Jim’s Mailbox

Posted at 12:32 PM (CST) by & filed under Jim's Mailbox.

Jim/Bill,

The question this raises is, are the banks in better shape than in 2008?

Dave

The Fed Did A Lot Of Talking Yesterday About A Big Bank Failure: Should We Worry?
October 21, 2020

Turns out the federal government’s plan for dealing with a mega bank failure on Wall Street is no better conceived than the federal government’s plan for dealing with the worst pandemic since 1918.

The Federal Reserve issued two press releases yesterday about “large banks.” One read: “Agencies finalize rule to reduce the impact of large bank failures.” The other read: “Agencies issue final rule to strengthen resilience of large banks.”

Wait. What? Fed Chairman Jerome Powell has been telling anyone who would listen this year – from Congress to viewers of the Today show – that the large banks have been a “source of strength” during the worst economic downturn since the Great Depression. If that were true (which we’ve questioned from the first time Powell said it) why is the Fed now worrying about a “large bank failure” and the need to “strengthen” large banks?

The first press release from the Fed yesterday deals with the fact that the biggest banks on Wall Street remain interconnected to one another. If you recall, in 2008 the interconnections of Lehman Brothers, Citigroup and AIG to the biggest banks on Wall Street created a daisy chain of rapid meltdowns across Wall Street.

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