Salient to Investors:
Simon Johnson at MIT Sloan School of Mgmt writes:
William Dudley at FRB New York made it clear that 1) too big to fail remains with us. 2) The completed first round of living wills – potential liquidation plans by major financial institutions – has been unsatisfactory and 3) The legal mechanisms for an FDIC-managed resolution wouldn’t work outside U.S. borders.
Living wills are a sham. Banks don’t “hold” capital – capital is not an asset but a liability, or shareholder equity. At the largest financial institutions, the relationship between business units and legal entities is hopelessly complicated, creating a major difficulty in any insolvency or resolution process.
Read the full article at http://www.bloomberg.com/news/2012-11-25/fed-s-dudley-signals-a-shift-toward-bank-reform.html