‘Living Wills’ for Too-Big-to-Fail Banks Are Released
By JESSICA SILVER-GREENBERG and NELSON D. SCHWARTZ
Published: July 3, 2012
Federal regulators released so-called living wills on Tuesday for nine of the nation’s largest banks — blueprints for how they could be dismantled in the event of a collapse — but some analysts and other banking experts warned that they were still too big to fail without sending shock waves through the financial system.
“The living wills are simply an exercise to make some people feel better,” said Mike Mayo, an analyst with Crédit Agricole Securities.
The living wills, released by the Federal Deposit Insurance Corporation and the Federal Reserve, outline plans prepared by the banks, including JPMorgan Chase, Bank of America and Citigroup, for their liquidation.
These contingency plans represent one more bit of fallout from the 2008 financial crisis, when the bankruptcy of Lehman Brothers caused the entire banking system to freeze up, prompting government guarantees for lending and outright aid for many of the largest banks. The financial sector has bounced back for the most part since then, but public ire over the bailout remains strong.
As of July 1, financial institutions with more than $250 billion in assets were required to submit living wills as part of the Dodd-Frank financial reform law. Under the law, more than 100 financial institutions will be required to submit such plans.
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