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> I really, really want to know how you just 'reboot' the financial system without massive disruption to retail banking or the payments system. There will be

> I really, really want to know how you just 'reboot' the financial system without massive disruption to retail banking or the payments system. There will be massive disruption in any case. It can come in the format of recapitalization (Iceland) or inflation due to inflating their insolvency away (Latin America). > How do you 're'capitalize a new bank? OP meant recapitalize the failed banks. Short version: 1. Fire the board of directors. 2. Fire the management. (The question here is how many levels: At least the C-level execs, but probably another level below that.) The above people have FUBAR'd the bank in the first place. Leaving them in place and expecting a different result is insanity. 3. Wipe out the shareholders. 4. Haircut the bondholders. Subordinated debt is probably 100% wiped out, preferred is probably 50%. 5. Inject treasury capital, and subordinate the formerly preferred. Nobody gets ahead of the treasury. Total time is probably 1 week for the BoA sized guys. Declare a bank holiday if you wish, like 1933. Guys smaller than BoA are a weekend, as evidenced by FDIC takeovers. 6. Prepare for steps 1-5 for all the idiots that depended on the bonds from this bank as Tier 1 capital because they thought this bank was too big to fail. The system will be better without those idiots too.

PakG1 15y ago
You honestly think we'll be able to find other people qualified to run the new banks? Maybe, maybe not. But I'd imagine that whoever's running the show right now will easily be able to stay in the picture. It's like being a CEO. Once a CEO of a big corp, always a CEO of a big corp, no matter how poor your track record. Maybe I'm just being cynical here.
- jpdoctor 15y ago
  > You honestly think we'll be able to find other people qualified to run the new banks? Clearly the ones currently running the bank are unqualified, which is why it is insolvent. Leaving them in place and expecting a different outcome is not sensible. But directly to the point you ask: Yes, I believe there are many candidates who will perform better and for less money. (In the words of Charles de Gaulle: The cemeteries of the world are full of indispensable men.) Probably a fair fraction are inside the organization already, but if I were the regulator in charge, I would cross fertilize and take folks from outside the organization because internal allegiances are probably in the way of a thorough reorg.
- steve8918 15y ago
  Good Lord!! What are you saying?? That because there aren't "qualified" people that we should leave the current criminals there, even though they jeopardized our entire financial system!??!? There are plenty of people that could have run the banks. Sheila Blair perhaps? I'd be okay with Elizabeth Warren. Hell I'd even take Jim Cramer at this point.
anigbrowl 15y ago
Total time is probably 1 week for the BoA sized guys You're telling me the government could have rebooted BofA, AIG, Wells Fargo, CitiGroup and Chase (to name just the top 5 - http://en.wikipedia.org/wiki/Troubled_Asset_Relief_Program#Participants http://en.wikipedia.org/wiki/Troubled_Asset_Relief_Program#P...) in the space of a week or two. I would love if that were possible, but I don't see how it is. Proposals like this were debated at some length back in 2008, after all, and I distinctly remember them being decried as Communism, for understandable reasons.
- bluedanieru 15y ago
  I distinctly remember them being decried as Communism, for understandable reasons. Understandable that they are actually communist, or understandable that bankers and regulators would say any old bullshit to at least barely legitimize to the public massive transfers of wealth into their pockets?
- Estragon 15y ago
  > I distinctly remember them being decried as Communism, for > understandable reasons. Yes, if I was a stakeholder in the financial industry whose wealth and connections afforded me a huge mouthpiece, I too would resort to emotive namecalling of any policy which might force me to take a haircut.
- jpdoctor 15y ago
  > Proposals like this were debated at some length back in 2008 No, they were not. The proposals were about how to avoid doing the above list. Firing the management and BoD would take less than a day. Wiping out the shareholders and bondholders would also take less than a day. Injecting new capital would take less than a day. All of those could be done on the same day. I'm alloting a week in order to find/promote the correct caretaker CEO.
deleted 15y ago
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PakG1 15y ago

You honestly think we'll be able to find other people qualified to run the new banks? Maybe, maybe not. But I'd imagine that whoever's running the show right now will easily be able to stay in the picture. It's like being a CEO. Once a CEO of a big corp, always a CEO of a big corp, no matter how poor your track record. Maybe I'm just being cynical here.

jpdoctor 15y ago
> You honestly think we'll be able to find other people qualified to run the new banks? Clearly the ones currently running the bank are unqualified, which is why it is insolvent. Leaving them in place and expecting a different outcome is not sensible. But directly to the point you ask: Yes, I believe there are many candidates who will perform better and for less money. (In the words of Charles de Gaulle: The cemeteries of the world are full of indispensable men.) Probably a fair fraction are inside the organization already, but if I were the regulator in charge, I would cross fertilize and take folks from outside the organization because internal allegiances are probably in the way of a thorough reorg.
steve8918 15y ago
Good Lord!! What are you saying?? That because there aren't "qualified" people that we should leave the current criminals there, even though they jeopardized our entire financial system!??!? There are plenty of people that could have run the banks. Sheila Blair perhaps? I'd be okay with Elizabeth Warren. Hell I'd even take Jim Cramer at this point.

anigbrowl 15y ago

Total time is probably 1 week for the BoA sized guys You're telling me the government could have rebooted BofA, AIG, Wells Fargo, CitiGroup and Chase (to name just the top 5 - http://en.wikipedia.org/wiki/Troubled_Asset_Relief_Program#Participants http://en.wikipedia.org/wiki/Troubled_Asset_Relief_Program#P...) in the space of a week or two. I would love if that were possible, but I don't see how it is. Proposals like this were debated at some length back in 2008, after all, and I distinctly remember them being decried as Communism, for understandable reasons.

bluedanieru 15y ago
I distinctly remember them being decried as Communism, for understandable reasons. Understandable that they are actually communist, or understandable that bankers and regulators would say any old bullshit to at least barely legitimize to the public massive transfers of wealth into their pockets?
Estragon 15y ago
> I distinctly remember them being decried as Communism, for > understandable reasons. Yes, if I was a stakeholder in the financial industry whose wealth and connections afforded me a huge mouthpiece, I too would resort to emotive namecalling of any policy which might force me to take a haircut.
jpdoctor 15y ago
> Proposals like this were debated at some length back in 2008 No, they were not. The proposals were about how to avoid doing the above list. Firing the management and BoD would take less than a day. Wiping out the shareholders and bondholders would also take less than a day. Injecting new capital would take less than a day. All of those could be done on the same day. I'm alloting a week in order to find/promote the correct caretaker CEO.

deleted 15y ago

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