Looking in the financial rearview mirror

Published: Sunday, January 12, 2014 at 05:35 PM.

Don’t fall for the international bank hogwash; it’s nothing more than a smokescreen. Of the top 20 banks bailed out by the Fed, see above, nine were foreign. In the American International Group fiasco, 10 of the top 16 banks with Fed lifelines were overseas institutions.  With well-capitalized U.S. banks, when the next crisis hits (and there will be one), the Fed won’t feel compelled to backstop the global system.  U.S. banks could perhaps scoop up undercapitalized foreign cousins; cue Adam Smith’s invisible hand.

Sure banks would have to hold more capital, but they could still make loans to credit-worthy borrowers. Someone described insanity as doing the same thing but expecting different results.

Buz Livingston, CFP, has a Blue Mountain Beach based fee-only, hourly financial planning and investment management firm. For more information, visit www.livingstonfinancial.net or come by our new office at 2050 Scenic 30A, M1-Unit 230, Redfish Village.




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