Financial Armageddon Approaches: U.S. Banks Have 247 Trillion Dollars Of Exposure To Derivatives --- let'em fail. American tax payers are not responsible for the financial failure of banks.
On Wednesday, December 30, 2015 at 1:29:09 PM UTC-6, Travis wrote: > > > > > > > > > *http://tinyurl.com/gqlh53d <http://tinyurl.com/gqlh53d>* > > Financial Armageddon Approaches: U.S. Banks Have 247 Trillion Dollars Of > Exposure To Derivatives > > > > [image: Description: Description: Nuclear War - Public Domain] > <http://theeconomiccollapseblog.com/archives/financial-armageddon-approaches-u-s-banks-have-247-trillion-dollars-of-exposure-to-derivatives/nuclear-war-public-domain-2>Michael > > Snyder | Economic Collapse Blog > > Did you know that there are 5 “too big to fail” banks in the United States > that *each* have exposure to derivatives contracts that is in excess of > 30 *trillion* dollars? Overall, the biggest U.S. banks collectively have > more than 247 *trillion* dollars of exposure to derivatives contracts. > That is an amount of money that is more than 13 times the size of the U.S. > national debt, and it is a ticking time bomb that could set off financial > Armageddon at any moment. Globally, the notional value of all outstanding > derivatives contracts is a staggering 552.9 trillion dollars > <http://www.bis.org/statistics/d5_1.pdf> according to the Bank for > International Settlements. The bankers assure us that these financial > instruments are far less risky than they sound, and that they have spread > the risk around enough so that there is no way they could bring the entire > system down. But that is the thing about risk – you can try to spread it > around as many ways as you can, but you can never eliminate it. And when > this derivatives bubble finally implodes, there won’t be enough money on > the entire planet to fix it. > > A lot of readers may be tempted to quit reading right now, because > “derivatives” is a term that sounds quite complicated. And yes, the > details of these arrangements can be immensely complicated, but the concept > is quite simple. Here is a good definition of “derivatives” that comes from > Investopedia <http://www.investopedia.com/terms/d/derivative.asp>… > > A derivative is a security > <http://www.investopedia.com/terms/s/security.asp> with a price that is > dependent upon or derived from one or more underlying assets > <http://www.investopedia.com/terms/a/asset.asp>. The derivative itself is > a contract between two or more parties based upon the asset or assets. Its > value is determined by fluctuations in the underlying asset. The most > common underlying assets include stocks > <http://www.investopedia.com/terms/s/stock.asp>, bonds > <http://www.investopedia.com/terms/b/bond.asp>, commodities > <http://www.investopedia.com/terms/c/commodity.asp>, currencies > <http://www.investopedia.com/terms/c/currency.asp>, interest rates > <http://www.investopedia.com/terms/i/interestrate.asp> and market indexes > <http://www.investopedia.com/terms/m/marketindex.asp>. > > Sponsored by RevContent > > *Weird Trick To Remove Eye Bags & Wrinkles in 1 Minute > 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> > x > > [image: Description: Description: Quantcast] > > I like to refer to the derivatives marketplace as a form of “legalized > gambling”. Those that are engaged in derivatives trading are simply > betting that something either will or will not happen in the future. > Derivatives played a critical role in the financial crisis of 2008, and I > am fully convinced that they will take on a starring role in this new > financial crisis. > > And I am certainly not the only one that is concerned about the > potentially destructive nature of these financial instruments. In a letter > that he once wrote to shareholders of Berkshire Hathaway > <http://www.fintools.com/docs/Warren%20Buffet%20on%20Derivatives.pdf>, > Warren Buffett referred to derivatives as “financial weapons of mass > destruction”… > > The derivatives genie is now well out of the bottle, and these instruments > will almost certainly multiply in variety and number until some event makes > their toxicity clear. Central banks and governments have so far found no > effective way to control, or even monitor, the risks posed by these > contracts. *In my view, derivatives are financial weapons of mass > destruction, carrying dangers that, while now latent, are potentially > lethal*. > > Since the last financial crisis, the big banks in this country have become > even more reckless. And that is a huge problem, because our economy is > even more dependent on them than we were the last time around. At this > point, the four largest banks in the U.S. are approximately 40 percent > larger > <http://theeconomiccollapseblog.com/archives/most-people-cannot-even-imagine-that-an-economic-collapse-is-coming> > > than they were back in 2008. The five largest banks account for > approximately 42 percent > <http://fortune.com/2013/09/13/by-every-measure-the-big-banks-are-bigger/> > of all loans in this country, and the six largest banks account for > approximately 67 percent > <http://fortune.com/2013/09/13/by-every-measure-the-big-banks-are-bigger/> > of all assets in our financial system. > > So the problem of “too big to fail” is now bigger than ever. > > If those banks go under, we are all in for a world of hurt. > > Yesterday > <http://theeconomiccollapseblog.com/archives/january-1-2016-the-new-bank-bail-in-system-goes-into-effect-in-europe>, > > I wrote about how the Federal Reserve has implemented new rules that would > limit the ability of the Fed to loan money to these big banks during the > next crisis. So if the survival of these big banks is threatened by a > derivatives crisis, the money to bail them out would probably have to come > from somewhere else. > > In such a scenario, could we see European-style “bail-ins” in this country? > > Ellen Brown, one of the most fierce critics of our current financial > system and the author of Web of Debt <http://amzn.to/1SlpPGs>, seems to > think so… > > Dodd-Frank states in its preamble that it will “protect the American > taxpayer by ending bailouts.” But it does this under Title II by imposing > the losses of insolvent financial companies on their common and preferred > stockholders, debtholders, and other unsecured creditors. *That includes > depositors, the largest class of unsecured creditor of any bank*. > > Title II is aimed at “ensuring that payout to claimants > <http://www.larouchepub.com/other/2013/4022dodd_frank_us_bailin.html> is > at least as much as the claimants would have received under bankruptcy > liquidation.” But here’s the catch: under both the Dodd Frank Act and the > 2005 Bankruptcy Act, *derivative claims have super-priority over all > other claims > <http://www.thedeal.com/thedealeconomy/the-case-against-favored-treatment-of-derivatives.php>* > *, *secured and unsecured, insured and uninsured. > > The over-the-counter (OTC) derivative market > <http://www.fimarkets.com/pagesen/OTC_derivatives_CCP.php> (the largest > market for derivatives) is made up of banks and other highly sophisticated > players such as hedge funds. OTC derivatives are the bets of these > financial players against each other. Derivative claims are considered > “secured” because collateral is posted by the parties. > > For some inexplicable reason, the hard-earned money you deposit in the > bank is not considered “security” or “collateral.” It is just a loan to the > bank, and you must stand in line along with the other creditors in hopes of > getting it back. > > As I mentioned yesterday, the FDIC guarantees the safety of deposits in > member banks up to a certain amount. But as Brown has pointed out, the > FDIC only has somewhere around 70 billion dollars sitting around to cover > bank failures. > > If hundreds of billions or even trillions of dollars are ultimately needed > to bail out the banking system, where is that money going to come from? > > It would be difficult to overstate the threat that derivatives pose to our > “too big to fail” banks. The following numbers come directly from the > OCC’s most recent quarterly report (see Table 2) > <http://www.occ.gov/topics/capital-markets/financial-markets/trading/derivatives/dq414.pdf>, > > and they reveal a recklessness that is on a level that is difficult to put > into words… > > *Citigroup* > > Total Assets: $1,808,356,000,000 (more than 1.8 trillion dollars) > > Total Exposure To Derivatives: $53,042,993,000,000 (*more than 53 > trillion dollars*) > > *JPMorgan Chase* > > Total Assets: $2,417,121,000,000 (about 2.4 trillion dollars) > > Total Exposure To Derivatives: $51,352,846,000,000 (*more than 51 > trillion dollars*) > > *Goldman Sachs* > > Total Assets: $880,607,000,000 (less than a trillion dollars) > > Total Exposure To Derivatives: $51,148,095,000,000 (*more than 51 > trillion dollars*) > > *Bank Of America* > > Total Assets: $2,154,342,000,000 (a little bit more than 2.1 trillion > dollars) > > Total Exposure To Derivatives: $45,243,755,000,000 (*more than 45 > trillion dollars*) > > *Morgan Stanley* > > Total Assets: $834,113,000,000 (less than a trillion dollars) > > Total Exposure To Derivatives: $31,054,323,000,000 (*more than 31 > trillion dollars*) > > *Wells Fargo* > > Total Assets: $1,751,265,000,000 (more than 1.7 trillion dollars) > > Total Exposure To Derivatives: $6,074,262,000,000 (*more than 6 trillion > dollars*) > > As the “real economy” crumbles > <http://themostimportantnews.com/archives/the-rise-of-the-temp-economy-more-u-s-employers-than-ever-want-a-disposable-workforce>, > > major hedge funds continue to drop like flies > <http://www.zerohedge.com/news/2015-12-29/hedge-funds-dropping-flies-doug-hirschs-seneca-capital-closing-after-20-years>, > > and we head into a new recession > <http://theeconomiccollapseblog.com/archives/58-facts-about-the-u-s-economy-from-2015-that-are-almost-too-crazy-to-believe>, > > there seems to very little alarm among the general population about what is > happening. > > The mainstream media is assuring us that everything is under control, and > they are running front page headlines such as this one during the holiday > season: “Kylie Jenner shows off her red-hot, new tattoo > <http://www.usatoday.com/story/life/entertainthis/2015/12/29/kylie-jenner-gets-a-new-sanity-tattoo-on-her-hip/78010844/> > “. > > But underneath the surface, trouble is brewing. > > A new financial crisis has already begun, and it is going to intensify as > we head into 2016. > > And as this new crisis unfolds, one word that you are going to want to > listen for is “derivatives”, because they are going to play a major role in > the “financial Armageddon” that is rapidly approaching. > Source: Economics Collapse Blog > > > > > __._,_.___ > ------------------------------ > Posted by: "Beowulf" <[email protected] <javascript:>> > ------------------------------ > > > Visit Your Group > <https://groups.yahoo.com/neo/groups/grendelreport/info;_ylc=X3oDMTJmYzFmY3NvBF9TAzk3MzU5NzE0BGdycElkAzIwMTk0ODA2BGdycHNwSWQDMTcwNTMyMzY2NwRzZWMDdnRsBHNsawN2Z2hwBHN0aW1lAzE0NTE1MDAxNzE-> > > > > [image: Yahoo! 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