Breaking Up The Big Banks?
Courtesy of Karl Denninger at The Market Ticker
We are hearing that discussion of breaking up large financial institutions that pose systemic risk to the market is gaining traction on the Hill. At this point, discussions are in the early stages, but we understand that an amendment addressing breaking up institutions deemed “too big to fail” could be introduced in the House over the next few days. How does one define “too big to fail” and how would the divestiture process work – these are good questions that Congress will have to address as the discussion moves forward. To our understanding, any amendment that could be introduced in the coming week would likely be vague and would give the regulators discretion to determine which institutions qualify as “too big” and how to address the risk they pose to the system.
The author goes on to say that Kanjorski may be the originator of this. Good, as far as it does, assuming it’s real.
But that’s not the bombshell in the post. No, it’s this:
He left Geithner with two documents. One was a fact sheet that listed all the attributes of AIG FP [the division run by Joe Cassano that blew the company up] and argued why it should be given status as a primary dealer. The other–a bombshell that Willumstad was confident would draw Geithner’s attention–was a report on AIG’s counterparty exposure around the world, which included “2.7 trillion of notional derivative exposures, with 12,000 individual contracts.” About halfway down the page, in bold, was the detail that Willumstad hoped would strike Geithner as startling: “$1 trillion of exposures concentrated with 12 major financial institutions.”
Was that a threat?
And isn’t threatening the United States (whether directly or otherwise) something you’re not supposed to do?
Sounds like "Bail me out or I will crash everything."
Isn’t that analagous to walking into a bank, opening one’s coat to reveal an explosives-laced belt, and saying "gimme all the money or everyone dies!"
Does such an act constitute a terroristic threat? You decide.
Then decide whether or not anything has actually changed for the better in terms of stability, or whether we’re really in far more danger than we were last fall, as we’ve not only failed to de-fuse the bomb, we’ve allowed those who made the threats to profit from it – and thus have increased, rather than decreased, the risk of an all-on collapse.
