too big 01When The Next Too-Big-To-Fail Bank Fails

 

This is a seekingalpha.com article.

 

Summary

Runs on banks and financial institutions, historically, are a fact if life in the banking business.

The exemption of banks’ derivatives positions from bankruptcy protection, along with the mandate to clear derivatives, puts dealer banks in greater danger.

Derivatives clearing houses apparently consumed three times the face value of Lehman’s equity in four days’ time.

The Orderly Liquidation Authority, a sheep in wolf’s clothing, will protect the next bank facing this threat.

First, I think it is axiomatic that there will be another Big Bank “episode.” However, the purpose of this article is to suggest that the horrors of this event are exaggerated in the minds of investors. So my point is this: Yes, there will be another “crisis.” But the process of resolving the problem is not going to be as nasty as some might think.

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