Is this a Naughty list that will get the Nice Treatment?

Okay, this is confusing me.  What exact policies are implied from being on the G-20 list of “50 Systemically Important Banks”?  It appears to me that you could be subjected to capital injections (i.e. free taxpayer money) for being so big you could bring down the global economy. No wonder Occupy is going global.

Group of 20 governments are considering naming as many as 50 banks as systemically important to the global economy and in need of extra capital, two officials from G-20 nations said.

The list, drawn up by Financial Stability Board Chairman Mario Draghi, will be published in time for a G-20 leaders meeting in Cannes, France, on Nov. 3-4, said the officials, who declined to be identified because the discussions are private. Regulators have said the banks named will be forced to take on more capital.

Regulators are at loggerheads with some institutions over the additional capital rules, with lenders arguing the requirements may harm the world’s economic recovery. Jamie Dimon, chief executive officer of JPMorgan Chase & Co. (JPM), and Bank of America Corp. (BAC) CEO Brian T. Moynihan are among bankers who have suggested this year that the new rules will constrain lending and hurt growth.

G-20 finance ministers and central bankers meeting in Paris yesterday discussed the standards that will be applied when compiling the list of systemic banks.

Twenty-nine to 40 banks could be designated depending on the potential impact on financial markets, according to one person familiar with the matter. Two officials from G-20 nations said the list could even be expanded to about 50 institutions. The regulators are also contemplating including the institutions in categories according to their ability to absorb losses.

So, the G-20 finance ministers “endorsed a framework to reduce the risks posed by systemically important institutions through strengthened supervision, a cross-border resolution plan and additional capital requirements”.  No wonder occupy is going global.  It seems bankers are draining funds from countries everywhere because they keep losing their mittens in the world’s largest gambling casinos.  So, if you’ve got a bunch of what looks like really bad institutions, why-oh-why do you just simply give them more of your treasury?  Good thing these guys went for that monopoly power!  Now they can bully just about any one with a threat of bringing down the global economy.  The World Bank and the IMF don’t even let entire countries do that!

The FSB is assessing how systemically important institutions are on the basis on five broad categories: size, interconnectedness, lack of substitutability, global activity and complexity.

Yup.  The bigger you are and the more difficult you are to figure out, then it looks like you win a prize!  Since when are we supposed to reward the creation of moral hazard and information asymmetry?  The government is supposed to regulate to clear that up, not provide cash infusions to the worst culprits in the market.  Oh, let me rephrase that because were talking about TWENTY governments doing that.  The leading candidate to head all this up is the head of the Bank of Cananda–Canada’s version of the Federal Reserve Bank–who just happens to be (yes, wait for it, you know it’s coming)a former employee of Goldman Sachs.

Here’s the sole sentence in the entire article at Bloomberg that indicates there may some be some push for some change.  The FSB is the Financial Stability Board.  They are in the process of doing a number of things under the jurisdiction of the G-20 group including derivatives reform.

The FSB suggested assessing banks’ involvement with shadow banks, reform of money-market funds, securitization regulation, supervision with an emphasis on risk and scale, and regulation of lending and repo markets, the official said.

Obviously, the soverign debt crisis of the Greece, Portugal, Spain, and Ireland are foremost on every one’s mind.  The deals are being worked out now to try to head off the potential calamity.  I have to wonder if this is going to turn into a world wide TARP plan where we all foot the bill and the banks continue on their merry way with a lot of public funds and mostly symbolic regulation and over sight.  I guess we’ll see.  This inquiring mind really wants to know.  Now, where’s the next G-20 meeting location and the nearest pitchfork store?