Derivatives

BREAK ‘EM UP Reason #4: TBTF Banks Use the FDIC to Cushion Against Losses

What a difference a credit rating notch can make. The biggest banks have used their FDIC-guaranteed, taxpayer-supported banking subsidiaries and the bank subsidiary’s credit rating advantage to reduce the capital behind their derivatives activities required by regulators to cushion against potential losses. This is another way that credit ratings influence derivatives through the taxpayer guarantee.…

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BREAK ‘EM UP Reason #3: The U.S. Bankruptcy Code Was Changed to Favor Derivatives Over Loans

A law passed during the height of the bubble in 2005 altered the treatment of derivatives in the U.S. Bankruptcy Code to greatly favor derivatives counterparties over other creditors. The law’s title was, ironically, “The Bankruptcy Abuse Prevention and Consumer Act of 2005”. Bankruptcy law had been designed to rehabilitate debtors while protecting creditors. The…

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Are You a Bank Analyst or Do You Know One?

Are you a bank analyst, or do you know one? I have created a link, below, to a model I built in 2011 after the passage of Dodd-Frank. Based on regulatory filings of the banks on the Fed’s Top Fifty Bank Holding Companies list, mentioned from time to time in my blog posts. I was…

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