{"id":15591,"date":"2017-07-11T03:15:42","date_gmt":"2017-07-11T07:15:42","guid":{"rendered":"http:\/\/goldstocksforex.com\/?p=15591"},"modified":"2017-07-11T03:15:42","modified_gmt":"2017-07-11T07:15:42","slug":"new-bailouts-prove-too-big-to-fail-is-alive-and-well-wsj","status":"publish","type":"post","link":"https:\/\/thepatientinvestor.com\/index.php\/2017\/07\/11\/new-bailouts-prove-too-big-to-fail-is-alive-and-well-wsj\/","title":{"rendered":"New Bailouts Prove \u2018Too Big to Fail\u2019 Is Alive and Well | WSJ"},"content":{"rendered":"<p><a href=\"https:\/\/www.wsj.com\/articles\/new-bailouts-prove-too-big-to-fail-is-alive-and-well-1499638636\"><img data-recalc-dims=\"1\" decoding=\"async\" class=\"alignnone size-full\" src=\"https:\/\/i0.wp.com\/thepatientinvestor.com\/wp-content\/uploads\/2017\/07\/bn-ue257_kashka_gr_20170707142508.jpg?w=525&#038;ssl=1\" alt=\"\" \/><\/a><\/p>\n<p>By Neel Kashkari:<\/p>\n<blockquote><p>Three strikeouts in four at bats would be barely acceptable in baseball. For a policy designed to prevent taxpayer bailouts, it\u2019s an undeniable defeat. In the past few weeks, four European bank failures have demonstrated that a signature feature of the postcrisis regulatory regime simply cannot protect the public. There\u2019s no need for more evidence: \u201cbail-in debt\u201d doesn\u2019t prevent bailouts. It\u2019s time to admit this and move to a simpler solution that will work: more common equity.<\/p>\n<p>Bail-in debt was envisioned as an elegant solution to the \u201ctoo big to fail\u201d problem. When a bank ran into trouble, regulators could trigger a conversion of debt to equity. Bondholders would take the losses. The firm would be recapitalized. Taxpayers would be spared&#8230;&#8230;<\/p>\n<p>The problem is that it rarely works this way in real life. On June 1, the Italian government and European Union agreed to bail out Banca Monte dei Paschi di Siena with a \u20ac6.6 billion infusion, while protecting some bondholders who should have taken losses. Then on June 24, Italy decided to use public funds to protect bondholders of two more banks, Banca Popolare di Vicenza and Veneto Banca, with up to \u20ac17 billion of capital and guarantees. The one recent case in which taxpayers were spared was in Spain, when Banco Popular failed on June 6&#8230;&#8230;<\/p><\/blockquote>\n<p>The Minneapolis Fed President has hit the nail on the head. Conversion of bondholders to equity may be legally plausible but psychologically damaging. Similar to money market funds &#8220;breaking the buck&#8217;, conversion of bondholders to equity in a troubled bank would traumatize markets. Causing widespread panic and damage far in excess of the initial loss. Actions of Italian authorities show how impractical conversion is. Especially when one considers that the affected banks were less than one-tenth the size of behemoths like JPMorgan [JPM].<\/p>\n<p>Banks need to raise more equity capital.<\/p>\n<p>Source: <a href=\"https:\/\/www.wsj.com\/articles\/new-bailouts-prove-too-big-to-fail-is-alive-and-well-1499638636\">New Bailouts Prove \u2018Too Big to Fail\u2019 Is Alive and Well &#8211; WSJ<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>By Neel Kashkari: Three strikeouts in four at bats would be barely acceptable in baseball. For a policy designed to prevent taxpayer bailouts, it\u2019s an undeniable defeat. In the past few weeks, four European bank failures have demonstrated that a signature feature of the postcrisis regulatory regime simply cannot protect the public. There\u2019s no need &hellip; <\/p>\n<p class=\"link-more\"><a href=\"https:\/\/thepatientinvestor.com\/index.php\/2017\/07\/11\/new-bailouts-prove-too-big-to-fail-is-alive-and-well-wsj\/\" class=\"more-link\">Continue reading<span class=\"screen-reader-text\"> &#8220;New Bailouts Prove \u2018Too Big to Fail\u2019 Is Alive and Well | WSJ&#8221;<\/span><\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mo_disable_npp":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[31,34],"tags":[331,345,3434],"class_list":["post-15591","post","type-post","status-publish","format-standard","hentry","category-the-fed-banks-interest-rates","category-us-canada-countries-regions","tag-bailouts","tag-bank-capital","tag-too-big-to-fail"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.2 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>New Bailouts Prove \u2018Too Big to Fail\u2019 Is Alive and Well | WSJ - the patient investor<\/title>\n<meta name=\"robots\" content=\"noindex, follow\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"New Bailouts Prove \u2018Too Big to Fail\u2019 Is Alive and Well | WSJ - the patient investor\" \/>\n<meta property=\"og:description\" content=\"By Neel Kashkari: Three strikeouts in four at bats would be barely acceptable in baseball. For a policy designed to prevent taxpayer bailouts, it\u2019s an undeniable defeat. In the past few weeks, four European bank failures have demonstrated that a signature feature of the postcrisis regulatory regime simply cannot protect the public. 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Gretchen Morgenson at NY Times writes: THERE\u2019S a lot to like, if you\u2019re a taxpayer, in the new bipartisan bill from two concerned senators hoping to end the peril of big bank bailouts. But if you\u2019re a large and\u2026","rel":"","context":"In &quot;Banks &amp; Interest Rates&quot;","block_context":{"text":"Banks &amp; Interest Rates","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/the-fed-banks-interest-rates\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":8298,"url":"https:\/\/thepatientinvestor.com\/index.php\/2013\/08\/19\/bloated-business-of-banking-the-australian\/","url_meta":{"origin":15591,"position":1},"title":"Bloated business of banking | The Australian","author":"ColinTwiggs","date":"August 19, 2013","format":false,"excerpt":"Adam Creighton discusses the likelihood of taxpayers being asked to bail out too-big-to-fail banks. In Australia that probability is now 100 per cent. Standard & Poor's, a ratings agency, gives Australia's biggest four banks a AA rating explicitly because taxpayers will provide \"extraordinary support\" to their creditors in any crisis,\u2026","rel":"","context":"In &quot;Australia &amp; NZ&quot;","block_context":{"text":"Australia &amp; NZ","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/countries-regions\/australia-nz-countries-regions\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":7326,"url":"https:\/\/thepatientinvestor.com\/index.php\/2013\/03\/27\/forget-too-big-to-fail-kill-the-fractional-reserve-banking-system\/","url_meta":{"origin":15591,"position":2},"title":"Forget too-big-to-fail: Kill the fractional reserve banking system","author":"ColinTwiggs","date":"March 27, 2013","format":false,"excerpt":"Interesting discussion on Bloomberg about currency-backed deposits and equity-funded loans. The fractional reserve banking system is the primary cause of instability and asset bubbles in the global economy, allowing banks to create money out of thin air. Credit expansion above the rate of real GDP growth has only two possible\u2026","rel":"","context":"In &quot;Banks &amp; Interest Rates&quot;","block_context":{"text":"Banks &amp; Interest Rates","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/the-fed-banks-interest-rates\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":5485,"url":"https:\/\/thepatientinvestor.com\/index.php\/2012\/09\/17\/eu-commission-considering-splitting-up-banks-to-avoid-future-bailouts-spiegel-online\/","url_meta":{"origin":15591,"position":3},"title":"EU Commission Considering Splitting Up Banks to Avoid Future Bailouts &#8211; SPIEGEL ONLINE","author":"Colin Twiggs","date":"September 17, 2012","format":false,"excerpt":"By Martin Hesse and Christoph Pauly EU Commissioner Michel Barnier has asked experts to examine the possibility of splitting up major European banks to avoid future bailouts at taxpayers' expense. But even less radical intervention in the banking sector could have drastic consequences for the industry, and its powerful lobby\u2026","rel":"","context":"In &quot;UK &amp; Europe&quot;","block_context":{"text":"UK &amp; Europe","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/countries-regions\/uk-europe-countries-regions\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":1274,"url":"https:\/\/thepatientinvestor.com\/index.php\/2011\/10\/12\/too-big-to-fail-is-here-to-stay\/","url_meta":{"origin":15591,"position":4},"title":"Too-big-to-fail is here to stay","author":"ColinTwiggs","date":"October 12, 2011","format":false,"excerpt":"Lehman Brothers' collapse in 2008 was intended to intended to teach financial markets that they could not rely on an implicit government guarantee for too-big-to-fail (TBTF) banks. What bondholders learned was the opposite: never again would an institution of that size be allowed to collapse because of the de-stabilizing effect\u2026","rel":"","context":"In &quot;Banks &amp; Interest Rates&quot;","block_context":{"text":"Banks &amp; Interest Rates","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/the-fed-banks-interest-rates\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":5897,"url":"https:\/\/thepatientinvestor.com\/index.php\/2012\/10\/29\/five-steps-to-fix-wall-street\/","url_meta":{"origin":15591,"position":5},"title":"Five steps to fix Wall Street","author":"Colin Twiggs","date":"October 29, 2012","format":false,"excerpt":"Some more thoughts on the five steps former FDIC chair Sheila Bair suggested to reform the financial system. Break up the \u201ctoo big to fail\u201d banksMy take is that breaking up may be difficult to achieve politically, but raising capital ratios for banks above a certain threshold would discourage further\u2026","rel":"","context":"In &quot;Banks &amp; Interest Rates&quot;","block_context":{"text":"Banks &amp; Interest Rates","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/the-fed-banks-interest-rates\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]}],"_links":{"self":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/posts\/15591","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/comments?post=15591"}],"version-history":[{"count":0,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/posts\/15591\/revisions"}],"wp:attachment":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/media?parent=15591"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/categories?post=15591"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/tags?post=15591"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}