Banks, Bankers, and Bankruptcies Under Crisis (eBook)

Dimitris N. Chorafas served on the faculty of the Catholic University of America and as Visiting Professor at Washington State University, George Washington University, University of Vermont, University of Florida, and Georgia Institute of Technology in the United States, as well as the University of Alberta, Technical University of Karlsruhe, Ecole d'Etudes Industrielles de l'Université de Genève, Ecole Polytechnic Fédérale de Lausanne, Polish Academy of Sciences and Russian Academy of Sciences. More than 8,000 banking, industrial and government executives participated in his seminars in the United States, England, Germany, Italy, other European countries, Asia and Latin America. Chorafas is the author of 160 books, translated into several languages world-wide.

Cover 1
Title 4
Copyright 5
Contents 6
List of Figures and Tables 10
Preface 12
1 Banks “Too Big to Fail” 18
1. Large and Complex Banking Groups 18
2. Big Bank Bailouts and Bail-ins 22
3. Small Is Beautiful 27
4. The Case of “Stickier” Deposits and of Living Wills 31
5. If Risk Control Is Ineffective, Then Hopeless Cases Should Go Bankrupt 35
2 Banks and Regulators 40
1. Basel III 40
2. The Leverage Ratio 45
3. Liquidity Coverage Ratio 49
4. Should the Glass-Steagall Act Be Reintroduced? 53
5. The Role of the CIO Must Be Rethought 56
3 Banking Practices and the Evolution of Trading Rules 60
1. Shadow Banking 60
2. Risky Securitizations Get a New Life 63
3. The Volcker Rule 66
4. Bank Consolidation: An Elephant in a Glass House? 70
5. OTC Derivatives and CCPs 73
6. The Increase in Legal Risk 78
4 Euroland’s Banking Union and Its Stress Tests 82
1. The Rush for a Banking Union 82
2. The Difference between Theory and Practice 86
3. ECB’s Single Supervisory Mechanism 89
4. The Cocktail of Stress Testing and Politics 93
5. A Vicious Cycle of Sovereign–Big Banks Alliance 97
6. Risk Premiums and the Rescue Fund 100
5 Lehman Brothers and Bear Stearns 104
1. Case Studies Are the Best Way to Examine “How” and “Why” the Bankruptcies Took Place 104
2. Lehman Brothers 107
3. Who Could Provide Assurances on Counterparty Risk? 110
4. How Dependable Can a Broker’s Investment Conclusions about an LCBG Be? 114
5. Bear Stearns 118
6. The End of Bear Stearns 122
6 American International Group 126
1. Corporate Bankruptcies Are a Part of Business Life 126
2. The American International Group Was More Than an Insurer 130
3. Regulatory Authorities Had Not Performed Their Duties 134
4. Lessons Taught by AIG’s Debacle 137
5. Bonuses, Counterparties, and Public Money 141
7 Federal National Mortgage Association and Federal Loan Mortgage Association 144
1. Mortgages, Uncle Sam, and the Hedge Funds 144
2. Can Mutual Agreements Cope with Risk? 148
3. Eventually Comes the Day of Reckoning 152
4. The Piercing of Government-Sanctioned Secrecy in 2003 was a Precursor to Bad News 155
5. The Markets Did Not Know What to Think of Fannie and Freddie 160
6. Fannie and Freddie Fall off the Cliff 164
8 Citigroup 168
1. A Bank That Found Its Dual Origin in Reputation and Conservatism 168
2. Expansion under the Citibank Banner 173
3. Citigroup: Merger with Travelers and Struggle in Boardroom 177
4. Uncle Sam Comes to the Rescue 180
5. A Year after the Sovereign Acted as Chief Savior 184
9 British Banks at the Edge 190
1. The British Socialists Bailouts 190
2. Royal Bank of Scotland 193
3. The RBS Way to Disaster 197
4. Lloyds, HBOS 201
5. Overextended British Banks 204
6. Ireland’s Nemesis: The Anglo Irish Bank 207
10 Euroland’s Banks 210
1. The Need to Banish the Threat from Zombie Banks 210
2. Commerzbank and Hypo Real Estate 214
3. IKB, WestLB, and Sachsen LB 218
4. Monte dei Paschi di Siena 223
5. Government Bailouts Help in Hiding the Losses 226
6. BNP Paribas, Société Générale, Crédit Agricole, and Caisse d’Epargne 230
11 The Challenges Japan Faced with Its Banking Industry 234
1. The Years of the Banking Disaster 234
2. Japan’s Intensifying Banking Crisis 238
3. Japanese Banks in Southeast Asia 241
4. Japanese Banks, Economic Deflation, and Creative Accounting 244
5. Deferred Tax Assets 248
12 Japanese Banks That Bled in a River of Red Ink 252
1. Daiwa Bank, Nippon Trust & Banking, Sumitomo Bank
2. Mitsubishi-Tokyo and the Hokkaido Banks 256
3. Mizuho, Industrial Bank of Japan, Fuji, and Dai-Ichi 259
4. UFJ and Resona 263
5. Long-Term Credit Bank and Its Resurrection as Shinsei Bank 267
Notes 270
Index 280