Secret Gov Recovery Plan Leaked: US Banks Told to Make Plans for Preventing Collapse

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Top Tier Gear USA

The global banking has been under so much strain since 2007 that the US government has forced them to take steps to prepare themselves for a scenario that could bring down the entire banking system. As reported by Reuters, government regulators have been working behind the scenes  for several years with the top five banks in the country to ensure that they can absorb a massive hit to the financial system:

U.S. regulators directed five of the country’s biggest banks, including Bank of America Corp. and Goldman Sachs Group Inc., to develop plans for staving off collapse if they faced serious problems, emphasizing that the banks could not count on government help.

The two-year-old program, which has been largely secret until now, is in addition to the “living wills” the banks crafted to help regulators dismantle them if they actually do fail.

According to documents obtained by Reuters, the Federal Reserve and the U.S. Office of the Comptroller of the Currency first directed five banks — which also include Citigroup Inc., Morgan Stanley and JPMorgan Chase & Co. — to come up with these “recovery plans” in May 2010.

They told banks to consider drastic efforts to prevent failure in times of distress, including selling off businesses, finding other funding sources if regular borrowing markets shut them out, and reducing risk. The plans must be feasible to execute within three to six months, and banks were to “make no assumption of extraordinary support from the public sector,” according to the documents.

“Recovery plans are about protecting the crown jewels,” said Paul Cantwell, a managing director at consulting firm Alvarez & Marsal. “It’s about, How do I sell off non-core assets?” The priority is to the shareholders. A resolution plan is about protecting the system, taxpayers and creditors.”

“Recovery plans required of the largest banks are helpful in ensuring banks and regulators are prepared to manage periods of severe financial distress or instability affecting the banking sector,” he said.

The recovery plans requested in 2010, meanwhile, have received little publicity. The names of the banks required to submit them have not been previously disclosed, and Reuters obtained them only through a Freedom of Information Act request.

It seems that the much talked about stress tests of 2009 proved one critical point that Americans were not made privy to: that the banking system, contrary to popular belief, is wholly unstable and would likely not be able to withstand a serious financial shock.

The plan, it seems, is that if banks get into serious trouble they would quickly sell of their assets to raise capital. Well, either that or they would simply utilize the assets of account holders per new Federal Reserve regulations that allow private money market funds (to the tune of $2.7 trillion dollars nationwide) to be frozen in an effort to keep the system afloat.

As is generally the case, the real collapse prevention plan calls for letting the little guy be financially destroyed while the banking giants walk away with record profits.

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  • Ed_B

    Too bad that all these brainiacs in the banking system cannot figure out that banking, by its very nature, is a conservative business… a VERY conservative business and it cannot be successfully run in any other way. Every time they try stuff like this, they fall on their ass and we get dragged into it to bail them out. One would think that they would figure this out eventually, but apparently not. If this cycle is ever going to end, it will be because the banks are the ones to suffer from their incompetence and not the tax-payers.

    Perhaps they need a checklist that they can consult:

    1. Do not loan money to anyone who is unlikely
    to pay it back.

    2. Return to Glass-Steagall so that banks who
    want to play financial Russian roulette have
    to do so with THEIR money and not ours.

    3. Wind down all of their derivatives and exit
    that “market”.

    4. Keep ALL banking activities ON the books.

    5. Do not invent any more new whiz-bang
    products. We’ve already seen too many of
    these and they virtually always lead to
    big profits and then financial disaster.

    That’s it. Simple AND effective.

  • phdinlogic`

    “According to documents obtained by Reuters”.. The bankers (JP Morgan) purchased the MSM back in the early twenties. What a circle jerk! The goal of the elite is to collapse the “banking system”. They don’t care about money; they have it all. They care about power and controlling the sheep.

  • gwynmarilyn

    And they will wonder why people wont trust banks again for two generation at least. Buy food or any other products one uses over time. Silver and gold coin would be nice but only for long haul.

  • Evie

    They may intend to collapse the system but now they are busy shoring up and ripping every one and everything they can. Meanwhile agencies are formed, oversight etc. yet it is much worse.
    Too inconcievable that even 1 of the elite should go to bed hungry. Remember they worked hard and earned it. You did not educate yourself enough so you deserve to loose. Or you have to sacrifice your retirement for the young. The elite will need them for the millions of dollars in school loans they can buy mansions with. How dumb is the general public really?

  • Mick

    Leaked by Reuters huh?

    Reuters, the undisputed king of all mainstream media leaked a document of the US govt without its permission?

    C’mon guys, you know better than to believe that.

  • Scott S.

    most of the public, including most who distrust the govt. and distrust big banks, are too trusting of the “information” provided by both. Consider this. How can all the financial geniuses in the world’s financial leadership positions not understand the simplest of economic concepts, and how can they forget the basic principles of arithmetic?

    That does not make sense, so what does make sense about what they are doing?

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