Too Big to Fail, Not too soon to Tell

Editor’s Note:  The collapse of Spanish megabank Banco Popular happened this month after government and regulators assured investors it had passed a stress test with the European Banking Authority. The failed bank was taken over by Santander, another megabank, but the shareholders lost everything as did the suppliers of contingent capital in the coco bonds. Meanwhile in America, the Trump administration has proposed relaxing capital requirements and lending standards while the for-profit Federal Reserve issued a report on Thursday that 34 of the nation’s largest banks passed the stress test.    The bottom line is that the stress test doesn’t mean jack and every Federal Reserve chairman has failed to predict the negative consequences of their actions.  It’s all part of the Central banking mirage where everything is fine- until it isn’t.

https://www.nytimes.com/2017/06/23/business/lessons-from-the-collapse-of-banco-popular.html?smid=tw-share

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