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The world financial system nearly melted down in 2008 – viagra buy.This was a result of the interlocking web of exposures between major financial institutions caused by the unregulated and completely opaque over-the-counter (OTC) derivatives market; viagra buy. Viagra buy: the U.S.taxpayer was forced to pledge nearly $24 trillion in cash and loan guarantees to avert financial Armageddon. That amounts to approximately $200,000 for every household in America!
Even though the system was saved from total collapse, still the economic pain inflicted upon America and the world was devastating.Trillions of dollars in savings were obliterated and millions of jobs were destroyed as the world’s economy was crushed.All of this could have been averted if OTC derivatives had been properly regulated.
The risk to our financial system must be eliminated, not simply regulated.We as Americans should not tolerate our system being put at risk.All OTC derivatives should clear through a Central Counterparty (CCP) with novation and daily margin, so that all swaps counterparties are forced to make good on their bets every day. In addition all derivatives that can trade on a public exchange should trade on a public exchange so that regulators have real-time transparency and the ability to police these markets for fraud and manipulation.
But barely one year after they were staring at Lehman-style bankruptcy, swaps dealers (the perpetrators of the financial crisis) are already rejecting this strong medicine. They are prioritizing their short-term profits and million dollar bonuses over the long-term health of the financial system. In fact these recipients of TARP money have spent $344 million in 2009 alone to defeat derivatives reform regulation.
More than anyone else, Wall Street knows a good investment when they see it. So what is their $344 million buying them? At least 4 humongous loopholes in the derivatives reform legislation being voted on in the House of Representatives this week:
Loophole #1 :: Foreign Exchange Exemption :: Foreign Exchange exposure represents approximately 8% of total Over-The-Counter (OTC) Derivatives Exposure. (see Loophole Calculations spreadsheet for methodology) By exempting Foreign Exchange from clearing this leaves a big portion of the market uncleared thereby adding to systemic risk. Think of it this way, would you be happy to know that for every 100 people boarding your airline flight, there were 8 people that did not have to pass through the metal detectors?
Loophole #2 :: End-User Exemption :: The swaps dealers have mobilized their corporate clients to oppose mandatory clearing in order to avoid posting margin on their trades. It turns out that Corporate America likes Off Balance Sheet Financing just as much as Wall Street! Because notional values do not represent true exposure and because end-users trade much less frequently and typically leave their trades on until expiration, there is little or no compression of the end-user notionals. Therefore by excluding end-users from clearing we believe that Congress is excluding between 16% and 21% of all derivatives exposures. Combined with the Foreign Exchange exemption now these two loopholes result in 24-29% of OTC derivatives going uncleared. The risk to the financial system is growing much larger with every loophole.
Loophole #3 :: “Balance Sheet Risk” Exemption :: “Balance Sheet Risk” is code for “interest rate hedging through swaps.” By exempting anyone using interest rate swaps for hedging balance sheet risk we estimate that you are excluding about half of all of the dealer-to-financial interest rate derivatives (on top of the previous end-user exemption). This means that under this loophole another 15% to 16% of all derivatives exposures goes uncleared. Combining all three loopholes together Congress is effectively exempting between 40% and 45% of all derivatives from clearing.
If all three loopholes are incorporated in the final bill then just over half of all derivatives will be moved into clearing, while nearly half will escape from mandatory clearing due to successful lobbying in Washington.
Loophole #4 :: Alternative Swaps Execution Facility (ASEF) :: Congress has also bowed to Wall Street’s request to allow them to avoid trading on a public exchange altogether. Instead swaps dealers can use ASEFs instead of exchanges. And the word “execution” in the term ASEF is misleading because Congress has allowed some high-powered lawyer/lobbyists to twist the definition so that “voice brokerage” is an ASEF (meaning calling your client on the telephone) and all the ASEF is used for is confirming or reporting the trade, not actually executing the trade. As a result 100% of all OTC derivatives can trade through ASEFs. They don’t have to trade on a public exchange at all.
So it’s clear what $344 million in lobbying buys you. In addition to multiple Congressmen and Senators it buys you a series of loopholes that allows you to avoid about half of the clearing requirement and all of the trading requirement in the derivatives reform bill. This is a fantastic investment (less than 1%) when derivatives represent $35 billion per year in revenue!!
Thanks to the Wall Street banks that nearly blew themselves up last year, the derivatives regulation reform bill that was supposed to fix these problems is actually just papering over the mess, without bringing the strong regulation that America desperately needs. Passage of the House Bill with the current gaping loopholes is no guarantee that our financial system will not be back on the brink of disaster within ten years.
UPDATE: All these loopholes made it into the final House version which will be voted on today.
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- Fed Debates New Role: Bubble Fighter
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- Wall Street Journal
- December 2, 2009
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With the beginning of Advent viagra prescription online, so comes the trickle, trickle of well positioned stories, comments and suggestions highlighting just how Goldman-ites – or should that be Sachs-ers – are suffering at this time of year.
First came news that its bankers are not being allowed to celebrate Christmas or whatever holiday they choose to at this time of year en masse.According to Henry Blodget’s respected Business Insider website, a diktat went out last month effectively stopping those who worship at the temple of the Vampire Squid from gathering in numbers of more than 12 this yuletide.
Then came news that 300 New York workers had been encouraged to give up part of their Thanksgiving to help others less fortunate than themselves.
And finally – the piece de resistance; viagra prescription online.Word that its bankers are so afraid for their lives – or their Aston Martins – that they’re resorting to carrying guns….
Viagra prescription online: although the bank’s latest attempt at explaining itself – a somewhat unrevealing account by former Goldman analyst Bethany McLean in next month’s Vanity Fair, replete with pictures by star snapper Annie Leibovitz – intimates that Goldman’s masters of the universe are not well remunerated compared to the likes of hedge fund managers George Soros or Julian Richardson, with gifts like the bumper bonuses that will be delivered come the end of the year, no-one should really feel sorry for Goldman-ites this Christmastide.
- Who would want to be a Vampire Squid at Christmas?
- James Quinn
- Telegraph
- December 2, 2009
It is well worth reading the whole article as well as the referenced Vanity Fair article. Goldman Sachs, by raising its public profile, has only succeeded in raising people’s awareness of their vampire squid-like characteristics. It seems that Goldman is so drunk with its own power, so steeped in its own megalomania that they are completely unaware of how they come off to the rest of the world. Either that or they just don’t care because they are convinced they’re untouchable.
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Where to buy viagra online: wall Street titans, recognizing that they have something of a credibility problem when it comes to opposing regulatory reform, are enlisting more sympathetic, everyday folks to lobby on their behalf on Capitol Hill.
Bankers, brokers and swaps dealers have been browbeating their clients — farmers, fuel companies, airlines, municipal power companies — who are the “end users” of financial derivatives: Lobby Congress against reform of the derivatives market, the bankers say, or the cost of your derivative deals will skyrocket….
Senate Banking Committee Chairman Chris Dodd (D-Conn.) said he sees evidence of the bankers’ influence when end users lobby him – where to buy viagra online.“The end users have been basically used by the major investment banks,” he told HuffPost Tuesday.
Dodd explains to them that, contrary to what they may have been told, one purpose of regulating derivatives is to protect people like them against predatory bankers.” Where to buy viagra online: when you tell them how they benefit from this, they say, ‘Well, no one told us this part.’” …
Sen.Jon Tester (D-Mont.) said he’s been lobbied by end users and has gotten the sense that Wall Street is behind what they’re saying.
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Where to buy viagra online: sen.Maria Cantwell (D-Wash.) where to buy viagra online, whose background in the business sector gives her an advantage in discussions with colleagues, is pushing to make sure there are no loopholes and that all derivatives are traded through an exchange.
Right now, she’s working to educate the lobbyists themselves that reform is in their best interests.” Where to buy viagra online: there are people who have been around for a long time who saw how damaging a dark market can be to the price of their business.And while some people have made a lot of money off of it, others have suffered greatly.
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- Huffington Post
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Twenty years ago, corporate end-users used to be able to rely on their investment banker for good strategic advice. Today those investment banks make more money off of proprietary trading and derivatives trading than they do off of M&A. The banks interests are no longer aligned with those of the end-users. But many end-users did not pick up on this tectonic shift in the makeup of Wall Street. And they do not realize that they are arguing against their own long term interests.
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Economist magazine which is the bastion of free markets / efficient markets / Ayn Rand / deregulation / etc has an opinion piece out where they point out that (1) derivatives should clear through an exchange and (2) end-users should not be exempt from the clearing requirement. Coming from them I think their arguments carry a lot of weight:
Proposed legislation to encourage the trading of more derivatives on exchanges or through central counterparties deserves support, for it would make it easier to monitor what market participants were doing.Capital requirements need to be increased, so derivatives cannot be used as an easy way for banks to get around restrictions on gearing.
The trickiest issue concerns exemptions for end-users, such as manufacturers; viagra purchase.Allowing companies to hedge their risks is the whole point of the instrument.But if the rules favour them over financial companies, trading will tend to migrate towards them, and away from banks – viagra purchase.AIG, once the world’s biggest insurer, thought it was making “easy money” by using its strong credit rating to sell protection against credit defaults; in fact, it was digging its own grave.
These reforms may raise the price of using derivatives, but that would not necessarily be a bad thing – viagra purchase. Viagra purchase: when fire and theft premiums rise, those who really need insurance still pay up.
- Options have a future: Economies need derivatives, but reform is justified
- The Economist – Editorial
- November 12, 2009
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Robust inflows continued in October pushing total commodity assets under management towards the all-time high of $270bn, reached in the second quarter of 2008, just as crude oil was approaching its all-time high of $147 a barrel.
- Investors rush to commodity funds
- Chris Flood
- Financial Times
- November 13, 2009
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This year’s 32 percent rally in aluminum and the 46 percent jump in the S&P GSCI index of commodities is prompting concerns of a bubble in the making. China, the biggest aluminum producer, is at risk from an absence of consumer demand from trading partners, said Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co.Exxon Mobil Corp; where to buy cialis.Chief Executive Officer Rex Tillerson said on Nov; where to buy cialis.13 that oil prices aren’t supported by market fundamentals.
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“ Where to buy cialis: i’m leaning on the bullish side,” said William O’Neill, a partner at Logic Advisors in Upper Saddle River, New Jersey.“There’s also just a desire for hard assets right now and all of the industrial metals are going to benefit from that.It’s very much a money-flow game right now, and not necessarily one based on fundamentals.”
- Aluminum Bubble Concerns Mount as Surplus May Add 29% (Update3)
- Millie Munshi and Anna Stablum
- Bloomberg
- November 23, 2009
Like leaf blowers, commodity analysts seem pointless and full of hot air; where to buy cialis.Investors might have at least expected some respite when the resources bubble burst last May; where to buy cialis.In spite of buy recommendations across the board (if everyone in China bought a refrigerator where to buy cialis, etc), the price of oil, copper and cotton halved.But it has taken less than a year for noise surrounding commodities to reach full volume again.
What is more, the worst economic slump in generations has done nothing to modify the bullish arguments of old; where to buy cialis.Commodity prices, apparently, will rise for ever on the back of rapid growth in emerging markets; where to buy cialis.The current rally may well have legs. Where to buy cialis: but, just like last time, the fundamentals do not stack up.
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- November 19 2009