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Subject == >>> ENDING "Too Big To Fail" <<<==

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[quote:GlassPearls:MV85MTAzODhfQUY3Nzc1OEE=]
[color=red]Ending "Too Big To Fail"[/color]

http://market-ticker.denninger.net/archives/1548-Ending-Too-Big-To-Fail.html

[i]"Let's not mince words - there is good in here.  Among the good parts of this bill are that "too big to fail" will become formally invalid as public policy.

It requires the failed firm's creditors and shareholders to bear "first loss", and, if the brief is to be believed, only if they are entirely wiped out and there remains a shortfall will assessments be laid - on other large financial institutions, not the taxpayer.  This should result in large amounts of "social pressure" to stop stupid actions, since the risk of them can fall on other large market participants.

It requires that securitized products retain 10% of the risk (which can be reduced to 5% but not lower by regulators) of any product so securitized, stopping the "pass it all on and watch the bomb go off on the back of the fool who you sold it to" game.

And finally, it requires approval of the Treasury Secretary for The Fed's employment of 13(3) authority - the blanket "we can lend to anyone" authority that The Fed has cited (and in my opinion both abused and exceeds the limits of) during this crisis.  In addition, it prohibits "special facilities" entirely - that's a real improvement."[/i]

Lookout S&P !!!  The trillions in taxpayer freebies is coming to an end. Nice turning point. ;-)
[/quote]

Original Message Ending "Too Big To Fail"

[link to market-ticker.denninger.net]

"Let's not mince words - there is good in here. Among the good parts of this bill are that "too big to fail" will become formally invalid as public policy.

It requires the failed firm's creditors and shareholders to bear "first loss", and, if the brief is to be believed, only if they are entirely wiped out and there remains a shortfall will assessments be laid - on other large financial institutions, not the taxpayer. This should result in large amounts of "social pressure" to stop stupid actions, since the risk of them can fall on other large market participants.

It requires that securitized products retain 10% of the risk (which can be reduced to 5% but not lower by regulators) of any product so securitized, stopping the "pass it all on and watch the bomb go off on the back of the fool who you sold it to" game.

And finally, it requires approval of the Treasury Secretary for The Fed's employment of 13(3) authority - the blanket "we can lend to anyone" authority that The Fed has cited (and in my opinion both abused and exceeds the limits of) during this crisis. In addition, it prohibits "special facilities" entirely - that's a real improvement."

Lookout S&P !!! The trillions in taxpayer freebies is coming to an end. Nice turning point. ;-)

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