Should banks or regulators come up with “living wills”?
The idea that financial firms whose collapse could create trigger broad economic problems should come up with their own living wills has been gaining traction lately.
After the confused attempt to bailout or save Lehman Brothers, Bear Stearns and AIG in 2008, some regulators have been suggesting that banks and important financial institutions plan for their own demise.
A senior Canadian finance official said on Wednesday that the Group of Twenty (G20) are thinking about the idea as a way to avoid financial meltdowns.
Even one of the top financial advisors unwinding Lehman Brothers’ has said a living will would have helped.
But is it the banks or the regulators that oversee them who should come up with these living wills? Should they come up with them together? Who would have better incentives to prevent systemic issues?
The issue was discussed on Wednesday at a Practising Law Institute conference in New York by H. Rodgin Cohen, a mergers & acquisitions lawyer at Sullivan & Cromwell in New York, who personally worked on deals like JPMorgan-Bear Stearns, Barclays-Lehman, and Wells Fargo-Wachovia last year. Here is what Cohen told the conference:
“I do think we have it somewhat backwards on all this emphasis on the living wills for these institutions. Actually the living will isn’t the institution’s responsibility. It is truly surprising to me that sitting in a locked desk somewhere there isn’t a living will which the relevant supervisor has for each institution. Clearly that did not exist last year, and hopefully we have it today. “
Wilbur Ross looks at banks, calls commercial real estate a “time bomb”
Billionaire investor Wilbur Ross said on Thursday he would consider buying banks under a newly revised proposal on private equity investment in troubled banks, but the rules should be eased further.
U.S. banking regulators on Wednesday partially retreated from a much-criticized proposal to impose new rules on private equity investment in troubled banks, aiming to encourage responsible investment in distressed banks.
The regulators lowered capital requirements and dropped or modified measures that could have required investors to kick in more capital after their initial investment. The rules will be further reviewed in six months.
In an interview with Reuters Television, Ross said the capital requirements should be lowered even further.
Under the current proposal, Ross said he still would be “in the game” and look at banks that have good local deposits. He said many of his potential targets are in Sunbelt States such as Florida, Arizona, Texas and Nevada.
Ross said the private equity industry has about $450 billion of unused capital and roughly $100 billion of that could be used to invest in banks.
Separately, Ross called the commercial real estate market the next “time bomb” that the market under-appreciates. Ross said he would be an investor in distressed commercial properties.
No.
There,obviously,is a reluctance to look at the real reasons and the remedy,by those concerned,and this casts doubts on the integrity of the G20 as a whole,whose members,it seems, are using the printing press to save a few big players in Derivatives.Subprime lending and Derivatives Trading are the reasons for the present Financial Crisis.While the first one, is a fait accompli,there is still time to BAN the second one,the ONLY solution.