Banks increase derivative exposure in Q4

We are letting the biggest US banks grow bigger and take larger risks ALL THE TIME. Where are the systemic regulators?

Wall Street Journal: US Banks lose total of $9.2 billion on derivative trades in 4th Quarter. The notional value of derivatives held by U.S. banks climbed $24.5 trillion in the fourth quarter to $200.4 trillion, as major U.S. investment banks converted to become banks to access government aid.

Bank Losses Spreading!:

"According to the OCC’s Q4 2008 report, America’s top five commercial banks control 96 percent of the industry’s total derivatives, while the top 25 control 99.78 percent. In other words, for every $100 dollar of derivatives, the big banks have $99.78 … while the rest of the nation’s 7,000-plus banking institutions control a meager 22 cents!

Commercial banks lost a record $3.4 billion in interest rate derivatives, or more than seven times their worst previous quarterly loss in that category."

Schumer on the passage of Graham Leach Bliley bill

Schumer is so bought by the banks it's not even funny.

CONGRESS PASSES WIDE-RANGING BILL EASING BANK LAWS - The New York Times: "''If we don't pass this bill, we could find London or Frankfurt or years down the road Shanghai becoming the financial capital of the world,'' said Senator Charles E. Schumer, Democrat of New York. ''There are many reasons for this bill, but first and foremost is to ensure that U.S. financial firms remain competitive.''"

The downside risk

Denninger is truly concerned that unless congress swiftly acts, that the populous will not be happy.

The Market Ticker: "Come summer and fall there will be no political capital available to play games, either in the American public or the Congress. If Congress tries to appease the Wall Street pressure groups again, they will run the risk of having the Capitol put under siege by angry citizens demanding 535 immediate resignations - or worse.

I further believe the American Public is getting damn close to the breaking point. The tone among people I interact with daily and among what I see online and off is shifting from hope and faith to anger with each passing day, and each revelation of another 10 billion here or there that get funneled through some conduit to an offshore bank just raises the pressure another notch. The people now want blood, and I believe the minimum they will accept are thousands of indictments, prosecutions and prison sentences along with forfeiture of these men and women's fortunes. Madoff didn't satisfy, it further enraged."

I hope it does not get to this point!

Op-Ed: Dear A.I.G., I Quit! - NYTimes

So long, farewell, Auf wiedersehen, goodbye - YOU WILL NOT BE MISSED.

Op-Ed Contributor - Dear A.I.G., I Quit! - NYTimes.com: "It is with deep regret that I submit my notice of resignation from A.I.G. Financial Products. ... The profitability of the businesses with which I was associated clearly supported my compensation."

You and your kind take what you have and run. Your false profits, excess pay are nothing but a blight on society. Eating the profits from the shrinking middle class. Like a tumor you have slowly killed your host. GOODBYE!!!

Bank of America’s Bernstein Says Sell Bank Stocks After Rally - and then is fired

Bernstein speaks up and tells it like it is - and then is fired. Management doesn't like the truth being told...

Bank of America’s Bernstein Says Sell Bank Stocks After Rally - Bloomberg.com:

"March 23 (Bloomberg) -- Investors should sell bank stocks after they rallied 12 percent today because the Treasury Department’s plan to buy toxic assets won’t stop profits from dropping, Bank of America Corp.’s Richard Bernstein said.

Removing devalued loans and securities from banks’ balance sheets is a short-term solution that will delay the problem’s ultimate solution, which is bank takeovers, Bernstein said. The government won’t be able to inflate the prices banks receive for selling bad assets indefinitely, he added.

“The history of bubbles shows quite well that financial sector consolidation is inevitable,” Bernstein, Bank of America’s chief investment strategist, wrote in a research note. “Financial stocks will be attractive when the government tries to speed up that inevitable process. However, to the contrary, the government continues to attempt to stymie that inevitable consolidation.”"

Come on government - get on with it - quit trying to save the system!!!

Condolences for the Rowes

Condolences to Devon and Leslie who just lost their little girl. My heart is truly saddened. May your thoughts and prayers be with them in this tough time. You can read her blog, and read all about Jordan.

Geithner Obama Kowtowing to "Massively Corrupted" Banks Galbraith Says

Yahoo Tech ticker interviews Galbraith who says Obama and Geithner have been pushed over by the big banks and colluded in the cover up. Watch the video interviews below.

Krugman agrees with Galbraith - see Krugmans weekend BLOG at nytimes where he says "The zombie ideas have won. The Obama ministration is now completely wedded to the idea that there’s nothing fundamentally wrong with the financial system — that what we’re facing is the equivalent of a run on an essentially sound bank."

What is going to happen with this new TARP is this: Banks through 3rd parties will purchase their own toxic assets at an inflated price. Why you ask? - the banks will only have to put up 5% of the purchase price. 5%? yes, the taxpayers pay the additional 95%, thus taking almost all the risk. The banks get to offload their toxic assets at inflated prices for only a 5% loss. Great deal for the banks - awful deal for the taxpayers!!! See this link for a more detailed explanation.

Galbraith says that putting the banks into FDIC receivership will be the only way that the corruption is uncovered:

"Crucially, FDIC receivership also means new management teams for insolvent banks; and Galbraith notes new leaders will have no incentive to cover up the fraudulent or predatory lending practices of their predecessors. Given the entire system was "massively corrupted by the subprime debacle," the professor believes criminal prosecutions on par with the aftermath of the S&L crisis - when hundreds of insiders went to jail - is a likely (and necessary) outcome of the current crisis."

Part I Geithner's Plan "Extremely Dangerous," Economist Galbraith Says

Part II Geithner Obama Kowtowing to "Massively Corrupted" Banks Galbraith Says

Part III "Happy Talk" Won't Solve Crisis, Galbraith Says: Much More Govt. Action Needed

"But don't expect to see many 'perp walks' if Geithner's current plan comes to fruition. That's one reason Galbraith called the plan 'extremely dangerous' in part one of our interview.

So why isn't the Obama administration pushing for FDIC receivership? 'Political influence of big banks,' the economist says."

Please contact your representatives and newspapers and expose this looting of the treasury! Follow the money trail - it goes from the taxpayer pockets, to our congress and then to the megabanks and wall street cronies!

Dodd Does an About-Face on Exec-Comp Wording in Law - FOXBusiness.com

Woops!!!

Dodd Does an About-Face on Exec-Comp Wording in Law - FOXBusiness.com:

"Senate Majority Leader Harry Reid’s office said the Senator did not know who put the
exemption in the bill, but his staff was trying to find out who was responsible.
Sen. Dodd said on Wednesday that without excluding bonus contracts already
agreed to, the executive pay limits could have met significant legal challenges.
Many legal scholars have said that breaking such bonus contracts would be
unconstitutional.

Sen. Dodd also said no one ever brought up AIG bonuses when writing the exemption into the bill. AIG donated more money to Sen. Dodd during the 2008 election cycle than to any other candidate, according to OpenSecrets.org."

But no conflict here. Dodd has been a major problem for years! Time to quietly resign.

The real scandal at AIG is the not the bonuses. It's the payments to counterparties. - By Eliot Spitzer - Slate Magazine

Mr. Spitzer back in the game (after being taken down by the Bush justice department on behest of the banks). This is a travesty, and shows how much the fox is in the hen house. The bonus issue is a smoke screen that is trying to distract the American public.


The real scandal at AIG is the not the bonuses. It's the payments to counterparties. - By Eliot Spitzer - Slate Magazine:

"So here are several questions that should be answered, in public, under oath, to clear the air:

What was the precise conversation among Bernanke, Geithner, Paulson, and Blankfein that preceded the initial $80 billion grant?

Was it already known who the counterparties were and what the exposure was for each of the counterparties?

What did Goldman, and all the other counterparties, know about AIG's financial condition at the time they executed the swaps or other contracts? Had they done adequate due diligence to see whether they were buying real protection? And why shouldn't they bear a percentage of the risk of failure of their own counterparty?

What is the deeper relationship between Goldman and AIG? Didn't they almost merge a few years ago but did not because Goldman couldn't get its arms around the black box that is AIG? If that is true, why should Goldman get bailed out? After all, they should have known as well as anybody that a big part of AIG's business model was not to pay on insurance it had issued.

Why weren't the counterparties immediately and fully disclosed?

Failure to answer these questions will feed the populist rage that is metastasizing very quickly. And it will raise basic questions about the competence of those who are supposedly guiding this economic policy."