Daily Archives: April 17, 2012

South Korean robotic prison guards study human behavior, promise high-tech “body searches”

Robo-Guard: Robot Prison Guard Is The First Of Its Kind

Huffington Post | Apr 16, 2012

By Courteney Palis

According to a recent report by Reuters’ Ben Gruber, the “Robo-guard,” which is undergoing its first field test at a prison in South Korea, comes equipped with software designed to study human behavior, 3D depth cameras and a two-way wireless communication system. All of these tools enable it to detect, record and transmit in real-time any abnormalities in a prisoner’s behavior. Based on the ‘bot’s data, the human controllers can respond to any situations that arise.

While the robotic guard has been designed to patrol prisons autonomously, it can also be controlled manually with an iPad. The hope is that these Robo-guards will help lighten the heavy workload human corrections officers often carry.

Full story

Facebook co-founder Peter Thiel: some people will live for centuries, rely on robots and take trips to the moon

Tech visionary Thiel sets out to spark a biotech revolution

fiercebiotech.com | Apr 17, 2012

By John Carroll

Peter Thiel, an early venture investor in Facebook and FierceMarkets, has handed out a round of grants of up to $350,000 to a slate of 6 startup biotech companies, each of which promises a game-changing approach to medicine. And he’s hoping that handing out checks to these startup dreamers will help ignite some radical thinking on the possibilities of our collective “amazing future.”

The list of radical “visionaries” includes Longevity Biotech, which is working on artificial protein technology to develop potent oral drugs; Arigos Biomedical, which is developing new technology to allow the long-term storage of organs; Immusoft, which is reprogramming human immune cells; Inspirotec, which is working on a low-cost device to gather and identify airborne agents; along with 3Scan and Positron, which are advancing new medical imaging technology.

“In the past, people dreamed of the future as a radically better, more technologically advanced place: You might live for centuries, delegate work to your robots, and take your vacations on the moon,” said Thiel, who established and funds the Thiel Foundation. “Now, many people expect their children to inherit a world worse than today’s. With Breakout Labs, we want to rekindle dreams of an amazing future. That’s why we’re supporting researchers who dream big and want to build a tomorrow in which we all want to live.”
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Thiel set up Breakout Labs to fund early-stage research work, backing teams of radical thinkers working outside traditional academic and industry circles. And he says more companies can earn his backing throughout the year. The new venture is currently focused primarily on the intersection of biology and technology, though Thiel plans to expand the focus as time goes on.

Scenes from Eyes Wide Shut: Prince William’s sister-in-law caught in debauched aristocratic bash, gun brandishing flap

On the gilded throne: A smiling Pippa Middleton and other female guests join the Vicomte de Soultrait, who is wearing a dog collar and chainOn the gilded throne: A smiling Pippa Middleton and other female guests join the Vicomte de Soultrait, who is wearing a dog collar and chain
Police expected to question Prince William’s new sister-in-law

If authorities want to prosecute, Pippa could be called as a witness

It happened hours after she attended decadent 18th century-style party

Daily Mail | Apr 16, 2012

By Rebecca English

Only hours after a debauched aristocratic bash, Pippa Middleton was at the centre of controversy as she was photographed with a man brandishing a gun on the streets of Paris.

Prince William’s new sister-in-law, dubbed Her Royal Hotness after her appearance at his wedding, is expected to be questioned by police after her companion pointed the realistic-looking weapon at a photographer who was following them.

It is not clear whether the pistol was real or a fake, but the French authorities are investigating the incident after receiving a complaint from a member of the public at a time when the capital is on high alert after a string of fatal shootings.

If they prosecute, the sister of the future Queen is likely to be called as a witness. The crime itself carries a maximum seven-year jail sentence.

Either way, the situation has the potential to cause acute embarrassment to the Royal Family as the Queen prepares to celebrate her Diamond Jubilee.

The incident occurred hours after Pippa, 28, was guest of honour at a decadent 18th century-themed party thrown by her close friend, the French aristocrat and designer Vicomte Arthur de Soultrait, on Friday.

The licentious bash at one of Paris’s hottest nightspots saw costume-clad socialites greeted by three dwarves lounging on a sofa for their ‘entertainment’.

It concluded with a stripper bursting out of a giant birthday cake before disrobing to a remix of God Save The Queen.

A smiling Pippa, in a scarlet corseted dress, even posed for photos perched on the side of a gilded throne – shipped in for the occasion – next to the vicomte, who wore a studded dog collar and chain.

Attraction: Sparks fly as a party performer grinds on the dancefloorAttraction: Sparks fly as a party performer grinds on the dancefloor
Scenes from the lavish party, attended by Pippa Middleton, in Paris to mark the seventh anniversary of Vicomte A a company formed by Arthur Solutrait, who also celebrated his 30th birthday at the eventScenes from the lavish party, attended by Pippa Middleton, in Paris to mark the seventh anniversary of Vicomte A a company formed by Arthur Solutrait, who also celebrated his 30th birthday at the event
Some pictures from the event have appeared on a publicly-accessible website set up to promote the party, while others have appeared on the website of the French magazine Le Point.
Pippa works as a party planner and is renowned for her assiduous development of society connections. Last year she stayed with de Soultrait at his multi-million-pound Paris home when she was invited to attend the French Open tennis tournament as a guest. Arriving at his 30th birthday party on Friday at the Theatre Saint Germain she appeared to be dressed rather half-heartedly compared to the other guests in a ribboned corset top, under which she wore lacy legging and gold pumps.

But onlookers said she still managed to cause a stir and was constantly surrounded by ‘a gaggle of hangers-on, like a swarm of bees’, and had her own bodyguard who ‘watched her constantly’.

The party was, by all accounts, filled with ‘feathers, baubles, jewels and privileged youngsters’. Some 300 guests including the cream of French, American, Latin American and English society had been invited to the bash, which was entitled ‘Le Roi est Mort, Vive le Vicomte’ (the king is dead, long live the vicomte).

 Among them was a Marie-Antoinette lookalike, a reveller claiming to be sexual deviant the Marquis de Sade, and a man dressed as a cardinal who was carrying a copy of the Kama Sutra instead of a bible.

‘We don’t take ourselves too seriously,’ said the vicomte’s brother, Marcy.

Arthur went further, boasting: ‘I love decadence. Today we’re going to have fun.’

Champagne flowed and revellers posed suggestively in revealing outfits and cavorted with the dwarves in the dimly lit room, draped with red velvet curtains.

The ‘highlight’ was the sight of a brunette stripper bursting out of a birthday cake and entertaining the guests, including Pippa, to a risque burlesque show which culminated in her striking her metal chastity belt with an electric angle grinder, showering the audience in sparks.

When midnight struck, the vicomte was given a Cartier watch as a present, before joking that he hoped to get a Rolex for his 40th.

The self-confessed party animal is one of the most successful young entrepreneurs in France and runs the upmarket Vicomte A clothing range. It is famed for its eye-wateringly bright preppy style clothing, such as polo shirts.


A self-confessed party animal, Vicomte de Soultrait was – despite his supposed ‘mortificaton’ – yesterday still boasting to friends that ‘any party where Pippa is goes with a swing’.

So who is the French aristocrat that has got the Duchess of Cambridge’s younger sister in such hot water?

In fact, he is one of the most successful young entrepreneurs in France and runs the upmarket Vicomte A clothing range, which had a turnover of around £10million in 2010.

Arthur went into business while doing an internship in Charlotte, North Carolina, in 2004, and began selling ties imported from Italy door-to-door.

Among the lucrative contracts he has picked up in recent years is a contract to supply ties to the French Olympic team – but his firm is as famed for its eye-wateringly bright preppy style clothing, such as polo shirts, which are immensely popular in France and Palm Beach.

They can be best described as a cross between Ralph Lauren and Gap – but very much targeted at wealthy young people like himself.

Hailing from a wealthy Burgundian family who have an estate in the region as well as a stunning chateau on the outskirts of Paris – to which Pippa is a frequent visitor – de Soultrait is a fanatically keen huntsman whose passion for anything connected with bloodsports is matched only by his love for the high life.

He plays polo to a high standard and has even been photographed with the Queen.

It is clear that his long-standing friendship with Pippa is now, given her sister’s marriage, one he prizes even more highly.

Yesterday, a spokesman for his company insisted that the furor was a storm in a teacup. ‘It was not a real gun. It was just a stupid joke,’ they were reported to have said.

Hailing from a Burgundian family who have an estate in the region and a stunning chateau on the outskirts of Paris – to which Pippa is a frequent visitor – de Soultrait is a keen huntsman whose passion for bloodsports is matched only by his love of the high life.

He plays polo and has been photographed with the Queen.

After the birthday bash, Pippa was among partygoers driven to the trendy Raspoutine bar. According to sources, the high-spirited group did not arrive back at the vicomte’s apartment in the expensive Rue de Varenne until 6am on Saturday.

Following a few hours of sleep, Pippa and her friends emerged in time for a late brunch nearby.

Afterwards she was driven to the Gard du Nord to catch the Eurostar home in a black Audi A5 convertible with red leather seats.

De Soultrait wore a baseball cap and sat in the back with an unidentified male friend, while Pippa hopped in the front and chatted with the mystery driver. It was on the journey to the station, at around 2pm, that the man spotted a photographer pulling up behind him on a moped in stationary traffic.

As his friends – including Pippa – smirked, the driver reached into his glove box and pulled out the weapon before aiming it directly at the photographer.

It is not clear whether the pistol was real or a fake – but his actions constitute an offence under French law either way. A judicial source said: ‘Anybody involved in the illegal use of a handgun in public is liable to arrest and interrogation.’

If the gun was real, those involved in the incident face up to seven years in prison. If it is a fake, they could be jailed for two years.

Sources indicated that the weapon looked similar to a Sig Sauer P226, used by numerous law enforcement and military organizations worldwide as well as by personal bodyguards.

France is on a heightened security alert after Islamic terrorist Mohammed Merah shot dead seven people in the south-west of the country last month.

And two men were arrested in Paris at the weekend in connection with four murders carried out with a pistol over the past five months. If the French authorities decide to question Pippa, the episode could turn into a major incident.

Diplomatic sources in the city said the ‘phones from London were already red hot about Pippa’s involvement’. ‘There is anger in London in royal circles that she has been dragged into this when she was just a passenger in the car,’ said one.

At least one witness has made a formal complaint to police. This is not believed to be the photographer concerned, who is still considering his options.

The complaint has been handed to the judicial police who are conducting a preliminary investigation before deciding whether to alert an examining magistrate.

St James’s Palace declined to comment while the Middleton family solicitor failed to respond to repeated requests for a comment.

Sources close to the Vicomte de Soultrait said he was ‘mortified’ and was ‘preparing to explain’ to the authorities what had happened.

Friends refused to the name the driver who brandished the gun but said he was ‘keeping a low profile and hoping everything will calm down’.

Shooting zombies is the fad among gun enthusiasts

Two young attendees get their picture taken with a zombie poster during the National Rifle Association’s (NRA) 141st Annual Meetings & Exhibits in St. Louis, in this April 13, 2012 file photo. The Hollywood-inspired zombie craze has extended to gun enthusiasts. REUTERS/Tom Gannam

Reuters | Apr 15, 2012

By Greg McCune

ST. LOUIS | One of Patrick Flanagan’s favorite movies as a kid was “Night of the Living Dead,” a 1968 horror film about a family trapped in a rural Pennsylvania house and attacked by zombies.

“I really dug zombie stuff since then,” said Flanagan, 23, an unemployed concrete worker from Alton, in southern Illinois.

So Flanagan combined his interest in zombies with another hobby – guns.

He was one of many gun owners crowded around a display of lifelike zombie paper shooting targets at the National Rifle Association’s Guns and Gear exhibition on Saturday during the NRA annual conference in St. Louis.

CDC Warns Public to Prepare for ‘Zombie Apocalypse’

The Hollywood-inspired zombie craze – featuring blood-soaked ghouls rising from the dead to attack the living – has extended to gun enthusiasts. At the huge NRA exhibition, vendors displayed zombie targets, zombie bullets, zombie paint coating for guns and zombie patches for a shooting jacket.

Firing ranges across the country are offering zombie-themed shooting events, some held as daylight fades for atmosphere, said Brad Ross, a division manager for Law Enforcement Targets, Inc, a maker of zombie targets.

Flanagan, who said he owns 19 guns, likes to drive out into rural areas to practice shooting. He is bored with shooting cans or simple bullseye targets and the zombie targets will be more fun, he said, clutching his roll of 40 poster-sized images.

Sales of zombie targets are booming and are expected to grow about 30 percent to a million targets this year, Ross said.

“It is absolutely dumbfounding,” said Addison Sovine, a salesman hustling on Saturday to keep up with the demand for the shooting accessory at the Law Enforcement Targets booth.

For the truly zombie-obsessed, Sovine demonstrated small packets of blood-colored liquid that can be purchased to attach to the back of the zombie target so that it bleeds when shot. If an explosion is desired, a grainy mixture is for sale that will blast like a firecracker when hit.


Among the most popular of the 18 zombie target designs offered in its catalog are “Becky,” an image of a wounded, pale and dark-eyed female, and “ZombiLadin” a bearded and bloody likeness of the late al Qaeda leader Osama bin Laden, company officials said.

Ammunition maker Hornady introduced a zombie bullet last fall with a green painted tip and it was one of their most successful product launches ever, according to marketing communications manager Everett Deger. The bullets come in a bright green box saying “20 rounds certified Zombie ammunition” with a warning that it is not a toy.

Zombie-themed paint coatings for guns are among the 10 most popular camouflage designs offered by DuraCoat Firearm Finishes, which paints guns, said Operations Manager Amy Lauer-Potaczek.

Much of the interest in zombies has been fed by popular culture, such as the movie “Zombieland,” starring Woody Harrelson, and the “Walking Dead” television series about a group of people trying to survive in a world overrun by zombies. But Sovine said the obsession has gained momentum from “preppers” – people who are preparing for doomsday – and the belief by some that, according to the Mayan calendar, the world as we know it will end in December.

“As soon as we pass December if we are not all dead, we live on, and it is really not the end of the world … I think you will see it (zombie target sales) start to come back down the other side,” Sovine said.

Virginia Tech massacre survivors, family press U.S. lawmakers on gun laws

Agence France-Presse | Apr 16, 2012

WASHINGTON — Survivors and relatives of victims of US shootings marked the fifth anniversary of the Virginia Tech massacre Monday by calling on Congress to “put an end to this madness” of gun violence.

The anniversary of the worst school shooting in US history, in which 32 students and faculty died, comes at a moment of intense debate over US gun laws, race relations and the right to self-defense.

“Today, 32 more will be murdered by guns in our nation. Yes, another Virginia Tech will happen today, like it happens every day,” Dan Gross, president of the Brady Campaign to Prevent Gun Violence, told reporters outside the US Capitol, backed by a symbolic 32 survivors and relatives of victims from various massacres and shooting sprees.

“And that’s why we’re here to say enough is enough, and to hold the people who do their work in that building behind us accountable to put an end to this madness.”

Virginia Tech was the scene of the worst school shooting in US history when Cho Seung-Hui, a 23-year-old Virginia Tech student born in South Korea, shot to death 32 fellow classmates and teachers before killing himself.

Gross and a US congressman from the district where the university is located put the blame for the proliferation of firearms and the high level of US gun violence squarely on the powerful gun lobby.

“Americans need to ask: where is the outrage?” congressman Jim Moran said, citing figures that show more than 100,000 people are shot — and 12,000 murdered — with a firearm each year in the United States.

“Guns permeate our culture,” Moran said. And despite the overwhelming number of them, “the National Rifle Association (NRA)… believes the answer to that gun violence that those guns generate is, even more guns.”

The NRA has been extremely successful in undermining gun controls. Some 40 US states now have permissive concealed weapon laws, up from just two in 1981.

“Here in Congress and in far too many state houses across the country, their side is in fact winning, loosening already porous gun laws, and blocking passage of any sensible gun control measures,” Moran said.

The issue has surged to the fore in recent weeks with the shooting death of a 17-year-old African-American, Trayvon Martin, in Florida by a self-described neighborhood watch guard.

Norway killer Anders Behring Breivik cries tears of nostalgia during own propaganda film

Anders Behring Breivik raises his fist as he arrives to courtroom for the first day of his trial in Oslo, Monday. Fabrizio Bensch / Reuters

Norwegian, who says he killed 77 people in self-defence, is ’emotional’ as film he made to justify one-man war is played

guardian.co.uk | Apr 16, 2012

by Helen Pidd in Oslo

In an average year, 30 murders are committed in Norway. In three hours one afternoon in July last year, Anders Behring Breivik more than doubled that figure. Yet when he appeared at the first day of his trial on Monday, the 33-year-old insisted he was not guilty of acts of terrorism resulting in the deaths of 77 people.

“I acknowledge the acts,” Breivik told Oslo central court when asked to enter a plea. “But I do not plead guilty and I claim that I was doing it in self defence.”

His lawyer had already warned that this would be how Breivik would justify planting an enormous bomb outside the government quarters in Oslo, killing eight people, before heading to the island of Utøya to gun down 69 more attending a summer camp of the ruling Labour party.

Earlier, he announced that he did not recognise the Norwegian court – because, he said, it receives its mandate “from political parties who support multiculturalism”.

Breivik was defiant as he arrived in court, giving a closed-fist salute before shaking hands with prosecutors and court officials and then declaring himself a “writer” when asked for his occupation.

Anders Breivik to Norway court: I killed 77 people but am not guilty

Breivik Cries in Court Watching His Own Propaganda Video

Knights Templar 2083 Movie by Anders Behring Breivik

Breivik wiped away tears as he watched a trailer for a propaganda film he had made to justify the one-man war which reached its awful conclusion on 22 July.

According to a lip-reader for the Norwegian broadcaster TV2, Breivik is to have said that watching the film made him “emotional”.

Breivik has said the attacks were necessary to protect Norway from being taken over by Muslims.

He remained impassive as prosecutors read out the indictment, which detailed not just the crimes for which Breivik was standing trial – charges of terrorism “with the intention of seriously intimidating a population” – but also those he had killed, and how they had died.

It made harrowing listening, the clinical medical details pinpointing how Breivik had ended so many young lives.

The youngest to die on Utøya was Sharidyn Meegan Ngahiwi Svebakk-Bohn, who had just celebrated her 14th birthday. Along with 10 others, she was shot on Kjærlighetsstien, which translates as Lovers’ Path.

The prosecutor read: “She was in the area by the escarpment below Lovers’ Path and was shot twice with the pistol and/or rifle. One of the shots penetrated inter alia the left lung, the main stem of the pulmonary artery and the aorta. The other shot crushed the 11th chest vertebra and liver, leaving through the right flank. Svebakk-Bohn died of the gunshot injuries to the chest causing internal and external blood loss.”

Breivik’s crimes were “extremely serious offences on a scale that has never previously been experienced in our country in modern times”, said the prosecutor, Svein Holden. The result, he added, has “given rise to serious fear in parts of the Norwegian population”.

Much of the morning in court was given over to explaining how, not why, Breivik had planned the attacks.

The five-member panel of judges was told that Breivik’s shift towards extremism began in high school when he joined the youth wing of the Norwegian Progress party.

He had told investigators he was a resistance fighter in a far-right militant group modelled after the Knights Templar, a western Christian order that fought during the crusades. He claimed he joined the group after connecting with “militant nationalists over the internet” who eventually invited him to a meeting in London in 2002. But police have found no trace of any organisation and say he acted alone.

“In our opinion, such a network does not exist,” Holden said.

The court heard Breivik’s initial plan was to be an “economic supporter” of the anti-Islam movement in western Europe. He appeared to stockpile “considerable amounts of money” made from selling fake diplomas and school certificates online.

But in 2006, Breivik folded his company and moved in with his mother in her Oslo flat. It was at this point, say prosecutors, where Breivik decided to become “active” against what he saw as a Muslim takeover of western Europe. The judges were shown a picture of Breivik’s bedroom, with the computer where Holden said he played the game World of Warcraft “full time” between the summer of 2006 and 2007.

Working from his mother’s house, he composed a rambling manifesto he published online before the attacks. In it, Breivik wrote that “patriotic resistance fighters” should use trials “as a platform to further our cause”.

U.S. ‘too-big-to-fail’ banks bigger than ever before – now holding $8.5 trillion in assets

Five banks — JPMorgan Chase & Co., Bank of America Corp., Citigroup Inc., Wells Fargo & Co., and Goldman Sachs Group Inc. — held US$8.5-trillion in assets at the end of 2011, equal to 56% of the U.S. economy, according to central bankers at the Federal Reserve. David Paul Morris/Bloomberg

Bloomberg News | Apr 16, 2012

by David J. Lynch

Two years after U.S. President Barack Obama vowed to eliminate the danger of financial institutions becoming “too big to fail,” the nation’s largest banks are bigger than they were before the nation’s credit markets seized up and required unprecedented bailouts by the government.

Five banks — JPMorgan Chase & Co., Bank of America Corp., Citigroup Inc., Wells Fargo & Co., and Goldman Sachs Group Inc. — held US$8.5-trillion in assets at the end of 2011, equal to 56% of the U.S. economy, according to central bankers at the Federal Reserve.

Five years earlier, before the financial crisis, the largest banks’ assets amounted to 43% of U.S. output. The Big Five today are about twice as large as they were a decade ago relative to the economy, sparking concern that trouble at a major bank would rock the financial system and force the government to step in as it did in 2007 with the Fed-assisted rescue of Bear Stearns Cos. by JPMorgan and in 2008 with Citigroup and Bank of America after the Lehman Brothers bankruptcy, the largest in U.S. history.

“Market participants believe that nothing has changed, that too-big-to-fail is fully intact,” said Gary Stern, former president of the Federal Reserve Bank of Minneapolis.

That specter is eroding faith in Obama’s pledge that taxpayer-funded bailouts are a thing of the past. It is also exposing him to criticism from Federal Reserve officials, Republicans and Occupy Wall Street supporters, who see the concentration of bank power as a threat to economic stability.

US banks are back and bigger than ever

From ‘too big to fail’ to even bigger in just four years

Banks grow despite Obama’s bid to end too-big-to-fail idea

As weaker firms collapsed or were acquired, a handful of financial giants emerged from the crisis. Since then, JPMorgan, Goldman Sachs and Wells Fargo have continued to grow internally and through acquisitions from European banks, reeling from government austerity measures related to the rising cost of public debt in Greece, Spain, Portugal, Ireland and Italy.

‘Few Massive Firms’

The industry’s evolution defies the president’s January 2010 call to “prevent the further consolidation of our financial system.” Embracing new limits on banks’ trading operations, Obama said then that taxpayers wouldn’t be well “served by a financial system that comprises just a few massive firms.”

Simon Johnson, a former chief economist of the International Monetary Fund, blames a “lack of leadership at Treasury and the White House” for the failure to fulfill that promise. “It’d be safer to break them up,” he said.

The Obama administration rejects the criticism, citing new safeguards to head off further turmoil in the banking system. Treasury Secretary Timothy Geithner said in a February 2 speech that the U.S. “financial system is significantly stronger than it was before the crisis.” He credits new regulations, including tougher capital and liquidity requirements that limit risk-taking by the biggest banks, authority to take over failing big institutions and prohibitions on the largest banks acquiring competitors.

Angering Taxpayers

The government’s financial system rescue, beginning with the 2008 Troubled Asset Relief Program, angered millions of taxpayers and helped give rise to the Tea Party movement. Banks and bailouts remain unpopular: By a margin of 52% to 39%, respondents in a February Pew Research Center poll called the bailouts “wrong” and 68% said banks have a mostly negative impact on the country.

Banks Cite Changes

The banks say they have increased their capital backstops in response to regulators’ demands, making them better able to ride out unexpected turbulence. JPMorgan, whose chief executive officer, Jamie Dimon, acknowledged public “hostility” toward bankers in a March 30 letter to shareholders, boasted April 13 of a “fortress balance sheet.” Bank of America, which was about 50% larger at the end of 2011 than five years earlier, says it has boosted capital and liquidity while increasing to 29 months the amount of time the bank could operate without external funding.

“We’re a much stronger company than we were heading into the crisis,” said Jerry Dubrowski, a Bank of America spokesman. The bank says it plans to shrink by year-end to US$1.75-trillion in risk-weighted assets, a measure regulators use to calculate how much capital individual banks must hold.

Still, the banking industry has become increasingly concentrated since the 1980s. Today’s 6,291 commercial banks are less than half the number that existed in 1984, according to the Federal Deposit Insurance Corp. The trend intensified during the crisis as JPMorgan acquired Bear Stearns and Washington Mutual; Bank of America bought Merrill Lynch; and Wells Fargo took over Wachovia in deals encouraged by the government.

“One of the bad outcomes, the adverse outcomes of the crisis, was the mergers that were of necessity undertaken when large banks were at risk,” said Donald Kohn, vice chairman of the Federal Reserve from 2006-2010. “Some of the biggest banks got a lot bigger and the market got more concentrated.”

Concerns Voiced

In recent weeks, at least four current Fed presidents — Esther George of Kansas City, Charles Plosser of Philadelphia, Jeffrey Lacker of Richmond and Richard Fisher of Dallas — have voiced similar worries about the risk of a renewed crisis.

The annual report of the Federal Reserve Bank of Dallas was devoted to an essay by Harvey Rosenblum, head of the bank’s research department, “Why We Must End Too Big to Fail — Now.”

A 40-year Fed veteran, Rosenblum wrote in the report released last month: “TBTF institutions were at the center of the financial crisis and the sluggish recovery that followed. If allowed to remain unchecked, these entities will continue posing a clear and present danger to the U.S. economy.”


The alarms come almost two years after Obama signed into law the Dodd-Frank financial-regulation act. The law required the largest banks to draft contingency plans or “living wills” detailing how they would be unwound in a crisis. It also created a financial-stability council headed by the Treasury secretary, charged with monitoring the system for excessive risk-taking.

The new protections represent an effort to avoid a repeat of the crisis and subsequent recession in which almost 9 million workers lost their jobs and the U.S. government committed US$245-billion to save the financial system from collapse.

The goal of policy makers is to ensure that if one of the largest financial institutions fails in the next crisis, shareholders and creditors will pay the tab, not taxpayers.

“Two or three years from now, Goldman Sachs should be like MF Global,” said Dennis Kelleher, president of the nonprofit group Better Markets, who doubts the government would allow a company such as Goldman to repeat MF Global Holdings Ltd.’s Oct. 31 collapse.

New Regulations

Dodd-Frank, the most comprehensive rewriting of financial regulation since the 1930s, subjected the largest banks to higher capital requirements and closer scrutiny. The law also barred federal officials from providing specific types of assistance that were used to prevent such firms from failing in 2008. Instead, the Fed will work with the FDIC to put major banks and other large institutions through the equivalent of bankruptcy.

“If a large financial institution should ever fail, this reform gives us the ability to wind it down without endangering the broader economy,” Obama said before signing the act on July 21, 2010. “And there will be new rules to make clear that no firm is somehow protected because it is too big to fail.”

‘Completely Unrealistic’

Officials at the Treasury Department, the Fed and other agencies have spent the past two years drafting detailed regulations to make that vision a reality.

Yet the big banks stayed big or, in some cases, grew larger. JPMorgan, which held US$2-trillion in total assets when Dodd-Frank was signed, reached US$2.3-trillion by the end of 2011, according to Federal Reserve data.

For Lacker, the banks’ living wills are the key to placing the financial system on sounder footing. Done right, they may require institutions to restructure to make their orderly resolution during a crisis easier to accomplish, he said.

Neil Barofsky, Treasury’s former special inspector general for the Troubled Asset Relief Program, calls the idea of winding down institutions with more than US$2-trillion in assets “completely unrealistic.”

It’s likely that more than one bank would face potential failure during any crisis, he said, which would further complicate efforts to gracefully collapse a giant bank. “We’ve made almost no progress on ending too big to fail,” he said.

Bankers’ Responses

Dimon dismisses such concerns as “chatter” and says U.S. banks need heft to meet the needs of their globally active clients. Since 2007, the bank has added more than 80,000 workers, equal to the current combined payrolls of Nike Inc. and Colgate Palmolive Co.

In his annual letter to shareholders, Dimon said JPMorgan will spend almost US$3-billion “over the next few years” and devote 3,000 full-time employees to complying with regulations that arose from the crisis.

That regulatory burden could promote further industry consolidation, according to Wilbur Ross, chairman of WL Ross & Co., a private-equity firm.

“We think the little tiny banks, the 90-odd percent of banks that are under US$1.5-billion in deposits, are pretty much an obsolete phenomenon,” he told Bloomberg Television on March 14. “We think they’ll all have to merge with each other, be acquired by bigger banks or something.”

Implicit Guarantee

Jake Siewert, a spokesman for Goldman Sachs, and Mary Eshet, a spokeswoman for Wells Fargo, declined to comment. Spokesmen for JPMorgan and Citigroup didn’t respond to e-mailed requests for comment.

Even with policy makers’ claims that the next crisis will be handled differently, investors still regard the largest banks as protected by an implicit government guarantee. One sign of that attitude is that investors continue to demand from the biggest banks lower interest payments in return for deposits.

That gives larger banks a funding advantage over their smaller rivals. In 2011, funding costs for banks with more than US$10-billion in assets were about one-third less than for the smallest banks, according to the FDIC. That gap was only slightly narrower than the 37% advantage the largest banks enjoyed when Dodd-Frank was signed.

US$250-Billion Boost

For 28 global banks in 2009, that benefit translated into a cumulative US$250-billion, according to Andrew Haldane, the Bank of England’s executive director for financial stability.

“Markets have come to believe that what the government did in 2008 and 2009 isn’t a one-time deal, that the government will somehow come to the rescue of these big financial firms,” Kevin Warsh, a former member of the Fed’s Board of Governors, said on the March 28 “Charlie Rose” TV show.

Credit-rating companies Standard & Poor’s and Moody’s say they anticipate the U.S. government would rescue large banks in a future crisis. Both cut the major banks’ debt ratings by one level late last year, while retaining them as investment grade credits.

Last month, 15 of the 19 largest U.S. financial institutions passed a Fed “stress test” designed to measure their ability to withstand a deep recession.

Richard Spillenkothen, the Fed’s director of banking supervision and regulation from 1991 to 2006, said regulators are moving in the right direction.

“We’ve made progress. I don’t think we’ve totally resolved it,” said Spillenkothen. “The proof will be in the next crisis.”