Secretive Banking Elite Rules Trading in Derivatives

[Richard]

More good news to make my effin' day...:mad:

And so it goes...

Richard :munchin

A Secretive Banking Elite Rules Trading in Derivatives
NYT, 11 Dec 2010

On the third Wednesday of every month, the nine members of an elite Wall Street society gather in Midtown Manhattan.

The men share a common goal: to protect the interests of big banks in the vast market for derivatives, one of the most profitable — and controversial — fields in finance. They also share a common secret: The details of their meetings, even their identities, have been strictly confidential.

Drawn from giants like JPMorgan Chase, Goldman Sachs and Morgan Stanley, the bankers form a powerful committee that helps oversee trading in derivatives, instruments which, like insurance, are used to hedge risk.

In theory, this group exists to safeguard the integrity of the multitrillion-dollar market. In practice, it also defends the dominance of the big banks.

The banks in this group, which is affiliated with a new derivatives clearinghouse, have fought to block other banks from entering the market, and they are also trying to thwart efforts to make full information on prices and fees freely available.

(cont'd)

http://www.nytimes.com/2010/12/12/business/12advantage.html

[nmap]

It gets worse...

From page 3 of the article:

Not so with derivatives. For many, there is no central exchange, like the New York Stock Exchange or Nasdaq, where the prices of derivatives are listed. Instead, when a company or an investor wants to buy a derivative contract for, say, oil or wheat or securitized mortgages, an order is placed with a trader at a bank. The trader matches that order with someone selling the same type of derivative.

Banks explain that many derivatives trades have to work this way because they are often customized, unlike shares of stock. One share of Google is the same as any other. But the terms of an oil derivatives contract can vary greatly.

Notice that this means that there is no way to establish a market price for these securities in general - so the security that a bank or other institution holds cannot be marked to the current market.

So if a bank...or pension fund...or anyone else owning these securities doesn't sell a security, the valuation can be at the original price not the actual price. Which means that a bank or other entity could have suffered horrific losses...losses that eliminate capital, and could in principle drive the entity below minimum capital requirements...and yet can keep quiet and keep on going.

Does any of this sound like a new financial emergency in the making? It should.

If the derivatives system falters as it did when Paulson demanded the original bailout, then we can anticipate a new bailout - and it may be far larger than we can cover.

By the way - in the old days, circa 1970, stock options were created in the same manner derivatives are. Notice that tradeable options were created and work just fine. But that wouldn't protect the chosen banks' profits.

[EX-Gold Falcon]

It gets worse...
Does any of this sound like a new financial emergency in the making? It should.


The last line of the article seems pertinent

“Fundamentally, the banks are not good at self-regulation,” Mr. Lubke said in a panel last March at Columbia University. “That’s not their expertise, that’s not their primary interest.”

At least we know who they are.
None of the three clearinghouses would divulge the members of their risk committees when asked by a reporter. But two people with direct knowledge of ICE’s committee said the bank members are: Thomas J. Benison of JPMorgan Chase & Company; James J. Hill of Morgan Stanley; Athanassios Diplas of Deutsche Bank; Paul Hamill of UBS; Paul Mitrokostas of Barclays; Andy Hubbard of Credit Suisse; Oliver Frankel of Goldman Sachs; Ali Balali of Bank of America; and Biswarup Chatterjee of Citigroup.

Sigh, the conspiracy theorists and progressives are going to have a field day. Not that it will change a wit of behavior. What is the point of having an FCC, Justice Dept, Senate oversight commitees, etc.

Thanks for the post, maybe...


T.

[Penn]

Thanks for the names; unlike the the mortgage fiasco, here we do have people to fault and hang.
Thomas J. Benison of JPMorgan Chase & Company; James J. Hill of Morgan Stanley; Athanassios Diplas of Deutsche Bank; Paul Hamill of UBS; Paul Mitrokostas of Barclays; Andy Hubbard of Credit Suisse; Oliver Frankel of Goldman Sachs; Ali Balali of Bank of America; and Biswarup Chatterjee of Citigroup.

[ZonieDiver]

Thanks for the names; unlike the the mortgage fiasco, here we do have people to fault and hang.

I wouldn't count on it! We know the names of many of the culprits in the 'Great Recession'... and the only one hanged, hanged himself.

[Penn]

the names of many of the culprits in the 'Great Recession

Yes, but to advocate hanging for the 70 socialist and black caucus members, to include Clinton and his administration appointees, other elected and non elected officials, is tantamount to treason.

I would not advocate such extreme retribution for the complete dismantling of the middle class, for such a trivial reason as the joining of business interest and government to the detriment of the people.

[Roguish Lawyer]

Yawn, no offense but this is a load of conspiracy %#*%.

[ZonieDiver]

Yawn, no offense but this is a load of conspiracy %#*%.

You don't think that there has been massive fraud commited in various markets - especially real estate - in the past 5 to 10 years? I am not saying massive conspiracy, but statutory neglect at the least, and conspiracy to defraud in many instances.

[Penn]

RL, with all due respectbut this is NOT a load of conspiracy %#*%.

What has been brought to bear on the American work force was conducted in the public forum. The catch phrases were “Globalization”, “NAFTA” etc. The uneducated public was phucked from the get go, the only globalization the American public would come to understand is the unemployment that resulted from the PR program produced by the companies involved in the new world market to expand the bottom line, circumvent unions, EPA regulation, Health care benefits, and all the other responsible developments that were the result of flagrant abuse of the workforce, from child labor, sweatshops and the like that were result of the industrial revolution.

Companies like US Steel, could not compete because congress allowed the DUMPING of cheap steel on our soil. Congress did, and does not give two shits about the American worker, who is patronized and summarily dismissed. Has anyone been to Pittsburg, Detroit, Philadelphia lately?

Conspiracy, hardly, by offering the middle class the opportunity to buy products cheaper was the lure, the bait and switch was lost of jobs and security and the middle class.

The Targets, Wal-Mart, Sams, and the Costco of the world, undermined the soft industrial base, and they continue to do so. The dismantling of our industrialized base for the sake of corporate and/or shareholders profits; this could not have occurred without the approval of congress, it required Congress to approve the transfer of that base, it required congress working in harmony with business to do so.

That Merger is Corporatism and or Corporatocracy and it is a hair's breath from the definition of a Fascist state.

[Paslode]

You don't think that there has been massive fraud commited in various markets - especially real estate - in the past 5 to 10 years? I am not saying massive conspiracy, but statutory neglect at the least, and conspiracy to defraud in many instances.


There hasn't been a day in I don't know how many months that 'The Banks' aren't mentioned in some apparent scheme. Whatever you want to call it, the majority of us would have been locked up long ago for far, far less.

Theft though legalese IMO.

[nmap]

The lack of transparency feeds suspicion.

If there is nothing to hide, those involved could provide full disclosure to eliminate any talk of wrong-doing. And yet, I notice that there is no transparency and no disclosure.

Human nature being what it is, I shall make my conclusions. The banks are welcome to provide clear and complete information that will compel me to revise my opinions. I shall not hold my breath.

[Roguish Lawyer]

RL, with all due respect

What has been brought to bear on the American work force was conducted in the public forum. The catch phrases were “Globalization”, “NAFTA” etc. The uneducated public was phucked from the get go, the only globalization the American public would come to understand is the unemployment that resulted from the PR program produced by the companies involved in the new world market to expand the bottom line, circumvent unions, EPA regulation, Health care benefits, and all the other responsible developments that were the result of flagrant abuse of the workforce, from child labor, sweatshops and the like that were result of the industrial revolution.

Companies like US Steel, could not compete because congress allowed the DUMPING of cheap steel on our soil. Congress did, and does not give two shits about the American worker, who is patronized and summarily dismissed. Has anyone been to Pittsburg, Detroit, Philadelphia lately?

Conspiracy, hardly, by offering the middle class the opportunity to buy products cheaper was the lure, the bait and switch was lost of jobs and security and the middle class.

The Targets, Wal-Mart, Sams, and the Costco of the world, undermined the soft industrial base, and they continue to do so. The dismantling of our industrialized base for the sake of corporate and/or shareholders profits; this could not have occurred without the approval of congress, it required Congress to approve the transfer of that base, it required congress working in harmony with business to do so.

That Merger is Corporatism and or Corporatocracy and it is a hair's breath from the definition of a Fascist state.

Hey bud, you know I love you, but this is a bunch of socialist crap. With all due respect. :)

[Paslode]

RL, with all due respect

What has been brought to bear on the American work force was conducted in the public forum. The catch phrases were “Globalization”, “NAFTA” etc. The uneducated public was phucked from the get go, the only globalization the American public would come to understand is the unemployment that resulted from the PR program produced by the companies involved in the new world market to expand the bottom line, circumvent unions, EPA regulation, Health care benefits, and all the other responsible developments that were the result of flagrant abuse of the workforce, from child labor, sweatshops and the like that were result of the industrial revolution.

Companies like US Steel, could not compete because congress allowed the DUMPING of cheap steel on our soil. Congress did, and does not give two shits about the American worker, who is patronized and summarily dismissed. Has anyone been to Pittsburg, Detroit, Philadelphia lately?

Yes and no. Dumping had something to play in it as did buyouts, unions and the Buy America Act. And yes, BiG Gov did subsidize and offer tax incentives to move things off our shores. But another part of the problem the steel industry failed to modernize their facilities. Old steel mills where miles in length where as modern mill are minuscule in comparison. A modern mill took less man power, was more efficient, better quality thus the ROI was greater......and the EPA didn't help matters.


Conspiracy, hardly, by offering the middle class the opportunity to buy products cheaper was the lure, the bait and switch was lost of jobs and security and the middle class.

The Targets, Wal-Mart, Sams, and the Costco of the world, undermined the soft industrial base, and they continue to do so. The dismantling of our industrialized base for the sake of corporate and/or shareholders profits; this could not have occurred without the approval of congress, it required Congress to approve the transfer of that base, it required congress working in harmony with business to do so.

For the Grandparents of anyone over 40 the majority of them purchased large ticket items cars, washer, etc based on durability. They didn't move every 7 years, trade the car in when the mileage reached 75k. Their purchases were about getting longevity for their money, we on the other hand purchases fads and are increasingly losing our perspective on quality......because we want it cheap, so we can afford the next latest and greatest thing that shows up on the market.

Target, Wal*Mart, Sams, Costco, etc will continue to lay waste to the landscape as long as the majority of us make the decision to buy cheap. And in time if the trend continues you will likely see one of the trash Chain Stores as your only source for just about everything. But HEY! It's cheap!

Cheap trickles down unnoticed until your livelihood is effected.


That Merger is Corporatism and or Corporatocracy and it is a hair's breath from the definition of a Fascist state.

That is Globalism, I am told it will make us all wealthy.....though my belief is that it destroys our foundation and merely provides income, not wealth. Aside from that, Socialism/Marxism/Fascism is coming to a venue near you via Big Sis spouting propaganda on monitors at Walmart! That is enough for me to realize BiG Gov and BiG Business are a little to close to each other.....soon it will be at schools, sporting events, work, etc.....Herr Goebbels would be proud.

Considering that Feds are now getting real time feed on Credit card transactions, it would at all surprise me that at some point the Gov will decide what you can and cannot buy in a cashless society.


Here is a nice new app for your phone http://patriotapps.com/PatriotApp.html Big Brother is watching 24/7/365!