Posted at 1:06 AM (CST) by & filed under In The News.

Dear CIGAs

More about the class action suit versus Deutsche Bank over manipulating the precious metals market.

According to the notice of suit, many of the major banks and financial firms are named as defendants. This class suit was filed last December. What is new is that Deutsche Bank has apparently admitted its involvement and is cooperating with ongoing government investigations.

Click here to read the full court filing…

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Posted at 8:18 PM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

There are no Morgans in JP Morgan and no Goldmans in Goldman. There is no loyalty to the grand old names, only loyalty to self interest in the New Normal. Now, if you got this report purely from number crunchers and not enemies what would you do with your own money in JP Morgan and Goldman? You got it, run to gold and silver. It is happening and hiding in plain sight.

I recently told you even I am terrified of what is coming financially. This type of public news only stokes my concern for you and I. This kind of information should motivate their employees to vote for “Bernie Free Things.” Remember Bear Sterns, where there was no Bear or Sterns, canned 14,000 employees in one push of the send button.

The Fed Sends a Frightening Letter to JPMorgan and Corporate Media Yawns
By Pam Martens and Russ Martens: April 14, 2016

Jamie Dimon, Testifying Before the Senate Banking Committee on June 13, 2012 Over Massive Derivative Losses at the Depository Bank of JPMorgan Chase

Yesterday the Federal Reserve released a 19-page letter that it and the FDIC had issued to Jamie Dimon, the Chairman and CEO of JPMorgan Chase, on April 12 as a result of its failure to present a credible plan for winding itself down if the bank failed. The letter carried frightening passages and large blocks of redacted material in critical areas, instilling in any careful reader a sense of panic about the U.S. financial system.

A rational observer of Wall Street’s serial hubris might have expected some key segments of this letter to make it into the business press. A mere eight years ago the United States experienced a complete meltdown of its financial system, leading to the worst economic collapse since the Great Depression. President Obama and regulators have been assuring us over these intervening eight years that things are under control as a result of the Dodd-Frank financial reform legislation. But according to the letter the Fed and FDIC issued on April 12 to JPMorgan Chase, the country’s largest bank with over $2 trillion in assets and $51 trillion in notional amounts of derivatives, things are decidedly not under control.

At the top of page 11, the Federal regulators reveal that they have “identified a deficiency” in JPMorgan’s wind-down plan which if not properly addressed could “pose serious adverse effects to the financial stability of the United States.” Why didn’t JPMorgan’s Board of Directors or its legions of lawyers catch this?

It’s important to parse the phrasing of that sentence. The Federal regulators didn’t say JPMorgan could pose a threat to its shareholders or Wall Street or the markets. It said the potential threat was to “the financial stability of the United States.”

That statement should strike fear into even the likes of presidential candidate Hillary Clinton who has been tilting at the shadows in shadow banks while buying into the Paul Krugman nonsense that “Dodd-Frank Financial Reform Is Working” when it comes to the behemoth banks on Wall Street.

How could one bank, even one as big and global as JPMorgan Chase, bring down the whole financial stability of the United States? Because, as the U.S. Treasury’s Office of Financial Research (OFR) has explained in detail and plotted in pictures (see below), five big banks in the U.S. have high contagion risk to each other. Which bank poses the highest contagion risk? JPMorgan Chase.

The OFR study was authored by Meraj Allahrakha, Paul Glasserman, and H. Peyton Young, who found the following:

“…the default of a bank with a higher connectivity index would have a greater impact on the rest of the banking system because its shortfall would spill over onto other financial institutions, creating a cascade that could lead to further defaults. High leverage, measured as the ratio of total assets to Tier 1 capital, tends to be associated with high financial connectivity and many of the largest institutions are high on both dimensions…The larger the bank, the greater the potential spillover if it defaults; the higher its leverage, the more prone it is to default under stress; and the greater its connectivity index, the greater is the share of the default that cascades onto the banking system. The product of these three factors provides an overall measure of the contagion risk that the bank poses for the financial system.”

The Federal Reserve and FDIC are clearly fingering their worry beads over the issue of “liquidity” in the next Wall Street crisis. That obviously has something to do with the fact that the Fed has received scathing rebuke from the public for secretly funneling over $13 trillion in cumulative, below-market-rate loans, often at one-half percent or less, to the big U.S. and foreign banks during the 2007-2010 crisis. The two regulators released background documents yesterday as part of flunking the wind-down plans (living wills) of five major Wall Street banks. (In addition to JPMorgan Chase, plans were rejected at Wells Fargo, Bank of America, State Street and Bank of New York Mellon.) One paragraph in the Resolution Plan Assessment Framework and Firm Determinations (2016) used the word “liquidity” 11 times:

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Jim Sinclair’s Commentary

Mr. Williams shares the following with us.

- First-Quarter 2016 Retail Sales Contracted Quarter-to-Quarter,
Before and Most Likely Also After Inflation Adjustment
- Non-Comparable Seasonal-Adjustment Revisions Boosted March Sales to a
Decline of 0.3% (-0.3%), Instead of About 0.8% (-0.8%)
- Retail Sales Series Faces Likely Major Downside Revisions in
April 30th Benchmarking
- March 2016 PPI Goods Inflation rose by 0.19%,
PPI Services Profit Margins Fell by 0.18% (-0.18%), Leaving
Aggregate Final-Demand PPI Inflation Down by 0.09% (-0.09%)

“No. 798: March Retail Sales and Producer Price Index (PPI) ”
Web-page: http://www.shadowstats.com

 

Jim Sinclair’s Commentary

Come on David, nothing is rigged, Martin told me. All you need is charts and cycles to be an omnipotent market maven.

More Bull
New York City, New York
April 14, 2016

The robo-machines were raging yesterday based on precisely nothing except banging 2080 on the S&P cash and a teapot’s worth of short-term trading momentum. But a 1% or $300 billion gain in the stock market apparently needs some fig leaf of rationalization. So the lazy hacks who cover the casino’s daily hijinks for the mainstream media came up with some doozies.

To wit, JPMorgan purportedly had a bang up quarter and surprised to the upside and China’s export machine came roaring back. This was supposedly some kind of all clear signal. According to the bulls, the market can’t rise without “participation” by the financials and China is still the mainspring of global growth.

I won’t bother to say, not exactly. You could have learned by the second paragraph that “up” was actually “down”.

In fact, JPMorgan’s earnings were down 7% from last year, and were nearly $1 billion or 15% below its bookings for the March quarter three years ago (2013). Whatever they implied, JPM’s Q1 profits had nothing to do with a break-out to the upside.

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That was reinforced by its revenue postings. They came in 3.5% below prior year, and that was no aberration. It seems as if JPMs revenues have been drooping ever since the Feds gifted it with Washington Mutual and Bear Stearns back in 2008. LTM revenues of $92.7 billion are now 10% below the $103 billion it posted back in 2010.

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In any event, why would anyone argue that quarterly accounting income of the giant Wall Street banks has anything to do with the main street economy or even real profits?…

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Jim Sinclair’s Commentary

Ask if you are one of more than 49% of the USA getting something from the Government Dole. Who are you voting for? Clearly the candidate that the police are using force on.

If that does not work then 100% of the vote counting machines will be Diebold.

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Posted at 1:50 AM (CST) by & filed under General Editorial.

Dear JSMineset Premium Gold Reader:

JSMineset Premium is underway and off to a great start. Thank you for your interest in this new and additional information stream. Because it is our intention for the gold subscription membership to mirror our previous (Question and Answer) Q&A meetings, we know you will find this content valuable and important. Now, we can respond to your questions directly and help you with your needs in an affordable, real-time and dynamic format which is convenient for you.

Our weekly recordings aim at directly addressing your questions. Our recorded discussions are in direct response to your questions. Due to the volume of questions we receive, we are considering additional discussions to assist you in your inquiries. The markets and world events are very volatile, and our discussions are on the cutting edge of this information stream. Our discussions are guided by your requests and your information needs.

We will provide a news and market briefing for events as appropriate and necessary, and also, based on your input. The scheduling will depend upon current events and market conditions. This briefing will be presented to you based on our talents, years of experience, analysis and skill sets. Depending on market volatility, briefings may be daily if conditions merit them. We are not permitted by regulations to provide individual investment counseling in a general format. However, we are pleased to provide our market opinions and the trends we see in response to your questions. To the degree permitted by regulations, we will respond to your questions regarding:

1. General market information.

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We strive to provide current and accurate information for your consideration. As the markets become more volatile, the need for quick information becomes more extreme. It is our goal through our JSMineset Premium service to provide vital information in an affordable and responsive format. Our Q&A sessions of the past were a great success. Our new JSMineset Premium service will continue this Q&A format, while providing the convenience of the internet and the flexibility to fit into your schedule and more specifically meet your information needs on an ongoing basis. We aim at excellence in assisting you. Because you need information in order to make timely decisions about current events and market conditions, we are here to assist you. Our goal is to help you to make judgments based on current market conditions, Geo-political events and trends which will enable you to better prepare for your personal needs. Thank you for your consideration.

Now, we welcome the opportunity to serve you in this new format, and look forward to hearing your specific questions.

Regards,
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Posted at 1:49 PM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

John Williams shares his latest with us.

- Dollar Selling Has Picked Up in Response to a Faltering Economy and a Befuddled Fed
- Real Retail Sales Declined by 0.4% (-0.4%) in March 2016, with an Annualized Contraction of 0.2% (-0.2%) in the First-Quarter Real Annual Sales Growth Fell to a 25-Month Low
- March 2016 Annual Inflation Softened Across the Board: CPI-U at 0.9%, CPI-W at 0.5%, ShadowStats at 8.5%
- Heavily Skewed by Bad Seasonals, Monthly and Annual Real Earnings Flattened Out

“No. 799: CPI, Real Retail Sales and Earnings, Gold and the U.S. Dollar”
Web-page: http://www.shadowstats.com

 

Jim Sinclair’s Commentary

A mere pittance in the “New Normal” instant money creating computer world.

Wells Fargo Finally Reveals Its Dire Energy Exposure: $32 Billion To Junk-Rated Oil And Gas Companies
Tyler Durden on 04/14/2016 10:25 -0400

Following its recent critical profile by Bloomberg which earlier this week penned, “Wells Fargo Misjudged the Risks of Energy Financing”, which came about 4 months after we wrote an almost identical report, the biggest US bank by market cap knew it had to reveal more than just the usual placeholder data in its investor presentation today. Sure enough, Warren Buffett’s favorite bank finally opened its books more than usual as concerns built about its $17.4 billion in total outstanding oil and energy loans (at the end of 2015). This is what it revealed.

First, the big picture. As the chart below shows, Wells’ net income has been consistently declining in the past year, with earnings of $5.5BN down from $5.8BN a year ago even as revenues grow 4% over the same period.

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Here is the reason: Net Interest Margin continues to decline, as a result of the continued curve flattening.

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Jim Sinclair’s Commentary

If your hedge fund investors run on these percentages what do you think will happen to even the best of the wild hedgies when the black hole sucks them in?

Hedge Funds Slammed: Tudor Hit With $1BN In Redemptions; NYC Pensions To Pull $1.5BN From Key Names
Tyler Durden on 04/14/2016 10:57 -0400

In a world in which the average hedge fund has failed to outperform the stock market for 8 years running, many have asked themselves what is the point of paying 2 and (not so much 20) to consistently underperform a global asset class which is now actively micromanaged by central banks themselves. while redemptions from hedge funds have been growing in recent months, coupled with the first year since the crisis in which more hedge funds shut down

than were created, it all culminated moments ago when Bloomberg reported that clients of none other than hedge fund legend Paul Tudor Jones have asked to pull more than $1 billion after three years of lackluster returns.

As Bloomberg reports, “the investor redemption requests were made in recent weeks, according to two people with knowledge of the matter, and follow the exit of several money managers, some of whom spent decades at the firm. Another senior executive, Richard Puma, Tudor’s deputy chief operating officer, is planning to leave, the people said.”

The withdrawals mark a setback for the $13 billion firm, one of the oldest and well regarded in the industry. BVI Global, Tudor’s main fund, which makes wagers on macroeconomic events, added to losses in March, pushing its decline to 2.8 percent in the first quarter, according to an investor document. What is surprising is that PTJ’s returns have not been too bad: gains of 1.4 percent in 2015 and 3.5 percent in 2014.

Still that was not enough for his clients used to seeing double digit returns every year.

As Bloomberg reports, PTJ’s bets during the financial crisis helped investors dodge damage. Tudor’s Tensor Fund gained 36 percent in 2008, and BVI lost just 4.5 percent while stock markets plunged by 37 percent, including reinvested dividends.

Snidely, Bloomberg notes that like most hedge fund firms that make investments based on macroeconomic events, Tudor has had difficulty matching those outsized returns in the years since. The Tensor fund returned cash to investors in 2014 after three years of losses.

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Jim Sinclair’s Commentary

Who was it that constantly says there is no manipulation in the precious metals markets? Martin who?

Deutsche Bank Confirms Silver Market Manipulation In Legal Settlement, Agrees To Expose Other Banks
Submitted by Tyler Durden on 04/14/2016 – 08:20

In a stunning victory for “conspiracy theorists” within the precious metals space, overnight Deutsche Bank not only agreed to settle a lawsuit accusing it of manipulating the silver fix, but also agreed to help the plaintiffs pursue similar claims against other banks as part of the settlement by providing instant messages and other communications. And so the former cartel members are turning on each other.

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Posted at 1:45 PM (CST) by & filed under Jim's Mailbox.

Jim,

When I read these headlines it scares me, but I take comfort in knowing I took your advice years ago in protecting my children’s future and wealth to the extent I can.

It just a matter of time for the ripples to reach our shores.

Thank you
CIGA Perry

Perry,

When you deposit your money in a bank anywhere you do not have title to it. You have made a soft and unsecured loan. Remember to say please if you wish to make a withdrawal.

Jim

Austria Just Announced A 54% Haircut Of Senior Creditors In First “Bail In” Under New European Rules
Submitted by Tyler Durden on 04/10/2016 21:08 -0400

Just over a year ago, a black swan landed in the middle of Europe, when in what was then dubbed a “Spectacular Development” In Austria, the “bad bank” of failed Hypo Alpe Adria – the Heta Asset Resolution AG – itself went from good to bad, with its creditors forced into an involuntary “bail-in” following the “discovery” of a $8.5 billion capital hole in its balance sheet primarily related to ongoing deterioration in central and eastern European economies.

Austria had previously nationalized Heta’s predecessor Hypo Alpe-Adria-Bank International six years ago after it nearly collapsed under the bad loans it ran up when it grew rapidly in the former Yugoslavia. Having burnt through €5.5 euros of taxpayers’ money to prop up Hypo Alpe, Finance Minister Hans Joerg Schelling ended support in March 2015, triggering the FMA’s takeover.

This was the first official proposed “Bail-In” of creditors, one that took place before similar ad hoc balance sheet restructuring would take place in Greece and Portugal in the coming months. Or rather, it wasn’t a fully executed “Bail-In” for the reason that creditors fought it tooth and nail.

And then today, following a decision by the Austrian Banking Regulator, the Finanzmarktaufsicht or Financial Market Authority, Austria officially became the first European country to use a new law under the framework imposed by Bank the European Recovery and Resolution Directive to share losses of a failed bank with senior creditors as it slashed the value of debt owed by Heta Asset Resolution AG.

The highlights from the announcement:

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Posted at 6:38 PM (CST) by & filed under Bill Holter.

Dear CIGAs,

Last week’s message to you regarding the “Panama Papers” release suggested…..”don’t be duped”. What impressed me immediately as very strange was;…there were no Americans or Europeans on the list of tax cheats, etc., with the exception of David Cameron’s father and two or three Members of Parliament. The skunk smelt then and still smells now. Why were mostly only names from the “East” mentioned and nearly none from the West?

Since that release;…the New York Times posted an opinion piece suggesting it was Putin himself who released the information. Laughable? No, not even a good joke, or at the very least a good argument! Today, we received the very same sentiments from a famed Swiss bank whistle blower;

Swiss Bank Whistleblower Claims Panama Papers Was A CIA Operation..”

My perception of who, what, why, where and when continues;.. I believe even more so, the Panama Papers were and are;… an effort to discredit the “TRUTH BOMB”, financial fraud, election fraud, a bankrupt financial system, false flags (even 9/11). A blockbuster event in my opinion will be dropped from Mr. Putin and China;… now that China has invoked their joint war doctrine. Time will tell as to what the real story is, however the Panama Papers event is not the topic I want to warn you of, “Don’t be Duped” is the HOT BUTTON OF MISDIRECTION, a typical intel operation.

Over the last month or more, we have seen story after story, ad after ad on every internet piece relating to finance, including many multiple interviews with James Rickards peering out from underneath a brimmed hat, wearing dark glasses. Ostensibly, he has just written a very important new book. He even went to Japan to promote their new book…All to flash a very important warning to the public, but lo and behold they got thrown out of the park by the Japanese police.

Mr. Rickards is well educated and well spoken. Much of his arguments on gold and finance are also very well thought out. In fact, he has become a vocal and visible cheerleader for gold!

Rickards has spelled out the math between money supply/debt and U.S. gold reserves to accordingly project a prediction where gold could be repriced by monetary authorities, at some $10,000-$50,000 current U.S. Dollars. In fact, this is the same math Jim Sinclair used to get to his “crazy” number of $50,000. The calculation is done similar to what happened in 1980, when gold ran to $875 per ounce, another effort to “balance” our external debt with supposed gold reserves …and herein lies the “spook problem.”

I say “spook problem” because this math includes a calculator, a numerator and denominator. We have money supply/debt as the numerator and gold reserves as the denominator, the calculator being Rickards. The problem(s) follow; first, we really do not know how much money supply/debt there truly is? Do we include all of the future promises and guarantees in this number? (Remember;… the Fed lent out “secretly” some $16 trillion all over the world in 2008-09 which was not discovered for another couple of years after the fact). We also do not know how much capital will need to be created to prevent another financial meltdown. Next, how much gold does the U.S. really have left …and how many times has it we been re-hypothecated? A larger numerator makes for a higher price target as does a lower denominator. In the case of no gold, the math goes to…….. INFINITY!

As for the calculator; Mr. Rickards is now saying a “secret deal has been cut where the dollar will lose reserve currency status …to a gold related SDR.” In my opinion, this very well may be true, but such a development would of itself necessitate a more equal voting structure; as it stands now, I do not believe the East will go along with the IMF running the show using the SDR. I want to point out;… the IMF was originally a U.S. led creation whereby the U.S. had and has control via it’s veto power. How exactly does changing from one “paper” currency to another change anything? Only that the SDR becomes an “international reference point” to be settled between Central Banks. The dollar currently is more than 45% of what the SDR consists of, and is nothing more than another USDX index in my opinion. Moving to the SDR will and can change the “power” of those pulling the strings; to the extent of the number of gold related SDR’S each country accumulates at the IMF. The East fully knows the score relative to achieving a balance of power based on gold.

Next, Jim Rickards says “we are on a shadow gold standard” which may be true to some extent, as the old saying goes; “HE WHO HAS THE GOLD MAKES THE RULES.” He says the U.S. can simply raise the price of gold 10 fold or more and re liquefy the Treasury (and IMF). I have news for you, there has been no true Federal Reserve audit of Gold since the 1950′s, you can imagine why. (As a side note, I know for a fact Rickards has been advised of this issue, as I TOLD HIM personally, in London at the GATA conference in 2011. I saw the expression on his face;… when I asked if he knew there had been no audits since the 50′s, he tipped his head slightly and said;… “really? I was not aware of that”. He surely does know now!) Also, why when Germany requested it’s gold be sent back to Germany from the U.S. would it take 7 years to get just 300 tons? Will seven years give U.S. monetary authorities enough time to “herd” those pesky ounces that are running free within the vault? As a footnote, the IMF claims to have 2,800 tons of gold, this is a double counting, as IMF gold has been mostly “pledged” from Western nations rather than actually delivered. Another real head scratcher is Rickard’s claims that;… the 8,300 tons of gold “belongs” to the Federal Reserve, so the Federal Reserve has $300 billion in gold. This is another misstatement;.. the gold supposedly held in Fort Knox, Kentucky, belongs to the U.S. Treasury, not a privately owned institution. It is the “peoples” gold.

As for a “shadow gold standard”, this could not be further from the truth! The world has been on a “dollar standard” which is the ANTI gold standard, for years;… we were on what was tacitly acknowledged as a “Petro Dollar” standard following the Vietnam War, when Lyndon Johnson said; “We could have guns and butter too.”

Why, for so many years has gold been maligned publicly in the press (and learning institutions) and physically with clandestine reserves sales? Why has physical gold been allowed to be diluted with a Dollar and fractional reserve sales. Futures sales in non-existent gold in the hundred’s per real ounce;… to suppress the price? (Please do not say this has not happened, the U.S. burned 12,000 tons in the London gold pool days which is now public knowledge).

We are so far away from a “gold standard” it is ridiculous, for Mr. Rickards to suggest otherwise …is simply insulting! Rickards was the lead counsel for LTCM when that fraud blew up in 1998. It has been suggested;… part of the blow up was due to some 300 tons of (Italian) gold they were short and could not deliver (the number is probably multiple of this). He also tells us he formerly was a consultant to the CIA and the Pentagon. This is the same as saying an ex Marine, or ex Mafia, is this even possible?

So as the title suggests, “Don’t be Duped”! Rickards is giving some;…maybe even 95%, good information. I believe he is in fact doing the investment community a service by promoting gold’s fundamentals. The “hook,” or misdirection is a standard operating technique of intel, as mentioned; that the U.S./West still has the gold to “mark up” and fix broken balance sheets. His discussion of moving to the SDR will still leave those (masters) in power to continue raping and pillaging the finances of the 99% and fighting between themselves for control of world affairs. Is Mr. Rickards a modern day Trojan horse;… being used to whip up fervor, …but keep as many things financial as possible … similar to how they have been since Bretton Woods?

To finish, Jim Rickards credits the Chinese with ownership of some 3,000 gold tons of gold and the Russians just over 1,000. Between imports and internal production…. China may have been been accumulating this amount EVERY YEAR.

A figure of between 10,000 and 20,000 tons, if not more, is highly probable as Chinese never tell you what they are doing until after THE EVENT! The East embarked on a vast accumulation of gold, and/ or evacuation from dollars at least 13 years ago when Vladimir Putin posed holding a gold bar.

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Mr. Putin and the Chinese have no chance of being duped as they already knew how this would all end years ago! President Xi Jinping is one of the smartest leaders in the world; His New Silk Road Project is a road paved with GOLD, NOT SDR’s!

This has been a “public article”, if you liked it, and would like to read more of our work, please Click here to sign up now!

Standing watch,

Bill Holter
Holter-Sinclair collaboration
Comments welcome bholter@hotmail.com

Posted at 6:38 PM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

Hillary needs to get the college vote and those who have graduated in the last few years with heavy non-payable education debt to eliminate Bernie. Sorry Bernie, here goes all your kids and their parents and whomever else might be held liable for debts assumed by someone not 18 or 21, depending on what state you live in.

It Begins: Obama Forgives Student Debt Of 400,000 Americans
Tyler Durden on 04/13/2016 08:01 -0400

Joining the ranks of “broke lawyers” who can cancel their student debt, “Americans with disabilities have a right to student loan relief,” now according to Ted Mitchell, the undersecretary of education, said in a statement. Almost 400,000 student loan borrowers will now have an easier path to a debt bailout as Obama primes the populist voting pump just in time for the elections.

On top of “the student loan bubble’s dirty little secret,” here is another round of student debt relief…as MarketWatch reports,

The Department of Education will send letters to 387,000 people they’ve identified as being eligible for a total and permanent disability discharge, a designation that allows federal student loan borrowers who can’t work because of a disability to have their loans forgiven. The borrowers identified by the Department won’t have to go through the typical application process for receiving a disability discharge, which requires sending in documented proof of their disability. Instead, the borrower will simply have to sign and return the completed application enclosed in the letter.

If every borrower identified by the Department decides to have his or her debt forgiven, the government will end up discharging more than $7.7 billion in debt, according to the Department.

“Americans with disabilities have a right to student loan relief,” Ted Mitchell, the undersecretary of education, said in a statement. “And we need to make it easier, not harder, for them to receive the benefits they are due.”

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Posted at 6:34 PM (CST) by & filed under Jim's Mailbox.

Jim/Bill,

Here we go again!

QE What? 4? 5? I lost count.

“Which is precisely the point: now that the precedent has been set and banks know they can rely on the generosity of taxpayers (with the blessing of legislators) why should they even bother planning; they know very well that if just one bank fails, all would face collapse, and the only recourse would be trillions more in taxpayer aid.”

CIGA Wolfgang Rech

Federal Regulators Accuse Banks Of Not Having Credible Crisis Plans, Would Need Another Bailout
Submitted by Tyler Durden on 04/13/2016 10:22 -0400

Perhaps the biggest farce to result from the Dodd-Frank legislation designed to “rein in” banks was the ridiculous notion of “living wills” -  a concept that makes zero sense in an environment where the failure of even one bank assures a systemic crisis and could – as the Lehman financial crisis showed – lead to the collapse of all other interlinked financial institutions.

Which is why we were not surprised to read this morning that federal regulators announced that five out of eight of the biggest U.S. banks do not have credible plans for winding down operations during a crisis without the help of public money.

Which is precisely the point: now that the precedent has been set and banks know they can rely on the generosity of taxpayers (with the blessing of legislators) why should they even bother planning; they know very well that if just one bank fails, all would face collapse, and the only recourse would be trillions more in taxpayer aid.

As Reuters writes, the “living wills” that the Federal Reserve and Federal Deposit Insurance Corporation jointly agreed were not credible came from Bank of America, Bank of New York Mellon, J.P. Morgan Chase, State Street, Wells Fargo. What is more impressive is that the Fed and FDIC found any living will to be credible.

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