WSJ's Victoria McGrane on the FDIC

We're gonna give you a history lesson in this next segment we're joined by Victoria mint Green from the Wall Street Journal Victoria welcome to the show -- Area good you know Victoria it it's funny how quickly time passes by the four years ago. Now we were kind of just on the verge of an economic collapse. And it was pretty clear at the time that FDIC was under prepared for that collapse in 2008. It can you remind assessed to what happened it and why the FTSE was on ready for that a collapse yeah. A lot of fairly the FDIC allowed without reading it in the government as well all didn't. As now that it didn't happen power that they needed. -- -- a lap. Lehman Brothers AID these very large aren't. Being bad. Entities you know I am though what happened went. -- got that Dodd-Frank legislation that the president signed in to lie in our intent is that Beijing gave them new powers and now we're in the yes it EU which would be in charge of taking over. You know that major financial our organization and like they do every Friday taking ever smaller aid. They stay out. They're staring at them -- on the that were laid out a lot. Now the the bank failures have slowed down quite a bit this year -- -- -- back and you know we were having art here. Four and five the weekend as you alluded to back in 2009 and ten but. I think this year I I I see the number and it's it's pretty -- it's they did most of the banks that we're gonna fail a party failed right. Would get what they -- the FDIC doing to make sure that they're better prepared. With the next melt down there will be another one to may not be in our lifetimes that there will be another bank meltdown what do they know how are they preparing for. So it and -- and if -- index -- where you know like a lot ethnic if they're really trying to game out a strategy out in practice would be. -- -- -- A very complex global financial firm. And and in wind it down in -- way it doesn't and markets in seeing and and -- They've they've come up with the beginning at a strategy paid -- -- admit it all the work -- it would. -- sees the arm chair of the anti all the operations. Go. But that would wipe out any equity that the bondholders in the article it. Equity at the airport to be wiped out up. Our wallet is it in the process they would date convert parent claims iPod or their act what you mean -- a spectacle -- And ultimately they'd like to recapitalize and it. Released back into the private sector and new entity. Which states they -- -- but ultimately on the face a crisis you -- your spelling is big big banks to big. Other big -- creating even larger big. Saying that those -- says it of the. While in Victoria the good news about bad is the stockholders. Are going to. Require very strict corporate governance right because if you're stockholder or older you're gonna say hey I'm not buying that stock unless you guys can prove to me. Your behaving in running a competent bank. And that and -- it at work like that at the end of regular. Cricket and -- apple these back. When I -- right. Their actions regular -- used that process and there is there aren't. -- You know it automatically -- and regulators have to decide it as editors at the start early -- that it would you know impact from this -- they would just got the thing and are what it -- it. You show like hey now we are. -- and hopefully that would make the overtime investors. Arm doubt that it would you walk. Victoria I was reading in the Wall Street Journal I'm not sure if you wrote the article but was -- the last couple weeks. About how JPMorgan is still actively involved in some very risky derivative trading. On our other banks besides JPMorgan still you know taking excessive risk with their portfolios and their depositors money. It depends where where you're standing up a lot of people all congress. In you know in the industry -- very -- but the big thing they're doing things -- and -- -- it -- and -- it. And engaging impact is that arm you know put them at rest act you know being an I think eight. Yeah about regulators seize the arm referees -- that whereas it service aren't going past the -- as. Dot banker so rolling out its so called local rule only you know it and see where recently painful I a few more years before they have the top of -- -- -- regulators are out and despite what exactly carpet is. I urged Beijing now there are changes coming there is gonna come late. What do you know just a ask your opinion on this and it's a tough when what are you what why not just bring back. Glass-Steagall I mean I heard all the arguments and you know it in -- it seems to me. Like that would be an easy solution to because all the problems that we had seemed to emanate around the back that we repealed Glass-Steagall. I don't know if they act on -- you know and there were -- and in 2009 it is adamant and congressman Eric and that thank you -- back. Com and -- -- L com you know local law in a lot of ways why design you. Do something you know a new version of black people aren't. Although in all of those are the ever backtracked you know doesn't expect you know commercial banks cannot be engaged in certain activities that they have been in -- You know the the government that each album now exactly today. -- -- -- I I don't want to seem overly cynical victory but it almost seems to me like you know the the banks lined up then. Lobbied or bribed if you will their congressmen and senators to make sure that Glass-Steagall did not get brought back and that's a cynics perspective on it though to -- I think in the patent -- -- more -- -- and you are an -- I don't think there is it was a lot of appetite immediately people like outlook is being. You know pure class people just wouldn't work anymore. Eight -- -- they're a lot that happened in that bill that the bank's part khaki where are and there are a lot of that that the big banks. -- I mean now the question is. He regulators like how our regulators are the rules that. But there's a lot left a lot of discretion in their hands about how exactly it'll tell Carter how much -- actually a but on the bank. No I did and I guess is there's always going to be two schools of thought and I just tend to take the of the more cynical view unfortunately Victoria thank you -- I mean I'm sure I'm not right Victoria you're -- trooper thanks for joining us. That's Victoria the -- might wanna read the article in today's Wall Street Journal he if you Google Earth to Victoria in the Green and CG RA and the Wall Street Journal. Great article about the FTSE.