T Nation

Presenting The $303 Trillion In Derivatives That US Taxpayers Are Now On The Hook For


#1

Proof positive that the American people have truly become simply sheep to shear....

http://www.zerohedge.com/news/2014-12-12/presenting-303-trillion-derivatives-us-taxpayers-are-now-hook


#2

That seems pretty fucked up


#3

Any thoughts on Republicans’ opposition to Dodd-Frank and the provision they want inserted in the current spending bill?


#4

http://www.examiner.com/article/bank-deposits-will-soon-no-longer-be-considered-money-but-paper-investments

http://www.examiner.com/article/fed-using-banks-to-short-gold-and-silver-to-protect-dollar-from-effects-of-qe

Cliff Notes: WE ARE FUCKED

-Don’t keep your money in the bank
-Invest in real property, tangibles, PMs
-Get out of debt NOW
-Prepare for civil unrest


#5

[quote]angry chicken wrote:
http://www.examiner.com/article/bank-deposits-will-soon-no-longer-be-considered-money-but-paper-investments

http://www.examiner.com/article/fed-using-banks-to-short-gold-and-silver-to-protect-dollar-from-effects-of-qe

Cliff Notes: WE ARE FUCKED

-Don’t keep your money in the bank
-Invest in real property, tangibles, PMs, guns
-Get out of debt NOW
-Prepare for civil unrest[/quote]


#6

[quote]SexMachine wrote:
Any thoughts on Republicans’ opposition to Dodd-Frank and the provision they want inserted in the current spending bill?[/quote]

From a mortgage broker’s perspective, Dodd-Frank was a knee jerk piece of shit legislation that was over reaching. It imposed forms, restrictions and fines for missing unreasonable deadlines or not signing repetitive, misleading disclosure forms that were simply misguided, unnecessary and showed that the people who crafted the law didn’t understand the first thing about the root of the problem.

As it happens, that law also yanked my career from me. I was a very successful loan officer, had an outstanding record, could count the number of loans that went into default on one hand and was highly respected. BUT, since I was a felon from 20 years ago, convicted of a crime that had nothing to with fraud, I was suddenly “unqualified” to sell mortgages any more because the law imposed ridiculous licensing requirements. One day I was top producer with a 5-10 million dollar monthly funding volume, the next day I was unemployable. Thank you Barney Frank…

It’s funny how no one from Lehman Brothers or Bear Sterns got in any trouble whatsoever, but they went after loan officers who legally sold the financial products offered by those entities.

The reason the crash happened in the first place was because of stupid legislation that mandated mark to market accounting. One little rule change and all of a sudden a bank’s balance sheet goes into the red because of loans that were performing just fine.

The crash didn’t happen BECAUSE of “liars loans” (SISA, SIVA, No Doc), those loans were a very small percentage of loans actually written (and they were underwritten by those entities and approved - they were portfolio products not insured by any of the GSEs). It happened because congress didn’t understand the consequences of the laws they passed. Even when people in the industry told them what would happen, they were too arrogant to listen. In the case of Barney Frank, if you ever heard that guy speak about finance and the legislation he passed, it would be immediately evident that the man is border-line retarded. Seriously, he had NO CLUE…

FTR, I’m not saying that there weren’t ANY problems whatsoever - it WAS a little too fast and loose. There WERE dishonest trades happening on the SECONDARY market with tranches of A,B,C and D rated products being sold as A. But those products WERE performing at the time of the default…

I have not read anything about the current provisions they want to insert because I’m no longer in mortgage and I am not very exposed to anything that congress can do to me (learned my lesson the first time). But whatever it is, I’m sure it’s asinine. Those fucking people couldn’t think their way out of a wet paper bag, much less figure out the long term consequences of their misguided financial policies.


#7

[quote]MattyG35 wrote:

[quote]angry chicken wrote:
http://www.examiner.com/article/bank-deposits-will-soon-no-longer-be-considered-money-but-paper-investments

http://www.examiner.com/article/fed-using-banks-to-short-gold-and-silver-to-protect-dollar-from-effects-of-qe

Cliff Notes: WE ARE FUCKED

-Don’t keep your money in the bank
-Invest in real property, tangibles, PMs, guns
-Get out of debt NOW
-Prepare for civil unrest[/quote]
[/quote]

Agreed, but I personally cant really go on record saying that. But suffice it to say that I have arrangements in place that do not have me breaking any current laws that allow me to sleep at night pretty easily.


#8

[quote]angry chicken wrote:

From a mortgage broker’s perspective, Dodd-Frank was a knee jerk piece of shit legislation that was over reaching. It imposed forms, restrictions and fines for missing unreasonable deadlines or not signing repetitive, misleading disclosure forms that were simply misguided, unnecessary and showed that the people who crafted the law didn’t understand the first thing about the root of the problem.

As it happens, that law also yanked my career from me. I was a very successful loan officer, had an outstanding record, could count the number of loans that went into default on one hand and was highly respected. BUT, since I was a felon from 20 years ago, convicted of a crime that had nothing to with fraud, I was suddenly “unqualified” to sell mortgages any more because the law imposed ridiculous licensing requirements. One day I was top producer with a 5-10 million dollar monthly funding volume, the next day I was unemployable. Thank you Barney Frank…

It’s funny how no one from Lehman Brothers or Bear Sterns got in any trouble whatsoever, but they went after loan officers who legally sold the financial products offered by those entities.

The reason the crash happened in the first place was because of stupid legislation that mandated mark to market accounting. One little rule change and all of a sudden a bank’s balance sheet goes into the red because of loans that were performing just fine.

The crash didn’t happen BECAUSE of “liars loans” (SISA, SIVA, No Doc), those loans were a very small percentage of loans actually written (and they were underwritten by those entities and approved - they were portfolio products not insured by any of the GSEs). It happened because congress didn’t understand the consequences of the laws they passed.

[/quote]

The crash was largely brought about by the 516 trillion dollar equity derivatives market; the way derivatives are valued as current and future net cash flow and the use of derivatives to hedge against even more risky ventures together contributed to the bubble and the crash. The taxpayers are footing the bill. The Republicans are pushing to get Frank-Dodd restrictions removed which would allow the kind of speculative borrowing and lending of derivatives that led to the 2008 crisis.


#9

[quote]SexMachine wrote:

The crash was largely brought about by the 516 trillion dollar equity derivatives market;
[/quote]

While there is no one exact cause to the 2008 financial meltdown, no one would put the equity derivative market in the top 10. Irresponsible mortgage lending, CDOs and their respective valuations, housing prices, the change to mark to market accounting rules, Lehman’s collapse, CDS’s and AIGs collapse, Congresses directives to Fannie and Freddie, Glass-Steagall’s repeal, Asian liquidity, credit rating agency mismanagement, greed…

I’ve never heard equity derivatives blamed before and would be interested in hearing your thoughts.


#10

[quote]Dr. Pangloss wrote:

While there is no one exact cause to the 2008 financial meltdown, no one would put the equity derivative market in the top 10.

[/quote]

I know there were a lot of reasons for the crash and I know a lot of commentators have each put forth their own pet theories emphasising one particular factor. Kevin Freeman alleges nation state/s(Sino-Islamic) organised cyber/economic terrorism as the trigger:

I’ve read a few different books on the '08 financial crisis but finance is an area I don’t know much about. I know a little about macroeconomics but nothing about how banks, traders and hedge funds operate.

That said, I have noticed that commentators on the left at Forbes for example and commentators on the right in many sources have emphasised vast overvaluation of derivatives in particular and using them as capital to hedge against even more risky ventures such as subprime borrowing and lending. I’m surprised you say that you haven’t heard anyone mentioning the derivatives market as a key element in the crisis.

That’s right. And throwing good money after bad by literally selling debt as if it were an asset.

Yes, Glass-Steagall’s repeal was a Republican initiative right? As are the attempts to repeal parts of Frank-Dodd currently.

Many have linked the crisis to the after effects of the Asian Economic Crisis of the 90’s and the Russian Financial Crisis of 1998 and a number of financial crises in emerging economies such as Brazil(1999), Argentina(1998-2002) etc. The US bailed out much of this foreign debt through IMF “loans” and the economies of South East Asia restructured themselves after the Asian crisis in such a way as to be very unfavourable to the “Washington Consensus”. And as Japan’s economy collapsed after their asset price bubble burst, China emerged from a massive export boom and began buying up US bonds to weaken the yuan against the US dollar, pushing down US interest rates down which in turn created favourable conditions for subprime lending.

See above. As I said, I’m surprised you haven’t heard the emphasis on the derivatives market. Just did a quick google search and:

Forbes:

http://www.forbes.com/sites/stevedenning/2013/01/08/five-years-after-the-financial-meltdown-the-water-is-still-full-of-big-sharks/

Wall Street Journal:


#11

[quote]SexMachine wrote:
The crash was largely brought about by the 516 trillion dollar equity derivatives market…
[/quote]

Ah, I see what happened.

Get rid of the word “equity” and you’d be correct. Equity derivatives are a very specific subset of financial instrument that had very little to do with the 2008 economic meltdown. Ironically, they - like all ETDs (Exchange Traded Derivatives) - were one of the few areas of the financial system that functioned properly and did not contribute to the financial meltdown.


#12

[quote]Dr. Pangloss wrote:

[quote]SexMachine wrote:
The crash was largely brought about by the 516 trillion dollar equity derivatives market…
[/quote]

Ah, I see what happened.

Get rid of the word “equity” and you’d be correct. Equity derivatives are a very specific subset of financial instrument that had very little to do with the 2008 economic meltdown. Ironically, they - like all ETDs (Exchange Traded Derivatives) - were one of the few areas of the financial system that functioned properly and did not contribute to the financial meltdown.

[/quote]

My mistake. Sorry about that. As I said, it’s not an area I know much about so I got my terms confused. Yes, I meant derivatives in general.