Sometimes it is hard to state the obvious. Your spouse’s middle-aged bulge. Your boss’s bad breath. You are aware of it but you are afraid to say it, fearing the awkwardness that will result if you speak up.
So it was this week, when two US regulatory authorities announced that they were not convinced by contingency plans put forward by 11 big banks, which are supposed to demonstrate that the institutions in question could go into bankruptcy without disrupting the broader financial system.
The statement issued by the authorities revealed nothing that informed observers did not already know. What is surprising is that the Federal Reserve Board and the Federal Deposit Insurance Corporation actually, finally, said it. Two years have passed since systemically important financial institutions were required to present US authorities with “living wills”, procedures for winding them down in the event of a bankruptcy. Not a peep had been heard from regulators on those plans until this week.