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Wall Street Moves to Put Taxpayers on the Hook for Derivatives Trades

OWoN: Disgusting as this move is, the real question is who is looking out for the average Taxpayer, and the silence is deafening. If they are allowed to suck out Public funds it will be bottomless. Kill ALL Derivatives and invalidate the lot by Law. Then smash Bankers once and for all.

Wall Street Moves to Put Taxpayers on the Hook for Derivatives Trades

Liberty Blitzkrieg
By Michael Krieger
5 December 2014

Wall Street has for some time attempted to put taxpayers on the hook for its derivatives trades. I highlighted this a year ago in the post: Citigroup Written Legislation Moves Through the House of Representatives. Here’s an excerpt:

Five years after the Wall Street coup of 2008, it appears the U.S. House of Representatives is as bought and paid for as ever. We heard about the Citigroup crafted legislation currently being pushed through Congress back in May when Mother Jones reported on it. Fortunately, they included the following image in their article:

click here to view larger image

Unsurprisingly, the main backer of the bill is notorious Wall Street lackey Jim Himes (D-Conn.), a former Goldman Sachs employee who has discovered lobbyist payoffs can be just as lucrative as a career in financial services. The last time Mr. Himes made an appearance on these pages was in March 2013 in my piece: Congress Moves to DEREGULATE Wall Street.

Fortunately, that bill never made it to a vote on the Senate floor, but now Wall Street is trying to sneak it into a bill needed to keep the government running. You can’t make this stuff up. From the Huffington Post:

WASHINGTON — Wall Street lobbyists are trying to secure taxpayer backing for many derivatives trades as part of budget talks to avert a government shutdown.

According to multiple Democratic sources, banks are pushing hard to include the controversial provision in funding legislation that would keep the government operating after Dec. 11. Top negotiators in the House are taking the derivatives provision seriously, and may include it in the final bill, the sources said.

The bank perks are not a traditional budget item. They would allow financial institutions to trade certain financial derivatives from subsidiaries that are insured by the Federal Deposit Insurance Corp. — potentially putting taxpayers on the hook for losses caused by the risky contracts. Big Wall Street banks had typically traded derivatives from these FDIC-backed units, but the 2010 Dodd-Frank financial reform law required them to move many of the transactions to other subsidiaries that are not insured by taxpayers.

Last year, Rep. Jim Himes (D-Conn.) introduced the same provision under debate in the current budget talks. The legislative text was written by a Citigroup lobbyist, according to The New York Times. The bill passed the House by a vote of 292 to 122 in October 2013, 122 Democrats opposed, and 70 in favor. All but three House Republicans supported the bill.

It wasn’t clear whether the derivatives perk will survive negotiations in the House, or if the Senate will include it in its version of the bill. With Democrats voting nearly 2-to-1 against the bill in the House, Senate Majority Leader Harry Reid (D-Nev.) never brought the bill up for a vote in the Senate.

Remember what Wall Street wants, Wall Street gets. Have a great weekend chumps.

In Liberty,
Michael Krieger



  1. Another Pension Scandal – The Crony Love Affair Between North Carolina, Credit Suisse and Erskine Bowles

    (See Link for full article)
    When it comes to how the U.S. economy of fraud functions in 2014, the following article has it all. A government official, a global investment bank and a businessman/politician, all working together to enrich themselves at the public’s expense. It demonstrates how big bucks are really earned by insiders in the new American Dream, characterized by extreme cronyism and corruption.

    As might be expected, this post highlights another excellent piece by David Sirota, who has been doing the best investigative journalism on the topic of public pension corruption. In this article, he zeros in on what’s known as “placement agents,” which are often large financial firms with connections across the political spectrum, and are often money managers themselves, such as private equity giant Blackstone. However, they don’t need to have any expertise in financial matters, they simply need to be connected. As such, placement agents are sometime even former NFL stars.

  2. Ponzi scheme, upon ponzi scheme...whatever happened to legislation that will not allow big banks and wall street to get any bailout from taxpayers?

    This same thing happened in Europe and with the guarantees, which is only more paper (fiat) their casino bets are piled on the back of taxpayers...WE SAY NO MORE!

    They will have to find another way of wiping the books clean without dumping their crap on taxpayers...we did not and wiil not agree to this!

    Why should taxpayers be on the hook when corporate DC USa is not governing for the people, only for the banks...HELL NO!

  3. With Attention Elsewhere, Wall Street Lobbyists Push to Weaken Post-Crash Regulations
    With few Americans paying attention, financial interests trying to undo restrictions on risky trading that played large part in 2008 financial collapse

  4. Plummeting Oil Prices Could Destroy The Banks That Are Holding Trillions In Commodity Derivatives

    Could rapidly falling oil prices trigger a nightmare scenario for the commodity derivatives market? The big Wall Street banks did not expect plunging home prices to cause a mortgage-backed securities implosion back in 2008, and their models did not anticipate a decline in the price of oil by more than 40 dollars in less than six months this time either. If the price of oil stays at this level or goes down even more, someone out there is going to have to absorb some absolutely massive losses. In some cases, the losses will be absorbed by oil producers, but many of the big players in the industry have already locked in high prices for their oil next year through derivatives contracts. The companies enter into these derivatives contracts for a couple of reasons.

    Number one, many lenders do not want to give them any money unless they can show that they have locked in a price for their oil that is higher than the cost of production. Secondly, derivatives contracts protect the profits of oil producers from dramatic swings in the marketplace.

    These dramatic swings rarely happen, but when they do they can be absolutely crippling. So the oil companies that have locked in high prices for their oil in 2015 and 2016 are feeling pretty good right about now. But who is on the other end of those contracts? In many cases, it is the big Wall Street banks, and if the price of oil does not rebound substantially they could be facing absolutely colossal losses.

    It has been estimated that the six largest “too big to fail” banks control $3.9 trillion in commodity derivatives contracts. And a very large chunk of that amount is made up of oil derivatives.

    1. 5 Wall Street Banks with Trillions in Derivatives

      ...commodity derivatives are just part of the story. Over the past couple of decades, Wall Street has been transformed into the largest casino in the history of the world. At this point, the amounts of money that these “too big to fail” banks are potentially on the hook for are absolutely mind blowing.

      As you read this, there are five Wall Street banks that each have more than 40 trillion dollars in exposure to derivatives. The following numbers come from the OCC’s most recent quarterly report (see Table 2)…

      JPMorgan Chase
      Total Assets: $2,520,336,000,000 (about 2.5 trillion dollars)
      Total Exposure To Derivatives: $68,326,075,000,000 (more than 68 trillion dollars)

      Total Assets: $1,909,715,000,000 (slightly more than 1.9 trillion dollars)
      Total Exposure To Derivatives: $61,753,462,000,000 (more than 61 trillion dollars)

      Goldman Sachs
      Total Assets: $860,008,000,000 (less than a trillion dollars)
      Total Exposure To Derivatives: $57,695,156,000,000 (more than 57 trillion dollars)

      Bank Of America
      Total Assets: $2,172,001,000,000 (a bit more than 2.1 trillion dollars)
      Total Exposure To Derivatives: $55,472,434,000,000 (more than 55 trillion dollars)

      Morgan Stanley
      Total Assets: $826,568,000,000 (less than a trillion dollars)
      Total Exposure To Derivatives: $44,134,518,000,000 (more than 44 trillion dollars)

      Those that follow my website regularly will note that the derivatives exposure for the top four banks has gone up significantly since I last wrote about this just a few months ago.

      Do you want to be on the hook for all of that?

      Keep in mind that the U.S. national debt is only about 18 trillion dollars at this point.

      So why in the world would we want to guarantee losses that could potentially be far greater than our entire national debt?

      Only a complete and utter fool would financially guarantee these incredibly reckless bets.

      Please contact your representatives in Congress and tell them that you do not want to be on the hook for the derivatives losses of the big Wall Street banks.

      When this derivatives bubble finally implodes and these big banks go down (and they inevitably will), we do not want them to take down the rest of us with them.

  5. REALIST NEWS – Banksters Trying To Get Derivatives Bailout via FDIC Insurance

  6. $1.1tn US budget deal imperiled by revolt over taxpayer net for risky bank trades

    Clause buried in 1,600-page spending bill could extend future public bailouts
    House Democrats rally around Senator Elizabeth Warren to oppose the plan
    Congress strikes 1.1tn budget deal to avoid government shutdown
    Congressional budget welcomes big bailouts despite opposition


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