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Wednesday, January 2, 2013


This question has significant implications as a result the recent financial experiences and is being re-edited to include a brief mention of the topic of Resolution Authority included in the new financial rule making to add to the powers of regulators to allow them to carry out their previous powers in the case of large financial institutions holding companies as well as to large insurance companies and why in my opinion, the writers did not favor it as the most viable alternative for achieving the desired outcome over the “Living Will” approach. Simply put, the existing method involves making judgments about the appropriate time to step in and take over the affairs of a financial institution that are always going to be second-guessed by shareholders and others with specific interests as oppose to the “Living Will” approach, which is a process to employ that would have certain mechanisms built in to trigger its implementation with regulatorsoversightinstead ofmanaging the process”.   
This question is a valid one deserving of a straightforward answer, so it is being posed in this post to pursue its validity as would be expected in the current environment, therefore the question is being raised. Have real lessons been learned from the recent financial disaster? According to experts in the field, apparently not. The aftermath of the recent financial disaster produced corrective legislation, which included a tough new capital requirement and a new Consumer Agency but can these fixes really prevent a similar debacle from taking place? The honest answer is no one knows in all certainty. What it boils down to, is that after all the recent changes, the ultimate decision still relies on how policy makers, regulators and those critical positions act in the face of such a crisis should another such scenario develop not what they assert in the absence of being put to the test. In the July 13, 2012 edition of that popular daily/weekend Business Publication (A13), two Writers in positions to be knowledgeable of such details point out that IN THE ABSENCE “LIVING WILLS”, THE CONCEPT OF “TOO LARGE TO FAIL” HAS NOT BEEN CREDIBLY ADDRESSED and I agree.
Some may say what about the tougher new capital requirement for all financial institutions? These tough new rules 1st of all won’t be implemented until 2019 and 2nd if greater regulatory “financial” burdens are placed on institutions without a corresponding “Living Will” rule, it is all the more likely that another crisis will necessitate a taxpayer bailout because such a capital requirement was intended to preempt such an occurrence. On the other hand, what a “Living Will” would do in the event of financial distress is to ensure that an orderly wind down of operations take place. Even after all the events that have taken place in the recent financial disaster, such a course of action to prevent a recurrence of a reliance on a taxpayer bailout has not been addressed and this is not fair to taxpayers. This course of action would be a true lesson learned, taxpayers await such a demonstration of courage for those so called Too Big To Fail institutions that act as dictatorial entities unto themselves (allowing the identities/financial history of individual to be carved up and taken over by con artist and others from whom wealth can be assured) need to be left to rely only on their investors to bear the burden of orderly winding them down for the manner in, which they have and still continue to treat taxpayers. THIS IS ONLY FAIR(NESS). 


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