Thursday, November 17, 2011

Will You Pay for 79 Trillion in Euro Derivatives

I rarely go into in depth investigations of economic / banking policy, but this story deserves some close scrutiny by every taxpayer and investor in this nation.

I am not bashing capitalism or banks in general today, but these bailouts of those entities "too big to fail" MUST STOP!

This is a derivatives swap being made under most people's radar, and fits the description of banksterism. I do give some credit to some elected representatives across the aisle for questioning this proposed action.

Bloomberg...Bank of America Corp. (BAC) may be prevented by regulators from shifting derivatives contracts into the books of a deposit-taking unit, potentially forcing the lender to hand over more collateral to counterparties.

“It’s a game of ‘move the risk,’” said Mark Williams, a former Federal Reserve examiner who lectures on financial-risk management at Boston University. “It makes sense for Bank of America, but the broader implication is that it makes the retail operations potentially riskier. If there is another downgrade, you have the possibility of falling off a credit cliff.”

The Fed has signaled that it favors moving the derivatives to give relief to the bank holding company, people familiar with its position said Oct. 18. The FDIC, which would have to pay depositors in a failure, objected, the people said....


Bank of America’s rating is now four grades below the one Moody’s assigned to JPMorgan Chase & Co. (JPM), which became the biggest U.S. bank by assets this year, and a level below the rating given to Citigroup Inc. (C), the No. 3 lender. JPMorgan’s deposit-taking entity, JPMorgan Chase Bank NA, contained 99 percent of the New York-based firm’s $79 trillion of notional derivatives, according to the OCC.

‘Not FDIC Insured’

Andrew Gray, a spokesman for the FDIC and Barbara Hagenbaugh of the Federal Reserve declined to comment on Bank of America’s filing.

Congressional Democrats including North Carolina Representative Brad Miller and Ohio Senator Sherrod Brown asked regulators last month whether they explored potential risks from the derivative moves. Eighteen lawmakers signed onto letters seeking information.

“These derivative trades are not FDIC insured,” said Jerry Dubrowski, a Bank of America spokesman. “Other financial institutions hold higher derivative balances in their banking entities.” ...Read More

“If banks are going to gamble, they should do it with their own money,” Sherrod Brown (D) said. “Ending ‘too big to fail’ means that depositors and taxpayers are not asked to cover Wall Street losses. It’s time to put an end once and for all to taxpayer-funded bailouts of reckless banks.”

This video explains this scam best...

In a related Euro-Zone debt scandal, this is what MF Global formerly run by (Jon Corzine ex Dem Gov of NJ) is doing to it's investors...

The recent bankruptcy of financial stalwart and Wall Street casino failure MF Global in the US, has claimed a new and unlikely victim. Following the company’s glorious collapse, Trends Research founder Gerald Celente had his own six figure gold investment account completely looted by chapter 11 trustees, and he is fighting to get it back.

Gerald Celente joined Alex Jones on the Infowars Nightly News for an in-depth discussion on the fallout from MF Global, with Celente issuing a stark warning to all Americans to withdraw their funds from the banks because “they are going to steal all our money”. Watch the video below.infowars

MF Global Holdings LTD, headquartered in New York City, filed for bankruptcy on Monday, October 31, 2011 after it was discovered that there was hundreds of millions of dollars missing from customers’ accounts.

This marks the eighth largest corporate bankruptcy in U.S. history and the largest Wall Street firm to collapse since the Lehman Brothers debacle in September 2008. The surprise discovery of some $950 million in missing money from customer accounts caused a tentative deal to sell the firm to Interactive Brokers to blow up.

The result was that all customer activity was frozen causing the Securities Investor Protection Corporation to initiate plans to begin liquidating the MF Global brokerage unit to unfreeze customer accounts.

MF Global Failed to Segregate Customers' Money

Federal regulators have discovered that hundreds of millions of dollars of customers’ money, which is supposed to be segregated from the firms’ own money, is missing.

This comes on the heels of huge bets on euro zone sovereign debt causing the company’s stock to plummet in the week prior to the bankruptcy filing. Immediately, the firms’ credit rating was cut to junk by the agencies.

MF Global Exec Says Firm Misused Clients' Money

An unnamed MF Global executive is said to have admitted that the firm used client money when its customers yanked their money out and business partners wanted more collateral to guarantee trades in light of the firm’s enormous exposure to European sovereign debt.
The Commodity Futures Trading Commission (CFTC) is trying to determine what MF Global did with the $900 million or so of customers’ money and where it is...Read More

The finance chief investigating the disappearance of $600 million from bankrupt broker MF Global today said the company’s actions were either ‘nefarious or illegal’.

Bart Chilton, from the U.S. Commodity Futures Trading Commission (CFTC) is considering whether criminal charges should be brought against the company, which led to the loss of 1,066 jobs.

‘I can’t comment on the investigation, but it looks suspicious as heck to me,’ he told CNBC. It’s either nefarious or illegal, in my personal opinion.’

‘The money should be there. It's not.’

The collapse of MF Global, which was run by former New Jersey Governor Jon Corzine, is being investigated by several agencies, including the FBI.

It is alleged that the company, which filed for bankruptcy on October 31, used clients’ cash to cover bad investments on European debt.
Read more: Daily Mail

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