WE ARE STILL VULNERABLE TO BANK BAILOUTS. Geoffrey Smith reported in an article in the weekend Wall Street Journal (November 5-6) that the enforcement agency for financial stability of the Group of 20 had published the list of banks that will be required to hold more capital “because of their importance to the global financial system.” These are the banks that have now been recognized as “too big to fail”. There are a total of 29 banks—17 European, 8 American, 3 Japanese and one Chinese. They will be required to take several steps over the next 8 years to reduce the danger they present to the global economy: a “living will” requirement by the end of 2012 to provide for their orderly unwinding in case of collapse; and 2016 to 2019 a phase in of higher capital requirements than other banks. I take from this that these banks have been recognized as presenting the danger of a possible required bailout for 8 more years. Note that one of the banks that would apparently have been on this list—Dexia—is not on the list because it required a bailout just over a month ago, as I posted on here.

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