consulting/Mapping
The HMDA Academy
www.kaybeescomplianceinsights.com

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