Shockingly, big banks say they are not Too Big to Fail

Under the Dodd-Frank Act, big banks had to create living wills.  Regulators released the public portion of these living wills in which the banks claim that it would be no problem to wind them down.

If the banks had been trying to make the case for why they should be required to provide ultra transparency, they would do so by starting with their living wills.

The reason I say that is the living wills highlight a) just how difficult it is to assess the risk of these banks because of opacity and b) how many different market participants who they are interconnected with who have the capacity to assess the information that ultra transparency would provide.

As Reuters reports 

Nine of the largest global banks on Tuesday expressed confidence they can be salvaged or dismantled without taxpayer bailouts if they became insolvent, as U.S. regulators released public portions of these banks' "living wills"....

But some experts doubt how hard regulators will push the banks for changes or how useful hypothetical resolution plans will be in major financial crisis....

The banks argued in the public documents that their resolution plans will work, with no cost to taxpayers or great consequence to the financial system. They used technical generalities in their conclusions without specifically addressing the unpredictable and vicious nature of a credit crisis....

JPMorgan Chase & Co concluded that its plan "would not require extraordinary government support, and would not result in losses being borne by the US government."...  

The disclosures on Tuesday give a glimpse of the kind of the kind of interconnections and complicated corporate structures that could still make governments fear letting big banks fail. 

JPMorgan named 25 "material" legal entities and 30 "core business lines," as required by Dodd-Frank and listed 18 clearing or financial settlement systems in which it is a member or participant, half of which are outside of the United States. 

The full-length plans are believed to include the most comprehensive maps of the insides of bank holding companies ever created. They are intended to give regulators confidence that they understand enough of the consequences of bank failures to allow more to happen. 

Bert Ely, a banking consultant in Alexandria, Virginia, said he is skeptical that the overall process could work because there would likely be a lot of turmoil in the markets when the plans were needed, raising doubt about who might buy any assets. 

"The presumption of a one-off event is not realistically valid," he said. "You can have one company blow itself up, but more often than not there are systemic problems."...

The bank resolution documents can be found at: here