Bank ‘Reform’ Makes All Oligarchs Permanently Too-Big-To-Fail
Written by Jeff Nielson Sunday, 24 October 2010 12:48
Articles & Blogs - US Commentary
The Obama regime must feel like a jilted-lover, as Wall Street has chosen to expend the vast majority of their politician-buying dollars buying Republicans in the next election. After all, the Democrats have demonstrated that they can serve the bankers at least as faithfully and unreservedly as the Bush regime did before them.
The crowning achievement of the Obama regime in serving its masters is the so-called “bank reform” in the Dodd-Frank bill – arguably created by the Democrats’ two most dedicated banker-servants (outside Obama, himself). The goals for this so-called “bank reform” were numerous and explicit.
There was supposed to be “regulation” of the derivatives market. There was supposed to be both the authority and the practical means of shutting-down the too-big-to-fail Oligarchs. There was supposed to be greater “oversight” (as in more than zero). There was supposed to be an end to reckless, bankster risk-taking. And overall, markets in general and the financial sector in particular were supposed to be made more stable (i.e. protected from reckless, bankster gambling).
None of those goals has even remotely been accomplished. Indeed, it is arguable that the Obama regime (and Dodd and Frank in particular) actually managed to make things worse in every respect. No one has been watching both the bankers and the farce of bank “reform” closer than Gretchen Morgenson of the New York Times.
In a detailed piece titled “Count on Sequels to TARP”, Morgenson explains the Democrats’ most-important failure - in the derivatives market. The “clearinghouse” which was created in the new legislation does virtually nothing to either regulate derivatives, nor to make them more transparent. Indeed, all it really accomplishes is to increase “liquidity” for the bankers – which always translates into the banksters simply ratcheting-up their leverage even further.
As if this wasn’t bad enough, instead of merely having the implicit backing of the U.S. government in back-stopping the reckless gambling of the Oligarchs, an explicit government guarantee has been created for this “clearinghouse”.
In other words, all the clearinghouse actually accomplishes is to create an explicit, unlimited “tap” of government funds – directly from the printing-press of the Federal Reserve and/or the coffers of the Treasury Department. Having “guaranteed” (and nationalized) the entire U.S. mortgage market, having provided a (literally) infinite “guarantee” on Fannie and Freddie’s endless losses, the U.S. government is now explicitly backing the $1.5 quadrillion derivatives market – which is more than twenty times larger than the entire, global economy.
The Obama regime (and their apologists) will disingenuously point to the “resolution authority” that was created in the so-called reforms. It is obviously totally meaningless. Governments could pass the “resolution authority” to end poverty, hunger, violence, or even to fly to another galaxy. Creating the authority to do something is irrelevant when there could never be a practical means of exercising such authority.
Specifically, in every meaningful way, the Obama regime has made the Wall Street Oligarchs even more “too big to fail”. To begin with, all of the Oligarchs (except AIG) are much bigger than before – having not merely been allowed to cannibalize many of their former brethren, but receiving $trillions in government hand-outs/guarantees/loans (mostly from Republicans) to facilitate their rapid expansion.
Those funds provided to Wall Street were explicitly given in return for the Oligarchs’ pledge to increase lending in the U.S. economy. The Oligarchs did the exact opposite – greatly reducing their lending, and spending all the money on buying-up other bank assets and increasing their reckless gambling – with the derivatives market having roughly doubled in size since the Wall Street-induced “financial crisis” began.
So, the Oligarchs are much, much bigger. They have doubled their reckless gambling, and now the U.S. government is explicitly backing their private casino: the derivatives market. What this means is that in the next systemic crisis created by Oligarch-greed, the argument which will be advanced (by both Republicans and Democrats) is not that the Oligarchs have to be saved because they are “too big to fail”. Even for the apathetic sheep of the American electorate, this would be too great an outrage.
No, in the future, unlimited and infinite funding of the banksters’ gambling will be provided by the U.S. government because with the U.S. now “guaranteeing” an amount which exceeds twenty times global GDP, it is the solvency of the United States, itself which is now directly on the line in each-and-every future crisis created by these bankers.
Thus, the political “spin” which both halves of the two-party dictatorship will use to “justify” TARP II, TARP III, and TARP XX is that they must give the Oligarchs anything and everything they ask for to prevent the United States itself from being bankrupted from these future “crises” (i.e excessive Wall Street gambling). Obviously, if you ever intend to “cure” gambling-addicts, “guaranteeing” all their future gambling-debts is not the way to do it.
In short, the U.S. government has made itself into a direct subsidiary of Wall Street: one which shares in 0% of the profits, but backstops 100% of the risks and liabilities. And with each and every current and future scenario, it is the entire United States economy itself which is now being “leveraged” by the Oligarchs in their gambling.
It becomes harder and harder to feel sympathy for the American people. Instead of doing anything to prevent their serial-rape at the hands of the U.S. two-party dictatorship, all they ever appear interested in doing is to simply let the rapists “take turns”, with the Republicans about to be given their turn to do most of the “screwing”.
As I made explicitly clear in my last commentary, there isn’t the slightest mystery as to the goals of the Wall Street Oligarchs, and the ultra-rich aristocracy they represent. They want all the wealth, all the land, and all the power. Meanwhile, the American people do nothing but meekly submit: to being nothing more than serfs.
Having done nothing while the banksters’ took all of their government’s wealth (i.e. their own wealth), there are nothing more than a few, sporadic whimpers from the serfs as the banksters begin to steal all of their land. They had already taken all of the “power” in the U.S. many years before.
Had the U.S.’s “Founding Fathers” been able to see into the future, and see the herd of complacent, American sheep give away anything and everything they fought for, one can only assume that they would have laid-down their arms and surrendered to the British – since the “King George” who ruled Americans in the 1700’s was a much more benign ruler than the “King George” and “King Barack” of the 21st century.
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written by mathnerd, October 28, 2010
A good comparison would be Weimar Germany. Did they have a sufficiently low multiplier that most people could have stored their savings in gold and silver if they so decided? Regardless, I'd suggest Weimar Germany was less of an economic power than the US currently is. The Weimar Reichsmark's collapse thus would have had a smaller global impact than if the US dollar falls to hyperinflation. Ofcourse that's not to say American citizens won't suffer in this case.
I don't know Zimbabwe's trade relationship with its main economic partners, but it didn't have much of an impact on the global economy.
If the USD was to collapse, though? This bout of competitive devaluation shows us central banks are willing to debase their currencies to some extent to maintain trade levels with the US; will they do this to infinity?
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written by Jeff Nielson, October 26, 2010
It's also my understanding that the banksters' ability to continue to manipulate bullion markets (WITHOUT taking a severe, financial beating) is OVER. It can only be done in large, protracted sell-offs - which have been absent from this market for well over a year. They are BLEEDING badly now!
Samix, Mathnerd, on the subject of "good money" and "bad money", I just happened to post the first of two parts on that (thanks to SilverCaper!). The ONLY good thing about what we're being subjected to is that it will be a "lesson" which will be remembered much longer than the Great Depression and/or the Weimar hyperinflation - because it's going to be bigger AND worse.
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written by mathnerd, October 26, 2010
Given the "learn from my experience, not from that guy's experience" attitude in society (or at least the Western World's attitude) it's when - not if.
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written by samix, October 26, 2010
If the world ever goes back to unbacked paper currencies after the collapse of the current economic system, that would really be a sad day.
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written by mathnerd, October 26, 2010
The American 08 - 09 market crash stopped on THE DAY that the banks were allowed to mark "to model" rather than "to market," which is done with conventional stock, commodity, and bond markets.
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written by paxjds, October 25, 2010
My theory is similar on how the Banksters help keep gold and silver prices down with HSBC and JP Morgan, or their proxies, being the main culprits. Example, JP Morgan puts in a Sell order for silver below market(while the price is climbing)and HSBC puts in an identical Buy order at the same time at the same price. Meanwhile, HSBC is selling gold(while the price is climbing) and JP Morgan is buying the same amount at the same time. Then the next time they decide to lower the market $30-$35 dollars an OZ for gold, they reverse the selling and buying.
No real dollars are lost or gain, and they drop the price of gold or silver whenever they feel like it.
Jeff, you know you can not "Reform" Banksters. You can jail them or use French Guillotines, but reforming Banksters and Mobsters, I dont think think is possible.
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written by Jeff Nielson, October 25, 2010
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written by mathnerd, October 25, 2010
Let's do the same thing with the silver market. Say the equilibrium price in today's dollars is $100. I buy X ounces of silver at today's price of about $25/ounce. That's a big enough purchase to bump the price up to $100/ounce, at which point I sell. You guys have identical orders, since we all placed limit orders to buy and sell at those prices.
Do this a few times, then retire in comfort.
I shudder to think of the pain the banksters will be subject to when the sheeple eventually realized they're being raped.
Ofcourse I don't condone the banksters' actions. But the people's revenge will be hollow.
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written by paxjds, October 24, 2010
Recent article I read has Wall Street Money ($'s) committed to Obama in 2012. Thats a good atta boy for Obama, very similar to how I give my dogs treats for being "Good Dogs".
Obviously the Banksters want QE and Printing presses to keep working around the clock. I figure they want more phoney dollars in their banks when they come out with new currencies to exchange almost worthless dollars, yens, and Euro's too. Just think, these Gluteous Maximus Arses are getting ready to sell the next Ponzi scheme to us: The New and Better Alpha Dollar, Beta Yen, and Gamma Euro. These new paper curriencies are designed to "save the World" from those old, worthless, and outdated curencies. I can already hear the BS. So get ready, the Banksters will have no other ploy left to keep them controlling the worlds purse strings in the near future when economic collapse hits the world!
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written by Jeff Nielson, October 24, 2010
Not too long after the financial collapse, the notional value of the derivatives market was $1.1 quadrillion. Then one day, it think it was the BIS which announced that it had changed its descriptions and that the notional value was now only about $500 trillion - and regardless of WHO'S numbers you look at, the market/casino/bubble keeps getting bigger and bigger.
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written by agsilverspoon, October 24, 2010
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written by Jeff Nielson, October 24, 2010
The number I referred to is "gross notional value" - defined in the same manner that the market was originally defined. Then they changed their DEFINITION of the market, to reduce that number by more than 50%.
The "$3.5 trillion" number is the (supposed) "exposure" of the market - i.e. the net, outstanding position AFTER all of the offsetting bets are resolved.
In other words, with $1.5 quadrillion of notional value, we're told this is so perfectly offsetting that there is only 0.05% net exposure. Even IF we take this ridiculous lie at face value, the statement is ONLY true if ALL the players in the market are capable of "performance" with respect to their contractual obligations.
In the case of just one, small "corner" of that market, we have $60 TRILLION in credit-default swaps - and given this is pretend-insurance, there is every reason to assume that it is ALL leveraged by about 300:1 (the leverage in the CDS contract in the Citigroup/Morgan Stanley law-suit). Assuming that a player in this market merely had to make-good on 1% of this market, that's $600 BILLION in obligations, by itself. That's enough to CRUSH any one of the debt-laden Wall Street Oligarchs.
Presumably, there are bigger players in this market, "covering" perhaps 10% or more of the market. Now we're talking about $TRILLIONS in obligations for just one player, in one segment of the market.
So irrespective if there is even a small element of truth in all the bankster lies, the mere size of the derivatives-bubble is a 100% guarantee of "vaporization" for any and all significant gamblers in this casino - in the event of any major "event".
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written by agsilverspoon, October 24, 2010
"According to the Bank for International Settlements, the entire derivatives market had a gross credit exposure of $3.5 trillion at the end of 2009. Obviously, even a small fraction of that amount could represent a sizable call on the taxpayers if a clearinghouse hit the skids."
LOL @ that! How do they get such a ridiculously small number (sadly only in comparison to the true number) for the derivatives market??? Also I'm amazed an article like that got published at all.
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You've done it again. You've presented a new way of looking at the current economic decline that I hadn't thought about.
Obviously, 'something's got to give': either the financial power elite will win this battle or else the rule of law and justice will prevail and reverse this decline. You can't have both. What's your prediction as to what will occur?