<< <i>So should I take my 401K $$ out of JP Morgan? >>
Not unless it's valued at 200billion$, which is the size of JPM's portfolio. I don't think a 2% hit to their portfolio is any real concern. >>
$2 BILL is not a concern. But it's probably already up to $7 BILL and growing. The real concern is that they have $56 more TRILL in interest rate contracts levered up the same way. This was just 0.2% to 1% of the total pile at risk.
They might destroy each other....but the taxpayer will backstop those losses. We're now responsible for the losses of derivative's clearing houses both home and abroad.
This from the WSJ on line:
A Mess the 45th President Will Inherit
Taxpayers Now Stand Behind Derivatives Clearinghouses
From the Wall Street Journal Thursday, May 24, 2012
President Obama's standard gripe is that the economy has performed so poorly during his term because of the financial crisis he inherited from George W. Bush. But this week it is Mr. Obama who has bequeathed to his successors a landmark in financial regulation. It is bound to haunt them, though not as much as it will haunt taxpayers.
J.P. Morgan's recent trading loss and the resulting Washington blather about tighter regulation have grabbed headlines.
Little noticed is that on Tuesday Team Obama took its first formal steps toward putting taxpayers behind Wall Street derivatives trading -- not behind banks that might make mistakes in derivatives markets, but behind the trading itself. Yes, the same crew that rails against the dangers of derivatives is quietly positioning these financial instruments directly above the taxpayer safety net.
As we noted in May 2010, the authority for this regulatory achievement was inserted into Congress's pending financial reform bill by then-Senator Chris Dodd. Two months later, the legislation was re-named Dodd-Frank and signed into law by Mr. Obama. One part of the law forces much of the derivatives market into clearinghouses that stand behind every trade. Mr. Dodd's pet provision creates a mechanism for bailing out these clearinghouses when they run into trouble.
Specifically, the law authorizes the Federal Reserve to provide "discount and borrowing privileges" to clearinghouses in emergencies. Traditionally the ability to borrow from the Fed's discount window was reserved for banks, but the new law made clear that a clearinghouse receiving assistance was not required to "be or become a bank or bank holding company." To get help, they only needed to be deemed "systemically important" by the new Financial Stability Oversight Council chaired by the Treasury Secretary.
Last year regulators finalized rules for how they would use this new power. On Tuesday, they began using it. The Financial Stability Oversight Council secretly voted to proceed toward inducting several derivatives clearinghouses into the too-big-to-fail club. After further review, regulators will make final designations, probably later this year, and will announce publicly the names of institutions deemed systemically important.
We're told that the clearinghouses of Chicago's CME Group and Atlanta-based Intercontinental Exchange were voted systemic this week, and rumor has it that the council may even designate London-based LCH.Clearnet as critical to the U.S. financial system.
U.S. taxpayers thinking that they couldn't possibly be forced to stand behind overseas derivatives trading will not be comforted by remarks from Commodity Futures Trading Commission Chairman Gary Gensler. On Monday he emphasized his determination to extend Dodd-Frank derivatives regulation to overseas markets when subsidiaries of U.S. firms are involved.
Readers know Mr. Gensler as the chief regulator of MF Global, which was run into bankruptcy by his old Beltway and Goldman Sachs pal Jon Corzine. An estimated $1.6 billion is still missing from MF Global customer accounts. What an amazing feat Mr. Gensler will have performed if, through his agency's oversight, he can manage to have U.S. customers eat the cost of Mr. Corzine's bets on foreign debt and have U.S. taxpayers underwrite bets in foreign derivatives trading.
If there's one truth we've learned about government financial backstops, it's that sooner or later they will be used. So eventually taxpayers will have to bail out one derivatives clearinghouse or another. It promises to be quite a mess. And if the 45th president spends his first term whining about his predecessor's mistakes, he'll have a point.
a 100% tax rate will not put a dent in the derivative trouble that is brewing. This will be the ultimate shot to the head for the US$ and the world economy. Sooner we get it over with the sooner we can start over. We don't need to be kicking a derivative can down the road.
<< <i>They might destroy each other....but the taxpayer will backstop those losses. We're now responsible for the losses of derivative's clearing houses both home and abroad.
This from the WSJ on line:
A Mess the 45th President Will Inherit
Taxpayers Now Stand Behind Derivatives Clearinghouses
From the Wall Street Journal Thursday, May 24, 2012
President Obama's standard gripe is that the economy has performed so poorly during his term because of the financial crisis he inherited from George W. Bush. But this week it is Mr. Obama who has bequeathed to his successors a landmark in financial regulation. It is bound to haunt them, though not as much as it will haunt taxpayers.. >>
I wonder if it's possible for a president such as the current one to be indicted for fraud.
"Poets are the unacknowledged legislators of the world." PBShelley
<< <i>So should I take my 401K $$ out of JP Morgan? >>
Not unless it's valued at 200billion$, which is the size of JPM's portfolio. I don't think a 2% hit to their portfolio is any real concern. >>
$2 BILL is not a concern. But it's probably already up to $7 BILL and growing. The real concern is that they have $56 more TRILL in interest rate contracts levered up the same way. This was just 0.2% to 1% of the total pile at risk. >>
I was basing the loss really at roughly 3.6 to 4bill$ --from what I hear up from 2.
I'm not sure where the idea of $56 Trillion in levered interest rate contracts comes from.
Also, it's my understanding that nothing more is unhedged.
"Poets are the unacknowledged legislators of the world." PBShelley
"Not unless it's valued at 200billion$, which is the size of JPM's portfolio. I don't think a 2% hit to their portfolio is any real concern."
Looking like a 4-5 bil hit is in the news. Even so, a 4% trimming is certainly not going to sink that ship. The other talk is that these super tanker banks must be broken up into smaller components instead of all being under the same institution with a single board of directors. I'm not sure how that helps because all of the enterprise would still likely be owned by a single entity but the concept of having components that you can hack off if they go south seems like an improved strategy to the TBTF megacorps. That strategy also seems like a good way to get in a position for some great chapter 11 opportunities to lose some of those bad bets.
With the uber leveraging and the strategy of off setting bets, it seems there is no end to the tools at the disposal of the big playas. Couple that with the insider information available to those playas from their network, throw in some monster cyber flash trades to keep things in line and you have an operation that is almost impregnable. A 4% trim job is going to get some folks fired but hey, take the write-off for the business loss, what's not to like?
Take the FB fiasco from last week. Some big boys won and some big boys lost. If I was one of those big boys that lost, I think I'd be more than a little pizzed, like talk to the congressman pizzed, about maybe some violations in the rules and some criminal activity pizzed. We all know, no wrongdoing was going on here and nobody is going to get stuck with anything anyway. Now, if you were j6p and were lucky enough to get some FB, you just have to suk it up 'cause you just got hosed by the playas for a 30% trim job...makes a 4% trim look not so bad.
I'm not sure where the idea of $56 Trillion in levered interest rate contracts comes from.
That number comes right from the govt's quarterly OCC derivative's report. It's right on their website. These are real numbers because no one in their right mind could possibly dream them up. Yeah, it's a notional value so the "net asset value" is about $1-$2 TRILL. But in the event of a default, the liability rises to full notional. As with anything else it's only worth what someone would pay for it. I knocked $1 TRILL off of the $57T to account for JPM's current trade to give them plenty of room. Of course all the TBTF banks say they are properly hedged on their $50T to $70T deriv's positions. Long Term Capital Management, Bear Sterns, and Lehman all thought the same thing.
Go to the right upper side for popular links - select derivatives - do the same thing again and select "quarterly deriv's activities." You could also select BIS which will get you information on world-wide derivatives though the detail by bank is not as good as the OCC's. Note that this is the USTreasury's Office of the Comptroller of the Currency.....not Orange County Choppers.
A precedent was set with TARP. The banks know they can always use the kneeling before Congress(Paulson threatening financial armegeddon) to get the taxpayer to socialize their losses. Sure the american public will not allow it, but since when has Congress listened to the American People. I just wonder how the Fed will come up with the additonal $15 trillion like the last time.
Comments
<< <i>So should I take my 401K $$ out of JP Morgan? >>
Not unless it's valued at 200billion$, which is the size of JPM's portfolio. I don't think a 2% hit to their portfolio is any real concern.
<< <i>
<< <i>So should I take my 401K $$ out of JP Morgan? >>
Not unless it's valued at 200billion$, which is the size of JPM's portfolio. I don't think a 2% hit to their portfolio is any real concern. >>
$2 BILL is not a concern. But it's probably already up to $7 BILL and growing. The real concern is that they have $56 more TRILL in interest rate contracts
levered up the same way. This was just 0.2% to 1% of the total pile at risk.
dollar destruction continues, the pace is accelerating.
Rampant currency debasement will be the most important investment trend of this decade, and it will devastate most people.
- Nick Giambruno Buy dollar insurance now, because the policy will cost more as the dollar becomes worth less.
<< <i>congrats to whomever had the other side of the bet >>
Gee.....thanks derryb. All I did was lever myself up 1 BILLION to one and put a $1,000 bet down.
This article suggests that GS, Citi, and MS are possible "winners."
Rampant currency debasement will be the most important investment trend of this decade, and it will devastate most people.
- Nick Giambruno Buy dollar insurance now, because the policy will cost more as the dollar becomes worth less.
both home and abroad.
This from the WSJ on line:
A Mess the 45th President Will Inherit
Taxpayers Now Stand Behind Derivatives Clearinghouses
From the Wall Street Journal
Thursday, May 24, 2012
http://online.wsj.com/article/SB1000142405270230484090457742239316410627...
President Obama's standard gripe is that the economy has performed so poorly during his term because of the financial crisis he inherited from George W. Bush. But this week it is Mr. Obama who has bequeathed to his successors a landmark in financial regulation. It is bound to haunt them, though not as much as it will haunt taxpayers.
J.P. Morgan's recent trading loss and the resulting Washington blather about tighter regulation have grabbed headlines.
Little noticed is that on Tuesday Team Obama took its first formal steps toward putting taxpayers behind Wall Street derivatives trading -- not behind banks that might make mistakes in derivatives markets, but behind the trading itself. Yes, the same crew that rails against the dangers of derivatives is quietly positioning these financial instruments directly above the taxpayer safety net.
As we noted in May 2010, the authority for this regulatory achievement was inserted into Congress's pending financial reform bill by then-Senator Chris Dodd. Two months later, the legislation was re-named Dodd-Frank and signed into law by Mr. Obama. One part of the law forces much of the derivatives market into clearinghouses that stand behind every trade. Mr. Dodd's pet provision creates a mechanism for bailing out these clearinghouses when they run into trouble.
Specifically, the law authorizes the Federal Reserve to provide "discount and borrowing privileges" to clearinghouses in emergencies. Traditionally the ability to borrow from the Fed's discount window was reserved for banks, but the new law made clear that a clearinghouse receiving assistance was not required to "be or become a bank or bank holding company." To get help, they only needed to be deemed "systemically important" by the new Financial Stability Oversight Council chaired by the Treasury Secretary.
Last year regulators finalized rules for how they would use this new power. On Tuesday, they began using it. The Financial Stability Oversight Council secretly voted to proceed toward inducting several derivatives clearinghouses into the too-big-to-fail club. After further review, regulators will make final designations, probably later this year, and will announce publicly the names of institutions deemed systemically important.
We're told that the clearinghouses of Chicago's CME Group and Atlanta-based Intercontinental Exchange were voted systemic this week, and rumor has it that the council may even designate London-based LCH.Clearnet as critical to the U.S. financial system.
U.S. taxpayers thinking that they couldn't possibly be forced to stand behind overseas derivatives trading will not be comforted by remarks from Commodity Futures Trading Commission Chairman Gary Gensler. On Monday he emphasized his determination to extend Dodd-Frank derivatives regulation to overseas markets when subsidiaries of U.S. firms are involved.
Readers know Mr. Gensler as the chief regulator of MF Global, which was run into bankruptcy by his old Beltway and Goldman Sachs pal Jon Corzine. An estimated $1.6 billion is still missing from MF Global customer accounts. What an amazing feat Mr. Gensler will have performed if, through his agency's oversight, he can manage to have U.S. customers eat the cost of Mr. Corzine's bets on foreign debt and have U.S. taxpayers underwrite bets in foreign derivatives trading.
If there's one truth we've learned about government financial backstops, it's that sooner or later they will be used. So eventually taxpayers will have to bail out one derivatives clearinghouse or another. It promises to be quite a mess. And if the 45th president spends his first term whining about his predecessor's mistakes, he'll have a point.
Rampant currency debasement will be the most important investment trend of this decade, and it will devastate most people.
- Nick Giambruno Buy dollar insurance now, because the policy will cost more as the dollar becomes worth less.
<< <i>They might destroy each other....but the taxpayer will backstop those losses. We're now responsible for the losses of derivative's clearing houses
both home and abroad.
This from the WSJ on line:
A Mess the 45th President Will Inherit
Taxpayers Now Stand Behind Derivatives Clearinghouses
From the Wall Street Journal
Thursday, May 24, 2012
http://online.wsj.com/article/SB1000142405270230484090457742239316410627...
President Obama's standard gripe is that the economy has performed so poorly during his term because of the financial crisis he inherited from George W. Bush. But this week it is Mr. Obama who has bequeathed to his successors a landmark in financial regulation. It is bound to haunt them, though not as much as it will haunt taxpayers.. >>
I wonder if it's possible for a president such as the current one to be indicted for fraud.
<< <i>
<< <i>
<< <i>So should I take my 401K $$ out of JP Morgan? >>
Not unless it's valued at 200billion$, which is the size of JPM's portfolio. I don't think a 2% hit to their portfolio is any real concern. >>
$2 BILL is not a concern. But it's probably already up to $7 BILL and growing. The real concern is that they have $56 more TRILL in interest rate contracts
levered up the same way. This was just 0.2% to 1% of the total pile at risk. >>
I was basing the loss really at roughly 3.6 to 4bill$ --from what I hear up from 2.
I'm not sure where the idea of $56 Trillion in levered interest rate contracts comes from.
Also, it's my understanding that nothing
more is unhedged.
Looking like a 4-5 bil hit is in the news. Even so, a 4% trimming is certainly not going to sink that ship. The other talk is that these super tanker banks must be broken up into smaller components instead of all being under the same institution with a single board of directors. I'm not sure how that helps because all of the enterprise would still likely be owned by a single entity but the concept of having components that you can hack off if they go south seems like an improved strategy to the TBTF megacorps. That strategy also seems like a good way to get in a position for some great chapter 11 opportunities to lose some of those bad bets.
With the uber leveraging and the strategy of off setting bets, it seems there is no end to the tools at the disposal of the big playas. Couple that with the insider information available to those playas from their network, throw in some monster cyber flash trades to keep things in line and you have an operation that is almost impregnable. A 4% trim job is going to get some folks fired but hey, take the write-off for the business loss, what's not to like?
Take the FB fiasco from last week. Some big boys won and some big boys lost. If I was one of those big boys that lost, I think I'd be more than a little pizzed, like talk to the congressman pizzed, about maybe some violations in the rules and some criminal activity pizzed. We all know, no wrongdoing was going on here and nobody is going to get stuck with anything anyway. Now, if you were j6p and were lucky enough to get some FB, you just have to suk it up 'cause you just got hosed by the playas for a 30% trim job...makes a 4% trim look not so bad.
That number comes right from the govt's quarterly OCC derivative's report. It's right on their website. These are real numbers because no one in their right mind
could possibly dream them up. Yeah, it's a notional value so the "net asset value" is about $1-$2 TRILL. But in the event of a default, the liability rises to full notional.
As with anything else it's only worth what someone would pay for it. I knocked $1 TRILL off of the $57T to account for JPM's current trade to give them plenty of room.
Of course all the TBTF banks say they are properly hedged on their $50T to $70T deriv's positions. Long Term Capital Management, Bear Sterns, and Lehman
all thought the same thing.
OCC home page
Go to the right upper side for popular links - select derivatives - do the same thing again and select "quarterly deriv's activities."
You could also select BIS which will get you information on world-wide derivatives though the detail by bank is not as good as the OCC's.
Note that this is the USTreasury's Office of the Comptroller of the Currency.....not Orange County Choppers.
Box of 20
Stories are starting to trickle out about who was on the other side of this trade
NY times
Rampant currency debasement will be the most important investment trend of this decade, and it will devastate most people.
- Nick Giambruno Buy dollar insurance now, because the policy will cost more as the dollar becomes worth less.