Nice post masaccio, but the snake referred to is Jamie Dimon, not Diamond, unless you were snarkin’. ;-}

Gee, Dimon seems to have studied at the Alfred E. Neuman School of Bidness.

Thanks, missed that.

“There’s an old saying in Tennessee — I know it’s in Texas, probably in Tennessee — that says…”

Yadda yadda yadda.

I don’t know about anyone else, but I am singularly unimpressed with Barney Frank’s handling of this whole financial catastrophe, beginning with his two-bit hearings a few month’s back, and leading right up to the discussion on derivatives which is currently under way. As for Jeb Hensarling…teh idiot.

On the other hand, what’s $592 Trillion worth of these instruments among friends? Let’s just go ahead and round up to $One Bazillion.

Trussssssssssssst in me…

I think there’s a corollary:

talk to the hand…

Very soon we need a list of the key items to demand be in the bill and a strategy for backstopping the bill so it gets real reform instead of being watered down.

What Jamie Dimon is talking about is a derivatives portfolio at JPMorgan with nominal value of something in the neighborhood of $90 trillion. Do you really trust him or anyone or some hole in the wall regulator like the OCC or the notoriously asleep at the swithc Fed to oversee this?

Dimon is a snake in the grass; won’t somebody cut his tongue out? Or cut in half so it properly reflects the ‘forked tongue’ that he uses?

The CMM reports that the House Financial Services Cmte. votes out a ‘reform’ package that allows the same sort of crap to go on that got us into this place to begin with.
“Two little-noticed amendments inserted Wednesday into legislation seeking to strengthen regulation of derivatives will allow private industry to continue to set rules and largely self-regulate, tying the hands of regulators who want more say in how these exotic financial instruments are traded.”

And when Barney Franks states “A spokesman for Frank said the issues the provisions addressed should be handled by the agriculture committee, and that Biggert’s amendments “were accepted to move the debate along.”, you can see the handwriting on the wall.

Greenspan saying “U.S. regulators should consider breaking up large financial institutions considered “too big to fail,” is a positive sign but….

As said here, “You know we’ve reached code red “Outrageous” when even “hands off” Alan Greenspan believes the top banks have become too large.”

Probably one of many motives is to keep this derivative book off the balance sheet so JPM can continue to appear well capitalized. I agree Rep. Frank does not seem to have clear goals for getting a grip on this faux market and regulating it properly.

It’s late in the day. Americans for Financial Reform is doing good work trying to close loopholes in the derivatives regulation coming out of the House. The Senate is far behind, and is more conservative. On the call David Dayen described in the last link, they pretty much seem satisfied if we can force the derivatives through clearinghouses and onto exchanges. These are different ideas, but together their expert guy seemed satisfied.

I asked if there was some literature I could review showing the value of these instruments, but I doubt that there is much. I suspect that cost-benefit analysis is irrelevant to the powers that be, and the real factor is the enormous size of the outstanding instruments.

Srsly where was the thunder bolt that should have come down and immediately struck Greenspan, co-conspirator to the financial collapse. Now he’s worried about the size of big banks? Should as hell didn’t bother him one whit when it would have mattered.

And the enormous fees bankers hoover up for arranging them privately!

Dodd in the Senate and Frank in the House have been spectacularly “captured” by the banking interests since the meltdown hit on September 15, 2008.

Dimon (JPM), Blankfein (GS), Mack (MS), Lewis (BoA), Pandit (Citi), and Stumpf (Wells Fargo) should all be in jail contemplating their crimes. You have to understand. They won. They completely fucked up the financial sector and the economy and the lives of tens of millions of Americans, and who knows how many others around the world. And they not only got the government to bail them out on risible terms to the tune of trillions but they are giving a great big fuck you to precisely those Americans who will end up having to pay off all their bad bets. As obscene as the healthcare debate has been it is nothing compared to the pillaging that has gone on with and by the banks.

“Rep. Frank does not seem to have clear goals..”

Actually, I think his goals are quite clear. Appease his corporate masters, and stay right in tandem with the WH while doing so. Nice gig, huh?

Feh.

I did a fast scan of Frank’s proposed legislation on derivatives. It was the same old same old. Only some would go through exchanges/clearinghouses. Exchanges like ICE which is owned by the banks would be permitted. Banks like JPM are the largest holders of derivatives. Market participants (the banks) would run the exchanges. Somewhere in there there was supposed to be a Prudential regulator but I think that was just for laughs. So we have banks participating in, running, and owning the exchanges. What could go wrong?

The theory behind derivatives is that they are a hedge. Hedging as morphed into straight arbitrage where the original idea of hedging has been lost.

Actually I’m afraid you’re probably right Shoto. Gah. I hate it when Dems are as bad as Republicans.

Very nicely stated. And yes, the numbers involved in the healthcare “debate” can be considered “immaterial, pass” when compared to the wholesale pillaging of the treasury by the “financial services” industry. It’s going to be interesting watching the 2010 and 2012 elections. If I had to bet, I’d say that a hard right turn just might be in our future.

http://www.unmaskthefed.com/

PLEASE SIGN THE PETITION AT THE LINK ABOVE.

Grayson calls on American public to ‘Unmask the Fed’

Florida Democrat U.S. Rep. Alan Grayson wants Americans to help him block Congress from confirming the Chairman of the Federal Reserve to his second term unless he hands over documents relating to the bailouts of financial institutions, including the rescue of Bear Stearns.

In the “Unmask the Fed” campaign, Grayson calls on constituents to sign petitions demanding that Fed Chairman Ben Bernanke “come clean” before senators re-confirm his appointment to the helm of the Federal Reserve.

Grayson wants access to the Bear Stearns rescue paperwork as well as the details of which financial institutions received $1.2 trillion in bailout money, how much each institution received, and what was promised in return. He’s also seeking Fed documents that discuss the Bank of America/Merrill Lynch merger, transcripts of Open Market Meeting minutes, and the terms and conditions of Fed transactions not reflected in balance sheets from the past three years.

“[T]he Senate should know who got the $2 trillion the Federal Reserve has lent out over the last two years,” the petition reads. “Only then will the Senate be able to judge whether he should keep his job.”

“So we have banks participating in, running, and owning the exchanges. What could go wrong?”

Whew! That’s a relief…

Some hedging is perfectly fine, of course. For instance if I buy a Hugh bond and I’m worried you might not be able to pay (nothing personal, of course) than I could buy a put option if you are a public company – but that’s not a perfect hedge – or I could go to a re-insurer and buy a credit default swap from you as insurance for my bond investment.

But naked credit default swaps work like this – say I’m your mailman (woman) and I see you have lots of late payment notices in the post. I go to the re-insurer and purchase a credit default swap to make $ from your troubles, when I personally have no exposure to your troubles. That is just bullshit.

The question is what is a legitimate hedge? In general if you need a CDS to sell a deal, then the deal should never have been entered into. Nowadays most accepted forms of hedging have been co-opted by arbitrageurs. The prime example of this for me is the oil futures market where the market has been taken over by speculators and traditional functions of hedging and price discovery have been largely done away with.

But what we are also talking about here is that derivatives in general need to be assessed in terms of “Do they serve any useful function?” and if they do, is that function worth the risks associated with using them?

That is just bullshit.

As well as being predatory and amoral.

George Soros said it most clearly, and most eloquently: traditionally (since the 1930s) the Fed has monitored money. Now, it must also monitor c-r-e-d-i-t creation and the amount of outstanding credit.

If the Fed and international agencies closely monitored the creation of credit, as well as ‘monetary supply’, then the continued use of CDOs might make sense.

But the Fed claims to monitor ‘the monetary supply’ (i.e. the amount of money in the system). Yet at the same time, it’s basically allowing Goldman Sachs, the mega-banks, and AIG to print money — only the ‘money’ that they print is called ‘credit default swaps’.

And D.C. and the Fed are too flipping gutless to call those derivatives what they are: a form of m-o-n-e-y.

It’s as if the Fed refuses to acknowledge the obvious: they enabled banksters and insurance companies to print money. Traditionally, that was the realm of the Fed, and only the Fed.

Now, it’s the realm of any Wall Street firm or megabank that has the legal authority to write and create CDOs.

The Fed doesn’t admit, acknowledge, nor articulate that it’s lost control of the money supply, and therefore any ‘monetary policy’ that it creates is doomed to inadequacy. The degree of inaccuracy and futility is roughly approximate to the ratio between ‘real’ money created by the Fed, and ‘pseudo dollars’ created by means of CDOs and CDSs.

If we can’t even have that conversation in public in America, we don’t have a prayer in hell of getting a grip on this disaster.

Did anyone look behind this guy’s back to see if his fingers were crossed?

say I’m your mailman (woman) and I see you have lots of late payment notices in the post. I go to the re-insurer and purchase a credit default swap to make $ from your troubles, when I personally have no exposure to your troubles.

Making money from others’ financial troubles? Where can I sign up?

/snark

Please, Sir, may I have another of plate of your Shite?

I used to run a derivatives sales desk @ Citi.
There is no way in hell that the average government bank examiner has a chance of understanding the bulk of these things.

I really appreciate your comment!

Nomi Prins made the same point in her recent FDL Book Salon visit (for “It Takes A Pillage”) about three weeks ago.

The more that I’ve come to understand this issue, the more convinced I am that this is a key problem. And if the government examiners can’t understand these things, then Congress is going to be completely bamboozled, as we’re seeing…

Of course a good way to get a hold of derivatives is to have some of the now unemployed guys who ran these desks working with and for regulators.

But in a larger sense, it is that government, the Fed and Treasury, aren’t trying very hard to understand derivatives. As for Dodd and Frank, they sound positively clownish when they discuss anything financial. And the “expertise” level, with a few exceptions, descends rapidly from there.

…Mr. Dimon and his ilk whose track record of losses in the…trillions as a resulto of their incompetence at risk management..

In my view, Mr. Dimon and his ilk have managed risk brilliantly. They have profitted enormously by transferring risk to American tax payers, who, in significant numbers, think their problems are caused by Mexican immigrants and homosexuals.

American tax payers, who, in significant numbers, think their problems are caused by Mexican immigrants and homosexuals.

And big gummint.

Just kill that market now !