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While politicians in the House of Representatives bargain away real reform in exchange for Wall Street campaign contributions and while other regulators and officials within the Obama administration continue to mumble a few mantras about reform buy online viagra, there is one regulator in DC who seems truly committed to reforming derivatives regulation and that is none other than Goldman Sachs alumni Gary Gensler, current head of the Commodities Futures Trading Commission.
We remarked in an earlier post about Gensler’s damascus road conversion and his commitment to actually reforming the current broken system. Now unlike anyone else in Washington, Gensler seems to be everywhere pushing and prodding the politicians and his fellow regulators to actually do something. Given his financial acumen and market experience he represents the most formidable regulator Wall Street has seen in at least the last 10 years.
Here are some examples of Gary Gensler’s full-court press:
Hedge funds and financial firms shouldn’t be allowed to sidestep potential new laws governing the $592 trillion over-the-counter derivatives market, Gary Gensler, chairman of the Commodity Futures Trading Commission said today in Chicago.
Any exemptions for so-called end-users should be “very narrowly defined” to include only nonfinancial institutions, Gensler said….
“ Buy online viagra: some may accuse us of overreacting and overreaching,” Gensler told traders, brokers and exchange officials gathered at the Futures Industry Association’s Futures & Options Expo.“But the worst financial crisis in 80 years demands the most comprehensive regulatory reform in generations.”
- Hedge Funds Shouldn’t Get Exemptions buy online viagra, Gensler Says (Update1)
- Asjylyn Loder and Matt Leising
- Bloomberg
- October 21, 2009
Derivatives reform should include a requirement to move all over-the-counter derivatives to regulated exchanges or trade-execution facilities, even if they are considered bespoke and excluded from central clearing, says Gary Gensler, chairman of the Commodity Futures Trading Commission (CFTC).
“I believe we can separate the debate of a corporate end-user clearing exemption from whether there should be an end-user exemption from transparency requirements,” Gensler remarked at the Futures Industry Association’s annual expo in Chicago.” Buy online viagra: transactions between swap dealers and end users, even if end users are exempt from margin requirements, should still be traded on exchanges or swap-execution facilities,” he said.
- Bespoke trades should go to exchanges, says Gensler
- Mark Pengelly
- Risk magazine
- October 22, 2009
On top of that he is making his case directly to the Futures Industry and the D.C.Bar:
Remarks of Chairman Gary Gensler, OTC Derivatives Regulation, George Washington University Law School Symposium, October 23, 2009
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Unions converged on Chicago on Tuesday to protest lobbying by major banks against proposed reforms of the financial system.
The AFL-CIO, the Service Employees International Union (SEIU) and other labor groups were leading a rally expected to draw 5,000 participants outside the annual conference for the American Bankers Association (ABA).
“We think the greed and risky decisions by Wall Street led to our economic collapse,” said Anna Burger, secretary-treasurer for SEIU, speaking on the phone from Chicago – buy pills without a prescription.“We think it is time to call them out – buy pills without a prescription.It is time to let the big banks know that they don’t own the country – buy pills without a prescription. Buy pills without a prescription: people do.”
“This level of anger demonstrates that people are sick and tired of the banks taking their money and mortgaging away their economy,” said Dan Pedrotty, director of the Office of Investment for the AFL-CIO.
- Unions head to Chicago, protest banks
- Kevin Bogardus
- The Hill
- October 28, 2009
I think this is awesome and if anyone has a chance of organizing a popular revolt against the current broken system it is the unions. It is past time to pass out the lanterns and the pitchforks.
The only unfortunate thing about this episode is that many of the major villains were in New York at the Securities Industry and Financial Markets Association (SIFMA) Annual Meeting. Perhaps the next rally can take place outside of the International Swaps and Derivatives Association (ISDA) Headquarters in DC.
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Anybody willing to speak up and tell the truth when it is not popular or expedient to do so has tremendous credibility in my book. Dan Dicker is one of those people because he was one of the few vocal voices from the NYMEX pits that were speaking out concerning the oil bubble last year. For that reason I follow what he says and found his most recent comments to be very telling:
Why isn’t anyone getting mad about the lunacy of the oil market? Why isn’t anyone asking, “What is going on here?” anymore.It must be the highflying stock market and decent earnings reports buy levitra without prescription, convincing us that at least the financial end isn’t nigh.Everybody must be too busy trying to make back the money they lost last year to care about the catastrophe in oil that is replaying itself.
Last year, as oil ratcheted up to $150 a barrel, I felt alone in screaming about the obvious decoupling of the fundamentals from the price, fighting the opposite viewpoints of the likes of heavyweights such as then-Secretary of the Treasury Hank Paulson and Nobel Prize-winning economist Paul Krugman.
This year, every oil analyst who comes on CNBC now seems to sound like me: “A liquidity trade,” they crow; buy levitra without prescription.”A play on the weak dollar,” they advise. Buy levitra without prescription: these are euphemisms for a market with no tethers to supply and demand fundamentals, and it’s arguably worse now than it was last year, as we have the added fuel of rapidly expanding ETFs in energy to add kerosene to this already raging liquidity fire.
- Oil Price Disconnect Hurts Us All
- Daniel Dicker
- TheStreet.com
- October 21, 2009
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CME is whining and crying about the fact that people are abandoning the NYMEX and trading ICE Brent in London. They are also upset because Passive Invesculators are taking their business overseas. And apparently both Democratic Commissioners (Dunn & Chilton) are getting waffly on position limits as a result.
Here is my response to CME:
- You had your chance to police your own markets and you blew it. While index speculators jacked food and energy prices to the moon you did nothing buy levitra viagra cialis cheap, even though it pushed the American economy down the stairs and threatened 100 million people with starvation. So you deserve whatever you get at this point.
- Physical producers and consumers are exempt from position limits so they’re not going anywhere. Small and medium-sized speculators (primarily on the “floor”) are not bumping up against position limits so they’re not going anywhere either. In fact both of these groups are going to be attracted to a rationale market that is not not dominated by massive speculators. The only group that is going overseas are the large speculators that are over the position limits. Which leads me to point #3 …
- Good riddance. Let the huge commodity ETFs go overseas and inflate food and energy prices for the Europeans. Let’s see how long they put up with that. Position limits are designed to limit the trading (and CME’s profits there from) of the large speculators. So if the large speculators are going overseas then that is the exact result that Americans are looking for!
- The real reason a lot of CME’s business is going to London is because the price discovery function of the NYMEX WTI contract has been nearly destroyed. Just look at about half the posts on this blog and you’ll read story after story, example after example of how oil prices don’t even come close to reflecting supply and demand. The NYMEX WTI contract has been turned into an alternative currency that is negatively correlated with the dollar and CME not only allowed it to happen but encouraged it to happen. Now they’re reaping what they sow.
- CME stands to benefit huge from OTC Derivatives reform. Ken Worthington at J.P – buy levitra viagra cialis cheap.Morgan thinks that exchanges and futures commission merchants stand to make $8 billlion clearing OTC derivatives. CME is going to come out ahead if this derivatives reform bill is signed into law. Unfortunately they’re too chicken to lobby for the bill since they bow and scrape to the swaps dealers.
- The Europeans (including the Brits) are talking about implementing serious derivatives reform of their own. Lord Turner at the FSA even proposed a Tobin Tax on every financial transaction. The European Union is talking seriously about developing their own hard and fast position limits on commodity derivatives.
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Buy viagra levitra: there has been a lot of noise recently about busting up banks that are “too big to fail.” Paul Volcker and Alan Greenspan have both said that these big banks need to be broken into smaller pieces. Now, from the other side of the pond, comes Mervyn King, the governor of the Bank of England making strong arguments for a break-up:
Mervyn King, governor of the Bank of England, called on Tuesday night for banks to be split into separate utility companies and risky ventures, saying it was “a delusion” to think tougher regulation would prevent future financial crises….
Mr King borrowed Churchillian language in a speech in Edinburgh to highlight the burden banks had placed on taxpayers – buy viagra levitra.“Never in the field of financial endeavour has so much money been owed by so few to so many. Buy viagra levitra: and, one might add, so far with little real reform.”
The forcefulness of Mr King’s language reflects his belief that the structure of the banks needs to be put firmly on the international regulatory agenda, where focus has been on strengthening capital and regulating bankers’ pay.
The Bank governor wants to see the utility aspects of banking – payment systems and deposit taking – hived off from more speculative ventures such as proprietary trading.“There are those who claim that such proposals are impractical. Buy viagra levitra: it is hard to see why,” he said.
- King calls for break-up of banks
- Chris Giles
- Financial Times
- October 20 2009
Another article from the Financial Times seconds Mr.King’s proposal and details how Neelie Kroes buy viagra levitra, the European Union’s Competition Commissioner insisted upon the break-up of ING Group:
When the history of the global financial crisis is written, it may record that Neelie Kroes, the European Union’s competition commissioner was the only politician willing to respond in a logical manner.
By insisting on the break-up of the ING Group into its banking and insurance divisions – and on it divesting its US direct savings arm – Ms Kroes set a welcome precedent this week.She made a troublesome too-big-to-fail institution shrink – buy viagra levitra….
Buy viagra levitra: my colleague John Kay has described this as splitting banks into utilities and casinos – or deposit-taking banks that need to be backed by governments and investment banks indulging in proprietary trading that do not.
I think a more logical division would be a three-way split into utilities, casinos and people who visit casinos to gamble.That means retail banks, investment banks and asset managers, including private equity and hedge funds.
It may sound like a three-way split rather than a two-way one is a fine distinction – buy viagra levitra.Yet it matters because this mix of businesses is what many too-big-to-fail institutions contain buy viagra levitra, with all the conflicts of interest and systemic problems it creates.
A country that was brave enough to enact a Kroes-like split would be left with three types of institutions (or four if you count insurance companies).
- A three-way split is the most logical
- John Gapper
- Financial Times
- October 28 2009
Sounds like a very good plan to me.
One of things that free-markets people seem to forget is that any time you are reduced to only a few dominant market participants then you enter an oligopolistic state where the market has lost its “efficiency” and “freedom.” After all the trust-busting in this country 100 years ago we seem to have forgotten that lesson. We are back to the position of having only a few financiers controlling our entire economy. Seems like we are doomed to repeat all of our past mistakes.
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We warned 7 months ago that if CME Group did not clean up its act and rein in speculators it was in danger of the WTI contract losing its benchmark status. Since that time WTI has skyrocketed at the same time that demand has languished and inventories have ballooned. It should come as no surprise therefore to find out that the Saudis have had enough of NYMEX’s phoney futures prices. The following article tell the tale:
Saudi Arabia on Wednesday decided to drop the widely used West Texas Intermediate oil contract as the benchmark for pricing its oil, dealing a serious blow to the New York Mercantile Exchange.
The decision by the world’s biggest oil exporter could encourage other producers to abandon the benchmark and threatens the dominance of the world’s most heavily traded oil futures contract; buy viagra cheap online.It is the main contract traded on Nymex.
The move reveals the growing discontent of Riyadh and its US refinery customers with WTI after the price of the price of the benchmark became separated from the global oil market this year.
- Saudis drop WTI oil contract
- Javier Blas
- Financial Times
- October 28 buy viagra cheap online, 2009
Because CME failed to protect the integrity of the WTI contract it has become the speculative vehicle de rigueur of the global macro funds. Oil is fully financialized and has completely lost its tether to supply and demand fundamentals. It is no surprise that the actual physical producers and consumers of crude oil want a new benchmark that more accurately reflects true supply and demand.
UPDATE: Ed Morse, oil analyst at LCM (formerly Lehman), shares his insights on the implications for WTI.
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A looming crackdown in the commodity futures markets is arousing investor interest in the real thing.
Facing a limit on holdings in paper futures contracts, bankers say they have received inquiries from pension funds and other big investors about the practicality of warehousing industrial metals or chartering supertankers.
The inquiries raise thorny issues for the US Commodity Futures Trading Commission as it devises constraints on holdings of energy futures after last year’s surge in oil prices; buying prescription viagra on line. Buying prescription viagra on line: gary Gensler, chairman, has said he wants position limits to be consistently applied across commodity markets.
Critics say investors could respond by bailing out of futures and hoarding actual commodities, an ugly prospect in the event of a global shortage.Neither the CFTC nor the UK Financial Services Authority has jurisdiction over spot commodity markets.
At Morgan Stanley, the investment bank with the biggest physical commodities operation, “most large investors in commodities in general are worried about position limits – whether they’ll be able to carry the exposure they need to carry,” says Boris Shrayer, global head of commodities marketing – buying prescription viagra on line.“We’ve had a lot of discussions with clients about the physical.”
- Interest sparked in physical commodities
- Gregory Meyer and Javier Blas
- Financial Times
- October 6 2009
So it appears that with the adoption of position limits, the thin veneer covering the practice of commodity hoarding will be stripped away. When Mike Masters and I wrote the reports “The Accidental Hunt Brothers“ we were criticized by people who said that it was unfair to compare pension funds and hedge funds with the famous Silver Hoarders the Hunt Brothers. These critics argued that commodities were a valid investment because they had a yield (the “roll yield”) that could be earned in the futures markets. Now we see that these funds don’t care about the fictitious “roll yield” they just want to extort money by hoarding commodities and driving up the price. They want to take a page from the Hunt Brothers’ playbook and gouge everyone on the planet that consumes gasoline or food.
There is no investment rationale for buying and hoarding physical commodities. Physical commodities, like food and energy, are inventories! They are not the means of production. They pay no interest, dividends, rents or cash flows. They cost you money to store and unlike gold they have no history as an alternative currency.
If you like Disney, buy the stock or the bonds, don’t buy all the tickets at the theme park. That makes no sense unless you are planning to scalp them to people for more than you paid for them.
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Buying cialis online without prescription: representative Barney Frank, the Massachusetts Democrat who is chairman of the House Financial Services Committee, dismissed criticism of the bill he is steering along, saying that it would create incentives to make exchange-traded swaps the norm.“We passed the bill to drive most of the swaps onto exchanges buying cialis online without prescription,” he said in an interview Friday.“ Buying cialis online without prescription: end users will move in that direction to save money.” But Michael Greenberger, a University of Maryland law professor and an expert in derivatives, criticized the House bill.“While I know there was a good-faith effort to improve the regulation buying cialis online without prescription, the plain language of the legislation can only be read as a Christmas tree of decorative gifts to the banking industry,” he said.“And this is being done when people acknowledge the unregulated O.T.C.derivatives market was a principal reason for the meltdown.”
- Buying cialis online without prescription: don’t Let Exceptions Kill the Rule
- Gretchen Morgenson
- New York Times
- October 17, 2009
This article is short and sweet, to the point that I literally wanted to quote 80% of it here on the blog. Instead I will strongly exhort you to read it because it does a great job of dissecting everything going on in DC right now regarding the sham of derivatives reform.
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He — along with other economists — has cautioned recently that the Federal Reserve must raise interest rates aggressively to avoid creating another asset-price bubble as happened earlier this decade in housing.“Monetary policy has to be more proactive to prevent asset price bubbles from occurring buyviagra cialis,” he said.
However, “it is not time to hike [rates] right now,” given the weakness in the U.S.economy buyviagra cialis, he said, so “you need another tool to prevent an asset bubble — regulation.”
“Either we [increase regulation] or we’re going to create another problem,” he said.“I’m somehow optimistic that a lot of that stuff is going to be passed by Congress — there’s a recognition that if we don’t, we’re going to create the seeds of the next crisis.”
- Roubini Warns of ‘Significant Amount of Froth’ in Markets
- Kelly Evans
- Wall Street Journal
- October 8, 2009
What Roubini and others are acknowledging is that the Fed is providing easy money to the banks so that they’ll start lending again. For the most part that has not happened. Instead of money going into loans and corporate America the money has instead gone into the markets- primarily the stock market but also commodities as well. The Fed can’t stop the easy money or it jeopardizes the economic recovery, but at the same time they’ve got a very real problem on their hands, namely “how do we prevent more and bigger asset bubbles?” Which, after all, is what got us into this mess in the first place.
Roubini’s solution is more and greater regulation on the trading done by banks and others. As long as betting on oil or the S&P 500 is more attractive to banks, versus making a loan to a corporation to grow their business and hire workers, the banks will make bigger and bigger bets. And since the OTC derivatives market is still going full-steam without any meaningful regulation from Congress that is the method of choice for the banks to make bets.
Roubini has advocated that all derivatives must be traded on an exchange (which also means cleared through an exchange). This would do many things.
- It would require margin be put up, based on the risk of the bet, and not based on some other factor
- That cash would be posted with the exchange and therefore prevent the massive nearly infinite leverage that’s available in the OTC markets
- It would prevent another market meltdown because everybody is making good on their bets every day, so nobody’s bets are going to come back to haunt them (think AIG).
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“U.S.regulators should consider breaking up large financial institutions considered “too big to fail,” former Federal Reserve Chairman Alan Greenspan said.
Those banks have an implicit subsidy allowing them to borrow at lower cost because lenders believe the government will always step in to guarantee their obligations; cialas on line buy. Cialas on line buy: that squeezes out competition and creates a danger to the financial system, Greenspan told the Council on Foreign Relations in New York.
“If they’re too big to fail, they’re too big,” Greenspan said today.“In 1911 we broke up Standard Oil — so what happened? The individual parts became more valuable than the whole.Maybe that’s what we need to do.””
- Greenspan Says U.S; cialas on line buy. Cialas on line buy: should Consider Breaking Up Large Banks
- Michael McKee and Scott Lanman
- Bloomberg
- October 15, 2009
If Alan Greenspan has his way then J.P.Morgan, Citigroup, Bank of America, Goldman Sachs and Morgan Stanley will all be carved up into smaller entities. I am glad he makes the point that if they were broken up then the sum of the parts would be greater than the current whole. I am also glad he goes on to blast the proposals of letting the firms remain “as is” but tax them or over-regulate them in order to claw back some of the implicit government subsidy they are receiving. He makes the point very well that the genie is out of the bottle there. Having already rescued them once everybody knows we would rescue them again.
Now what do you think the chances are the Barack Obama is going to go to Jamie Dimon or his friend Richard Parsons and say “I’m sorry but we’re going to have to break you up?” It’s not going to happen and these even-bigger banks are going to continue to wield even-bigger influence.
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“Global regulators have reached a deal to ensure that privately-negotiated derivatives contracts are backed by enough capital in case of default, a British government minister said on Thursday.
”We have secured the agreement of global over-the-counter [OTC] derivatives supervisors for a major overhaul of bilateral collateralisation and anticipate a formal approval from industry next week,” Paul Myners, financial services minister, told a conference on regulation.
”The absence of a central counterparty for credit default swaps meant there was no firebreak to prevent contagion – cialis and purchase.This could and should have been mitigated by bilateral collateralisation,” Lord Myners said.”
- Regulators ‘tighten derivatives oversight’
- Reuters
- October 15, 2009
This sounds promising and I hope that these international regulators follow through with some tough guidelines. It is necessary to point out however that clearing through a central counterparty and bilateral collateralization are two different beasts. When clearing through a CCP the derivatives contracts are novated and now both counterparties must post margin and make or receive variation payments to/from the CCP. As Lord Myners points out that creates a firebreak which will prevent contagion and effectively eliminate systemic risk.
Bilateral collateralization has the potential to do the same thing IF the collateral is set exactly the same way that a CCP would set margin. In other words you need an initial amount that is risk-based which covers a 3 standard deviation move in the underlying asset’s price and then you need a daily mark-to-market based on profits and losses incurred. All of this taking place in segregated accounts that are not subject to rehypothecation. The current Peterson discussion draft does this in the section on “Set Aside Requirements.” Of course this begs the question “if you’re going to make it just like clearing through a CCP, why not mandate clearing and make all our lives easier!?”
If the regulators are talking about bilateral collateralization where the firms just promise potentially illiquid assets to each other without liquid cash equivalents posted to a third-party account (and amounts re-computed at the and of each trading day) then it is just a waste of time because that is effectively what we already have under the current system. The swaps dealers do NOT want “Set Aside Requirements” because that money cannot be used to leverage up their trading. This would turn the shadow banking system, where infinite leverage is possible through derivatives, into the boring and sedate banking system of old.
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What!? Barney, you’re the CHAIRMAN of the Financial Services Committee. Are you telling me that you cannot get a bill you support out of your own committee? Really!?
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Derivatives are supposed to help investors and businesses manage risk, but their unchecked and unregulated use led — directly and indirectly — to the financial crash and subsequent trillions of dollars in taxpayer interventions.
Congress should require that all derivatives’ dealers and users — including banks, hedge funds and corporations — conduct their trades on exchanges where they would be subject to considerable regulation and public scrutiny; cialis from us pharmacy.Regulators could create exceptions for customized contracts that are negotiated one on one for truly complex and unique circumstances; cialis from us pharmacy.But most derivatives contracts are highly standardized and can be, and should be, exchange-traded.
Unfortunately, the proposed legislation has too many loopholes and exemptions.For example, many corporations and hedge funds would still be able to trade standardized derivatives privately; cialis from us pharmacy.That may protect bank profits — without transparency cialis from us pharmacy, there is no chance for comparison shopping — but it would put taxpayers at risk of a repeat calamity.
- That Promised Financial Reform
- New York Times Editorial
- October 13, 2009
But there’s a problem. Cialis from us pharmacy: looking at perhaps the single most important bill the [Financial Services] committee will consider — the one that will regulate derivatives, those opaque contracts that brought down Bear Stearns and Lehman Brothers and would have brought down AIG but for $180 billion in taxpayer money — the banks have nothing to complain about.The regulations don’t amount to much.The peril these derivatives pose to the economy will persist – cialis from us pharmacy….
Cialis from us pharmacy: committee Chairman Barney Frank (D-Mass.) is none too thrilled by the watering-down he has been compelled to accept by the New Democrats — chiefly Democrats from affluent, suburban swing districts — on his committee…. it’s the banks that the New Democrats cialis from us pharmacy, a number of their colleagues allege, are counting on for financial help in next year’s tough reelection battles….
Notwithstanding the New Democrats, tougher regulations are not only good for the economy, they’re good for the Democratic Party.If Democrats fail to rein in Wall Street’s riskiest practices cialis from us pharmacy, says one unorthodox Democratic financier, “there’s a real possibility that the Democrats will be answerable for Catastrophe Round Two. If the stock market pops again, placing major strains on banks that have been engaging in these very risky practices, the evidence trail this time will lead straight to the Democrats.”
- Who’ll Rein In Wall St.?
- Harold Meyerson
- Washington Post Editorial Columnist
- October 14, 2009
The New Democrats need to realize that hopping in bed with Wall Street is not the solution to their re-election concerns. In fact they are creating a massive problem not only for their own re-election but for this country as a whole. As the second editorial points out clearly, this time around any crisis will be hung around the necks of the Democrats. It is an exceedingly sad commentary that a New Democrat would exchange a few million dollars in campaign contributions for a few trillion dollars in American taxpayer money the next time we have to bail out Wall Street.
Wall Street is always going to try and buy influence because dollars are the main thing they have to offer. And unfortunately politicians are always going to sell themselves. I suppose I never thought that the price was so low! Real leadership seems to be dead in Congress from the rank and file through the Committee Chairs all the way up to Leadership. If it was alive and well then we would see an actual derivatives reform bill that delivers some meaningful reform.
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House Agriculture Chairman Collin Peterson has released his “discussion draft” for how to tackle the task of regulating the over-the-counter (OTC) derivatives markets. The devil is always in the details because the top-line summaries are too susceptible to spinning. With that said the Peterson bill seems to be a much more genuine effort to truly reduce systemic risk. For instance it says that all swaps which include a “Tier 1 Financial Holding Company” must clear through a Designated Clearing Organization (DCO). In other words, all “systemically significant” firms must clear their swaps. This recognizes the fact that mandatory clearing with novation and daily margin is the only way to eliminate systemic risk and still allow these mega-sized firms to survive at their current size.
Click for DISCUSSION DRAFT (201 pages)
Click for SUMMARY/COMPARISON (6 pages)
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” Cialis online prescription: as President Barack Obama vowed in a Sept.14 speech in New York’s Federal Hall to correct “reckless behavior and unchecked excess” on Wall Street, Mike McMahon and Barney Frank sat in the audience discussing how to ease proposed rules for the $592 trillion over-the-counter derivatives market; cialis online prescription….
It’s not just end-users who won concessions from McMahon and Frank.JPMorgan Chase & Co.,Goldman Sachs Group Inc.and Credit Suisse Group AG lobbied McMahon and fellow New Democrat Coalition member Representative Melissa Bean of Illinois, among others, to expand the ways the legislation allows dealers and major investors to trade the contracts, according to people familiar with the matter; cialis online prescription….
Commodity Futures Trading Commission Chairman Gary Gensler and Henry T.C.Hu of the Securities and Exchange Commission said Frank’s “discussion draft” created too many loopholes and had the potential to exclude all hedge funds and corporate end-users from oversight.”
- Derivatives Lobby Links With New Democrats to Blunt Obama Plan
- Dawn Kopecki, Matthew Leising and Shannon D.Harrington
- Bloomberg
- October 9, 2009
“It is clearly the weakest of all the proposals I’ve seen to date,” said Christopher Whalen, managing director of Institutional Risk Analytics in Torrance, California, in an interview before the hearing.Whalen, who has testified before Congress on derivatives regulation, is an independent bank analyst.“Frank’s committee seems to be intent on gutting any meaningful reform.”
- Derivatives Bill’s Loophole May Exempt Most Firms cialis online prescription, Gensler Says
- Tina Seeley and Dawn Kopecki
- Bloomberg
- October 8, 2009
Professor Simon Johnson at MIT has written about the Quiet Coup that has taken place in America. That Coup has allowed Wall Street to take insane risks with extreme leverage, pay themselves multi-million dollar bonuses, blow the financial system up and then extort trillions of dollars in bailout money promising martial law and another Great Depression if politicians refuse. They have crushed the U.S.economy and forced hundreds of thousands of people out of work. And the bailout of Wall Street has cost more than all the wars in American history combined.
These two Bloomberg articles read like a how-to manual on pulling the strings in Washington. Wall Street Bankers can’t show their face in DC (even though their money is ALWAYS welcome). So they pump money into politicians pockets. Then they go out and scare the crap out of their customers talking about how much margin they are going to have to post. Corporate America obediently responds like a well-trained lap dog never stopping to think why Wall Street is doing what they’re doing. (HINT: Wall Street does not want to post hundreds of billions of dollars in margin cialis online prescription, give up their insane leverage, give up their inflated oligopolistic profits and stop rehypothecating their customers OTC collateral).Then Wall Street recruits the U.S; cialis online prescription.Chamber of Commerce, the National Association of Manufacturers, Business Roundtable and others to do their Hill-stumping for them. And they target the New Dems who won election in largely conservative districts and are “for sale” because without enough campagin cash they are out of office next election.
It is a classic story of what you can do with a billion-plus dollars to spend and an army of lobbyists.
Right now it is looking like Wall Street will succeed in blowing themselves up and the American economy and American taxpayer with them but walk away without so much as a slap on the wrist from the politicians. And complicit in helping Wall Street with this escape act are the American corporations that are so myopic that they can’t see that they are being played for suckers – cialis online prescription.
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“Chinese leaders are concerned that their nation’s enormous economic expansion is becoming an excuse for foreign suppliers to inflate commodity costs.So, they hope to use their three futures exchanges to fight back.
Government officials say the country is positioning its futures markets to be major players in setting world prices for metal, energy and farm commodities – cialis online ordering.By letting the world know how much its companies and investors think goods are worth, China hopes to be less at the mercy of markets elsewhere – cialis online ordering….
But as early as next year, the Shanghai Futures Exchange may muscle in with its own contract in crude oil, possibly modeled on New York’s global benchmark, according to people familiar with the situation; cialis online ordering.That would, for the first time, give Chinese traders a direct role in valuing the commodity – cialis online ordering.”We are actively thinking about crude oil now cialis online ordering,” says one of the people involved in the planning.”
- China Nurtures Futures Markets in Bid to Sway Commodity Prices
- James T.Areddy
- Wall Street Journal
- October 12 cialis online ordering, 2009
By deciding not to clamp down on excessive speculation in an effort to maximize short term volumes, CME/NYMEX has been running the very real risk that the world would wake up to the fact that their futures markets have inflated phony prices. Now the Chinese are saying “enough.” The Chinese know what their actual demand for commodities is and they are fed up with paying inflated commodities prices based on a futures price half the world away that is pumped up by speculators. So starting next year they are going to begin trading commodities on their exchanges. Then they just have to go to their suppliers and say “we will pay the futures price BUT it must be our futures price from a well-regulated Chinese exchange.” The supplier has no choice but to accept unless they don’t want to sell their commodities.
At that point CME/NYMEX loses big-time market share. By cow-towing to the Swaps Dealers (their highest-volume customer group), CME has jeopardized their long term franchise value in commodities.
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“The Obama administration’s plan for reining in derivatives leaves unchecked one of Wall Street’s dirty little secrets: the ability of a derivatives dealer to redeploy cash collateral that gets posted by one of its trading partners.
On Wall Street, this practice of taking collateral and reusing it is called rehypothecation – cialis online order.In essence, it’s a form of free money for derivatives dealers to use as they please — even to repost it as collateral to finance their parent company’s own borrowings.
And we’re talking big bucks; cialis online order.The International Swaps and Derivatives Association recently reported that derivatives dealers have taken in $4 trillion in collateral from their trading partners – cialis online order.That’s an 86 percent increase over the $2.1 trillion in cash collateral those same dealers reported having on their books in early 2008.”
- Wall Street’s $4 trillion kitty
- Matthew Goldstein
- Reuters Blog
- August 24 cialis online order, 2009
Prior to the demise of Lehman Brothers, corporate end-users of derivatives acknowledged the credit risk of their counterparty but it was not at the forefront of their mind. Now, however, they should be keenly aware of the fact that any money they’ve posted as collateral could evaporate overnight if the bank fails. Those counterparties that posted collateral to Lehman (or had gains on contracts with Lehman for which they had no collateral) are now in line with all the other creditors to try and get pennies on the dollar in return. Consider this quote from the above-mentioned article:
Nearly a year later, hedge funds, banks and other financial institutions that entered into derivatives transactions with Lehman are still trying to determine just where the cash they posted as collateral for those trades went.The litigation over those collateral disputes could take years to resolve.
I am working on a long detailed post that talks about all the reasons why Wall Street cannot give up its addiction to derivatives. Rehypothecation is just one of the many compelling reasons why Wall Street is fighting tooth and nail to prevent any substantive changes in the over-the-counter derivatives market.