One way to properly evaluate this issues is by looking at the “big banks” and making sure they are too sturdy to fail. Some key points:
- America has 6 highly impactful banks - Goldman Sachs (GS), JP Morgan (JPM), Bank of New York Mellon (BNY), Morgan Stanley (MS) and State Street.
- The Fed has highly regulated these banks and often gives them ‘stress tests’ to validate that they are able to handle another economic catastrophe without the assistance from other resources.
- The Fed estimates that 2 of those 8 banks currently have enough capital to cover another catastrophe. Oddly enough the Fed will not release the names of the 2 banks to the public.
Why does this matter?
In 2008 when these banks were in troubled waters, taxpayers were the ones to pay for the mess. This was not well taken by hardworking taxpayers like you and I, and the Fed took note. Now, the Fed wants to make sure if this happens again the taxpayers won’t be on the hook to foot the enormous relief fund. Our belief is that even if the banks have the necessary capital cushion taxpayers will most likely still be impacted.