"LIVING WILLS" FOR BIG BANKS!

Traditionally, the American public is accustomed to the following definition of a "living will": a legal document that sets out the medical care an individual, or the principal, wants or does not want in the event that he or she becomes incapable of communicating his or her wishes.

[www.investopedia.com/terms/livingwill.asp]

Now, however, in an effort to end the era of "too big to fail", the Federal Reserve and the Federal Deposit Insurance Corporation, on Tuesday, July 3rd, 2012, released new so-called "living wills" guidelines for megabanks which seek to deal with the issue of "unwinding" 9 of the largest banks doing business in the United States.

On Monday, July 2nd, 2012, these nine big banks were required to give regulators copes of their living wills, which these regulators will use to guide themselves on how to resolve a failing but systematically important bank (that is, a "megabank"). Summaries of these living wills were released on Tuesday, July 3rd, 2012.

The purpose of these living wills is to detail exactly how the Federal Reserve and the Federal Deposit Insurance Corporation (FDIC) would halt (stop) business operations and sell-off parts of the bank should the bank spiral downwards the way Lohman Borthers and Bear Stearns did in 2008.

The bank generally state in their resolution that -- in the unlikely situation they don't have enough capital in subsidiaries to cover claims -- money could be raised "by divesting in any of our lines of business," as the summary for JPMorgan Chase stated.

The nine banks that were first to turn in their wills have more than $250 billion in assets. U.S. banks in the group are Bank of America (BAC, Fortune 500), Citigroup (C, Fortune 500), Goldman Sachs (GS, Fortune 500), JPMorgan Chase (JPM, Fortune 500) and Morgan Stanley (MS, Fortune 500). International banks that also had to submit living wills are Barclays (BCS), Credit Suisse (CS), Deutsche Bank (DB) and UBS (UBS).

By December 2013, some 125 banks will have given regulators living wills, according to an FDIC official.

[money.cnn.com/2012/07/03/news/economy/bank-living-wills/index.htm]