Some comments about the ”living wills“

Five US banks (Bank of America, JPMorgan, BNY Mellon, Wells Fargo and State Street) failed both regulatory tests and the US regulators reject their living wills. Besides these five banks, Goldman Sachs and Morgan Stanley failed one test. Living wills could prevent a massive bailout in the future and create a safe net for the investors. However, when a crisis hits, the entire financial system is in its danger of collapsing, then we might need a living will for the entire system. In the last crisis, we could see that the central banks and governments use fiscal and monetary tools to provide liquidity for the markets. Although banks did exist during the crisis, they were more like middlemen between the central banks and the markets. Therefore, I do not think the living wills will play an important role in rescuing an economy from a crisis.