News For Real (via CalculatedRisk und salon.com)

Da ist es gut, dass jemand noch mal dran denkt, was er in 1991 gesagt hat.

Banks that need to get money to a trouble securities affiliate will do exactly the same thing. By linking up three or more banks, each with its own securities subsidiary, a daisy chain will facilitate a round robin of reciprocal loans in times of need. Then, the next time we have a Black Monday on Wall Street, this daisy chain will swing into action as a handful of mega-banks try to prop one another’s securities subsidiaries and their customers as the market plummets.

In such a scenario, billions of federally insured dollars will disappear in the twinkle of a few program trades.

That will happen, not might happen but will happen, and when it does these too-big-to-fail banks will have to be propped up with Federal money. In the smoking aftermath, Congress can stand around and wring its hands and give speeches about how awful it is that these bankers violated the spirit of the law, but once again, the money will be gone, the bill will have come due, and taxpayers will again be required to cough it up.