Network News

X My Profile
View More Activity
Posted at 11:30 AM ET, 12/28/2010

How banks are structured

By Ezra Klein

The finance lawyer behind Economics of Contempt set out to write a defense of the resolution authority provisions in the Dodd-Frank bill, but then realized that to understand why they would work, "you really have to have an understanding of how the major banks/investment banks are structured, legally, and why that structure causes so many problems in bankruptcy." So he sat down and explained it. The resulting post is well worth your time.

By Ezra Klein  | December 28, 2010; 11:30 AM ET
Categories:  Financial Regulation  
Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   Del.icio.us   StumbleUpon   Technorati   Google Buzz   Previous: Harry Reid as a young man
Next: Why Obama weighed in on behalf of Michael Vick

Comments

Also, for learning about shadow banking this Fed report is excellent (h/t Mike Konczal): http://www.ny.frb.org/research/staff_reports/sr458.pdf
(check out that graph on page 2)!!!

@chris_gaun
chrisgaun@gmail.com

Posted by: chrisgaun | December 28, 2010 12:29 PM | Report abuse

Hmmm.

"What’s important to understand — and I don’t think enough people do understand this — is that one of the biggest reasons that Lehman’s failure was such a catastrophic event for the markets was Lehman’s complete and total lack of preparation for a bankruptcy filing. I know this isn’t what most people want to hear or believe, since it doesn’t fit neatly into any of the popular narratives, and fixing it wouldn’t be gut-wrenchingly painful for the banks. But it’s the truth — and if you ask people who worked through the Lehman failure, they’ll all tell you the same thing: the complete lack of preparation was devastating.

It was honestly as if no one in the entire Lehman organization had thought about what they’d need to do in the event of a bankruptcy filing until the moment they filed. As a result, it was the most chaotic, uncontrolled failure imaginable."

So we need a new resolution authority other than bankruptcy because they didn't bother to properly prepare for bankruptcy?

Seems to me that this is overkill, specifically since my understanding is that the Dodd-Frank resolution authority allows the government to change the creditor prioritization at it's discretion without judicial approval.

Posted by: jnc4p | December 28, 2010 11:03 PM | Report abuse

Post a Comment

We encourage users to analyze, comment on and even challenge washingtonpost.com's articles, blogs, reviews and multimedia features.

User reviews and comments that include profanity or personal attacks or other inappropriate comments or material will be removed from the site. Additionally, entries that are unsigned or contain "signatures" by someone other than the actual author will be removed. Finally, we will take steps to block users who violate any of our posting standards, terms of use or privacy policies or any other policies governing this site. Please review the full rules governing commentaries and discussions.




characters remaining

 
 
RSS Feed
Subscribe to The Post

© 2010 The Washington Post Company