Saturday, August 11, 2012

Large U.S. Banks' Secret Survival Plans

America’s large banks have been required by the Dodd-Frank bill to establish "living wills" so they can die off in an orderly manner if one of them becomes unstable. Rick Rothacker of Reuters reports that, additionally, for two years there have been plans for staving off collapse in the face of serious problems without counting on government help. The Reuters article states:
"Officials like Lehman Brothers former Chief Executive Dick Fuld have been criticized for having been too hesitant to take bold steps to solve their banks' problems during the financial crisis.

"According to documents obtained by Reuters, the Federal Reserve and the U.S. Office of the Comptroller of the Currency first directed five banks - which also include Citigroup Inc,, Morgan Stanley and JPMorgan Chase & Co - to come up with these "recovery plans" in May 2010."
The banks aren’t talking about this and neither is the Federal Reserve. The article states that the "living wills" are "resolution plans" to protect the banking system, taxpayers and the banks’ creditors. But the "recovery plans" seek to protect stockholders by selling off the peripheral businesses and keeping the core operations for the future. Large banks in Great Britain are required to have both types of plans.

In a presentation given in March of 2012, JPMorgan Chase said it had a recovery plan in place and said it was ordered by regulators. The presentation was organized by Harvard Law School and was closed to the media at the time, but is available online at:


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