Wall Street banks told Federal Reserve Governor Daniel Tarullo in a meeting three weeks ago that a plan to limit exposure to individual companies and governments would harm liquidity, the Financial Times reported on its website Sunday, citing people familiar with the talks.
The meeting included Goldman Sachs Group (GS) Chief Financial Officer David Viniar, Morgan Stanley (MS) CFO Ruth Porat, and their counterparts at six other banks, the FT reported the people as saying.
The banks warn that the move would cut a total $1.2 trillion from credit commitments at Goldman Sachs, JPMorgan Chase & Co. (JPM), Morgan Stanley, Bank of America Corp. (BAC) and Citigroup Inc. (C), and would also cause a ripple effect through international markets because their government bond holdings could be snared by the caps, the FT reported.
An unpublished Clearing House study, using data from the five biggest U.S. Wall St banks, found 65 breaches of the Fed's proposed counterparty limit with 22 different counterparties and suggested $1.2 trillion of credit would have to be cut, the FT reported.
Full story: http://www.ft.com/intl/cms/s/0/6a789456-871d-11e1-865d-00144feab49a.html#axzz1s9ZK7OPi.