This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

If 'Too Big to Fail' Banks Fail, We'd Be Greece (Correct)

The FDIC Quarterly Banking Profile for 2Q 2013 showed a mark-to-market loss of $51.1 billion in fixed-income securities in the "available-for-sale" category. This mark-to-market loss is likely growing.

Other Real Estate Owned in the banking system totals $32.6 billion. The "too big to fail" banks were the major mortgage lenders so they likely have the lion's share of this exposure.

The deposit insurance fund (DIF) totaled $37.9 billion at the end of the 2013 second quarter. Even if insured deposits do not grow and remains around $6 trillion in September 2020, the DIF would need to be funded at about $81 billion. The "too big to fail" banks will have the largest increases in DIF assessments.

Noncurrent loans still total $239.3 billion. My bet is that the 'too big to fail" banks account for 40% to 50% of this amount.

Since the end of 2007 notional amount of derivatives in the banking system are up 42.4% to $236.5 trillion and most of this exposure is controlled by the four "too big to fail" banks. There are likely more time bombs ticking in this category.

I am not an expert on FASB accounting rules, but I understand that new rules will require the bigger banks to increase capital.

Two senators are trying to work together to bring us a "21st Century Glass-Steagall Act." They are Elizabeth Warren, D-Mass., and John McCain, R-Ariz. They agree that traditional banking such as mortgage lending and checking accounts be separated from the speculative activities in investment banking and derivatives trading. I agree with this initiative.

Meanwhile, Main Street USA is beginning to have similar issues as Main Street, Greece: lower family incomes, more part-time jobs, tight lending standards and increasing costs for insurance of all types, homeowners, life, flood and health care.

At the time of publication the author had no position in any of the stocks mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.
Richard Suttmeier is the chief market strategist at AlphaPlus Analytics in addition to He has been a professional in the U.S. Capital Markets since 1972, transferring his engineering skills to the trading and investment world.

Suttmeier has an engineering degree from Georgia Tech and a Master of Science degree from Brooklyn Poly. He began his career in the financial services industry in 1972 trading U.S. Treasury securities in the primary dealer community. He became the first long bond trader for Bache in 1978, and formed the Government Bond Department at LF Rothschild in 1981, helping establish that firm as a primary dealer in 1986. This experience gives him the insights to be an expert on monetary policy, which he features in his newsletters, and market commentary.

Suttmeier's industry licenses include, Series 7 and Registered Principal (Series 24). He has been the Chief Market Strategist for since 2008 and often appears on financial TV.

Click here for details on Suttmeier's "Buy and Trade" investment strategy.

Richard Suttmeier can be reached at
4 of 4

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
C $37.54 0.00%
JPM $57.49 0.00%
WFC $47.31 0.00%
AAPL $93.99 0.00%
FB $102.01 0.00%


Chart of I:DJI
DOW 15,973.84 +313.66 2.00%
S&P 500 1,864.78 +35.70 1.95%
NASDAQ 4,337.5120 +70.6750 1.66%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs