‘Living Wills’ For Big Banks?

Posted on by Phil Querin

It has recently been reported that Big Banks must have ‘living wills’ in place by July, 2012.  In estate planning circles, a “living will” is a document one creates in the event they should later become incapacitated or incompetent, and are unable to make important decisions for their long term care.  More to the point of the article – apparently the FDIC had unanimously voted to require banks with $50 billion or more in assets to prepare and submit these so-called “living wills” to “…ensure comprehensive and coordinated resolution planning for both the insured depository and its holding company and affiliates in the event that an orderly liquidation is required….” This,  according to FDIC chairman Martin Gruenberg.

In the case of the Big Banks, the idea here is to avoid a repeat of the Bear Stearns and Lehman Bros. debacles that occurred in 2008, setting off a chain reaction and causing credit to seize up to the point of nearly collapsing our country’s entire financial system.  Several weak banks were either absorbed by more stable ones, filed bankruptcy, or taken over by the FDIC.  Today, some of the country’s largest banks are still struggling.

I guess the thinking is that some Big Banks are still viewed as “systemically important” – using the currently accepted term – rather than those nasty pejoratives “Too Big To Fail” or “TBTF” [an acronym that could refer to any number of expletives about Big Banks. – PCQ]

I find the use of the term “living will” an interesting choice of words, as it tends to humanize Big Banks – a task of Herculean proportions – even Dr. Frankenstein failed on that count.   On the other hand – put yourself in the bankers’ shoes; this whole idea must raise some uncomfortable feelings at the highest executive levels.  I mean, how would you feel, if every time you turned around, someone wanted to perform a “stress test” on you – digitally poking around in one orifice or another?   And then after performing the tests, the examiner promptly suggests that you might want to make arrangements for the time when you can no longer care for yourself.   It’s like facing the Grim Reaper mano a mano.  Does the Fed know something the Big Banks can see but refuse to admit? After reading his patients’ charts, does Dr. Bernanke fear the end is near?  Does he foresee these symbols of wealth and power now becoming “Zombie Banks”? Mere shells of their former selves, soulless, disembodied creatures, aimlessly lurching across the financial landscape, frightening everyone, as they hemorrhage the last vestiges of their life-sustaining cash reserves – this sounds like a scene out of Thriller.   Well, if that’s what’s in store, “Yes!” – By all means, Living Wills are definitely in order!

In an effort to discover what plans some of the Big Banks have made toward drafting their Living Wills, I recruited a trusted associate to see if he might quietly find me a copy of one such document.  I am happy to report that the mission was hugely successful and I am now in possession of one of the few known Living Wills that has been drafted for submission to the FDIC this July.  What appears below is a redacted copy of the original:

Living Will

If the time should ever come when we are financially incapacitated to the point that we can no longer actively take part in necessary corporate decisions regarding our continued financial viability, and we are unable to direct our lawyers, accountants, politicians, regulators, apologists, and other assorted toadies, to act in our best interests, we wish this written statement to stand as our last, final, and binding instructions for the continued operation of our banking and financial services to the American Public.

The undersigned, being of sound mind, and acting as CEO for XXXXXXXXXXXXX Big Bank, instructs that if our fiscal condition is deemed Terminal (as hereinafter defined), or if we are determined to be Permanently Incapacitated (as hereinafter defined) we be allowed to expire peacefully and with a minimal amount of discomfort or attention from the Occupy Wall Street crowd, Pro Publica, and Matt Taibbi.

Notwithstanding the preceding, if it is humanly possible to be kept alive – even though in a vegetative state – through artificial life support systems such as massive infusions of taxpayer funds – we request that such heroic (though quite foolish) measures be employed to the fullest extent possible.  Under no circumstances is any Regulator to hang a “Do Not Resuscitate” or “DNR” sign on our front door – even in jest.  Some things just aren’t funny.

The term “Permanently Incapacitated” shall mean and refer to any fiscally terminal condition that cannot otherwise be remedied by: (a) a large” Wells Fargo-like” Warren Buffet investment; (b) another taxpayer funded bailout; (c) calling in political favors; (d) exotic FASB accounting gimmicks; or (e) imposing $5.00 debit card fees.  The word “Terminal” shall mean and refer to any event in which options (a) – (e) have run their course.

In the event that the opinion of a neutral third party is necessary to determine whether we are Permanently Incapacitated or Terminal, as defined above, we appoint Chris Dodd, or any of the other politicians officially appearing on the “Friends of Angelo” list who received sweetheart loans from Countrywide.

If it should be determined that we are in a permanently unconscious or persistent vegetative state such that we are not aware of our own existence or the environment around us, and show no behavioral response to the concerns of our borrowers, shareholders, or the American Public, we want to be treated exactly as if we were fully cognitive and capable of making our own decisions.  It is this unconscious state that we are most comfortable with, since it is exactly what the American Public has come to expect.  This is known in Bank Speak as the “State of Stupor” and we have found that it is best achieved when our top executives are given huge taxpayer-funded bonuses for continuing to permit our industry to languish in its perpetual Zombie-like existence, disclaiming any actual knowledge of daily events, and blaming our poor performance on underlings and the press. Based upon the best (government funded) research, the Big Banking industry has found that the lower the bar, the lower the expectation.  If we were to make competent and rational business decisions, people would start expecting that from us on a regular basis. We prefer unexceeded expectations.

Specific Instructions

Listed below are our instructions regarding particular types of life support systems. This list is not all-inclusive.  Any idle comments pre-dating this Living Will, that may have been  influenced by hubris, alcohol, excessive profits, or similar conditions likely to lead to feelings of grandeur and immortality, should be disregarded.  In other words, statements like “We don’t need your stinkin’ money” should be completely ignored if it truly appears that we do need your stinkin’ money.

Any general instruction that we not be kept fiscally alive through extraordinary efforts, may be superseded at any time by our specific instructions to the contrary. In other words, if in doubt, ask first and do not pull that plug!

  1. Fiscal Resuscitation? By all means!  However, we prefer more generous terms than those provided under TARP, where we were expected to actually repay the money.
  2. Medication? You Betcha!  But no generics.  We want the real deal; regardless of cost. We prefer hallucinogens that will cause us to believe that the trend lines show our share prices going up, rather than down.  And if suppositories should become  necessary, please wrap them in $100 bills.
  3. Heroic Operating Measures? Duh!? Of course! These measures should include transplants that remove the P&L Statements from healthy banks and give them to us.  The healthy banks don’t need help!  It’s the sick ones that should get to the front of the line!  This is triage time, folks!  Desperate times, desperate measures, etc., etc., etc.
  4. Nutrition and Hydration? Obviously!  Remember: “Feed a Fever.”  Despite the Recession, we prefer a spread like the Obama White House puts out for the Holidays.  However, please do not pour us any “Milk of Human Kindness” as it can cause severe allergic reactions for the Top Brass.
  5. Bathrooming Assistance? Depends!

Distribution of Specific Bank Assets & Programs

All of the rest, residue and remainder of our worldly possessions shall be distributed thusly:

  1. We hereby endow a chair at the Department of Religious Studies at a major Catholic University to determine, if, in fact, the Big Bank loan modification process is the closest thing to Purgatory on Earth.
  2. We donate the sum of $1,000,000 to three major office supply manufacturers to assist in the research and development of facsimile machines that connect directly to shredders rather than printers. This will better enable us to legitimately tell borrowers seeking modification that we never got their paperwork.
  3. We hereby donate the sum of $50,000 to the Speech Pathology Department of a major medical school to determine why so many Loan Modification Processors have developed a ‘gag reflex’ whenever they tell distressed borrowers “We’re here to help.”
  4. We hereby request that all Big Bank loan modification trainees be required to view the Abbott & Costello skit,  Who’s on First?”   We believe that no loan modification professional can be truly effective unless he or she has become thoroughly versed in the fine art of obfuscation and misdirection as so effectively demonstrated in this skit .
  5. We hereby endow a chair at a major mid-western liberal arts college for the School of Moral Equivalency, dedicated to the teaching of effective forms of argument that make distressed borrowers appear to be just as bad – if not worse – than Big Banks. We have found that large doses of moral equivalency shortly before bedtime have become the only effective over the counter sleep aid for Big Bank execs and their foreclosure mill attorneys.
  6. We donate the sum of $500,000 to fund lobbying efforts for a change of name in the federal government’s HARP program, which has become a colossal failure in both of its two iterations.  We believe that the HARP – a stringed instrument of lilting harmony -is a far too ambitious acronym for these dissonant refinance programs; we suggest something less pretentious.  The Lyre is a close cousin to the Harp, but smaller, and more primitive.  We asked that henceforth, the government change the program’s name to “Lyre Loans” which harkens back to our glory days when there was no such thing as “underwriting” and “Put Back” lawsuits.
  7. We donate all of our land, buildings, furniture, furnishings, and fixtures, to the Occupy Wall Street groupies, with the invitation that they figure out a way to pay the overhead without becoming “One Percenters”.
  8. We donate the sum of $5,000,000 for the research, writing, and publication of a Code of Ethics for the banking industry.  We do this because we have noticed, of late, that all respectable businesses and professions have Codes of Ethics, except ours.  We have nothing!  To date, the only treatise our industry has ever followed is The Prince, by Machiavelli.
  9. We donate the sum of $3,000,000 to the School of Performing Arts at a large California college to bear the name of soon-to-retire Barney Frank, for his incredible performance as a guardian of the consumer in the Dodd Frank  Wall Street Reform Act – a tome befitting the loquacious Mr. Frank – while having spent years as a Fannie and Freddie sycophant.  His Oscar- worthy performance serves as an invaluable example for up and coming politicians who want to perfect the art of speaking out of both sides of their mouth.
  10. Lastly, we endow the vast sum of $50,000,000 for the creation of a vocational school dedicated to teaching Magic and the Sleight of Hand.  The school shall be instructed exclusively by former MERS executives and lawyers, all of whom have vast experience in the art of illusion.  Who else can argue – with a straight face – that an empty bag of air is actually an independent and viable business model that should replace all recording offices throughout the country?

The above requests are made, after careful reflection, before we are taken over by the FDIC and become, like Fannie and Freddie, sucklings on the public teat.

P.S. – If the Volker Rule becomes law, just pull the plug!  [How did Chris Dodd let this happen?  We thought he was on our side! He never returned any of our campaign contributions!]

By XXXXXXXXXXXXXXXXXX, this XXX day of XXXX, 2012

Acknowledgments

This document was signed in our presence by its author, who appeared to be over the age of majority, and able to understand the nature and consequences of his/her/its financial health care decisions at the time of signing.  The author appeared to be under no improper influence, although the drumbeat of further regulations, lawsuits, and Congressional Testimony, can be heard in the distance. We have subscribed this document in the author’s presence and at the author’s request and in the presence of each other this XXX day of XXXX, 2012.

XXXXXXXXXXXXXXXXXXXXX

XXXXXXXXXXXXXXXXXXXXX

Posted in Fannie&Freddie, Financial Crisis, Foreclosure, Foreclosure Mills, GSEs, Lenders, Loan Modifications, Market Conditions, MERS, Miscellany, Real Estate/Distressed, Refinancing, Servicers | Tagged , , , , , , , ,
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