Paulson: We must improve tools to facilitate the "orderly failure of a large complex financial institution"
The July 2nd Remarks of Treasury Secretary Henry Paulson, on the World Economy and Markets before the Chatham House were quite remarkable. Let's have a look at a few of them.
Whether it was Long Term Capital Management in 1998 or Bear Stearns this year, it is clear that Americans have come to expect the Federal Reserve to step in to avert events that pose unacceptable systemic risk. But, as we noted in our Blueprint, the Fed has neither the clear statutory authority nor the mandate to attempt to anticipate and prevent risks across our entire financial system.In my estimation this is tacit admission that large financial institutions are poised to fail, and the tools are not in place "to limit that impact and facilitate an orderly failure".
We need to strengthen our practices and financial infrastructure in the OTC derivatives market and in the tri-party repo system. Important work is underway in each of these areas, and needs to be completed quickly.
To address the perception that some institutions are too big to fail, we must improve the tools at our disposal for facilitating the orderly failure of a large complex financial institution.
It is clear that some institutions, if they fail, can have a systemic impact, so we must give regulators the authorities to limit that impact and facilitate an orderly failure.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List
Paulson: We must improve tools to facilitate the "orderly failure of a large complex financial institution"
Posted by Michael Shedlock at 4:03 AM .... Print .... Email
Posted by Michael Shedlock at 4:03 AM .... Print .... Email
To sign up for a free copy of our Monthly Client Newsletter, please register your email address at the bottom of the Sitka Pacific Commentary Page.
Buy Gold and Silver Online at GoldMoney
The Best Way to Buy Gold and Silver
Disclaimer:The content on this site is provided as general information only and should not be taken as investment advice. All site content, including advertisements, shall not be construed as a recommendation to buy or sell any security or financial instrument, or to participate in any particular trading or investment strategy. The ideas expressed on this site are solely the opinions of the author(s) and do not necessarily represent the opinions of sponsors or firms affiliated with the author(s). The author may or may not have a position in any company or advertiser referenced above. Any action that you take as a result of information, analysis, or advertisement on this site is ultimately your responsibility. Consult your investment adviser before making any investment decisions.
Comment Guidelines: Comments should be succinct, constructive and relevant to the story. We encourage engaging, diverse and meaningful commentary. Comments that include personal attacks, racial, religious, or ethnic slurs are not permitted. We continuously review and remove any inappropriate comments.