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LETMYSILVERGO
2nd September 2009, 02:31
A MUST READ {AMR}

The Nightmare of Contemplating Global DerivativesBy: Richard Daughty, The Mogambo Guru - The Daily Reckoning


WE ARE ALL FEAKING DOOMED !!

valerb
2nd September 2009, 04:20
Here is a copy of the actual Reuters report. Looks like the derivative monster is about to break out of his cage!

China's derivative default stance rattles banks


Submitted by cpowell on Tue, 2009-09-01 03:53. Section: Daily Dispatches (http://www.gata.org/taxonomy/term/2) By Eadie Chen and Chen Aizhu
Reuters
Monday, August 31, 2009
http://www.reuters.com/article/rbssBanks/idUSSP47327420090831 (http://www.reuters.com/article/rbssBanks/idUSSP47327420090831)
BEIJING -- A report that Chinese state-owned companies will be allowed to walk away from loss-making commodity derivative trades provoked anger and dismay among investment bankers on Monday as they feared it may set a damaging precedent.
The state-owned Assets Supervision and Administration Commission, the regulator and nominal shareholder for state-owned enterprises (SOEs), told six foreign banks that SOEs reserved the right to default on contracts, Caijing magazine quoted an unnamed industry source as saying in an article published Saturday.
While the details of the report could not be confirmed, it was Monday's hot topic in financial circles from Shanghai to Singapore as commodity marketers feared that companies holding underwater price hedges could simply renege on the deals, costing banks millions of dollars in profit.
The warning from SASAC follows a series of measures from Beijing this year to crack down on the sale of derivative products by foreign banks to Chinese enterprises, principally big consumers, who bought protection against higher prices last year only to watch the market collapse -- leaving them with losses.
While many companies including top airlines have come clean on the losses, some analysts fear another wave may follow.
"I wouldn't be surprised if more state firms emerge with big derivatives trading losses. Otherwise SASAC wouldn't come out with such a radical move," said a Hong Kong-based derivatives analyst, who like most other industry officials and bankers declined to be named due to the high sensitivity of the issue.
A SASAC media official said on Monday that he was waiting for the "relevant department's" official comment before he can clarify to media. A government official said that the Bureau of Financial Supervision and Evaluation under SASAC was handling the issue. The official declined to be named and did not elaborate.
Spokespersons at Goldman Sachs and UBS declined comment, and media officials at Morgan Stanley and JPMorgan were not immediately available for comment. All are major global providers of commodity risk management.
No bank were named in the Caijing report. The SASAC media officer also declined to identify any specific banks.
"It's a handful of companies who are being encouraged by regulators to renegotiate," said a second banking source. "It's outrageous, but it's China, so everyone is treading very carefully."
For banks that are hoping to sell more derivatives hedges in China, the world's fastest-expanding major economy and top commodities consumer, the danger goes beyond the immediate risk to existing contracts to the longer-term precedent that suggests Chinese companies can simply renege on deals when they like.
The report follows an order from SASAC in July that required all central government-controlled state companies engaged in trading derivatives to make quarterly reports about their investments, including details of holdings and performance.
But the reported letter opened several important questions that could not immediately be answered.
"If we were among the banks receiving that letter, we would be very angry. But now the key is to find out more details on the letter: In whose name the letter was issued, the government or the corporate's? And under what was the reason for defaulting?," said a Singapore-based marketing executive with a foreign bank.
The source, whose bank did not receive a letter, said that Air China, China Eastern, and shipping giant COSCO -- among the Chinese companies that have reported huge derivatives losses since last year -- had issued almost identical notices to banks.
"If it's in the name of the government, the impact will be very negative," said the source, who declined to be named.
Beijing-based derivatives lawyers said the so-called "legal letter" has no legal standing -- SASAC as a shareholder has no business relationship with international banks.
"It's like the father suddenly told the creditors of his debt-ridden son that his son won't pay any of his debt," said a lawyer from the derivatives risks committee of the Beijing Lawyers Association.
It's also unclear why Chinese state firms, which have complained that their foreign banks sometimes did not disclose full information of potential risks when selling them complicated products, did not seek redress through the courts.
"If that is the case, these firms should seek through legal measures to safeguard their rights, instead of turning to the authorities for political interference," said a different lawyer.
SASAC took over the job of overseeing SOEs' derivatives trading from the securities regulator in February after several Chinese firms reported huge losses from derivatives.

Cup-of-Ruin
2nd September 2009, 04:53
Here is a copy of the actual Reuters report. Looks like the derivative monster is about to break out of his cage!

China's derivative default stance rattles banks


Submitted by cpowell on Tue, 2009-09-01 03:53. Section: Daily Dispatches (http://www.gata.org/taxonomy/term/2) By Eadie Chen and Chen Aizhu
Reuters
Monday, August 31, 2009
http://www.reuters.com/article/rbssBanks/idUSSP47327420090831 (http://www.reuters.com/article/rbssBanks/idUSSP47327420090831)
BEIJING -- A report that Chinese state-owned companies will be allowed to walk away from loss-making commodity derivative trades provoked anger and dismay among investment bankers on Monday as they feared it may set a damaging precedent.
The state-owned Assets Supervision and Administration Commission, the regulator and nominal shareholder for state-owned enterprises (SOEs), told six foreign banks that SOEs reserved the right to default on contracts, Caijing magazine quoted an unnamed industry source as saying in an article published Saturday.
While the details of the report could not be confirmed, it was Monday's hot topic in financial circles from Shanghai to Singapore as commodity marketers feared that companies holding underwater price hedges could simply renege on the deals, costing banks millions of dollars in profit.
The warning from SASAC follows a series of measures from Beijing this year to crack down on the sale of derivative products by foreign banks to Chinese enterprises, principally big consumers, who bought protection against higher prices last year only to watch the market collapse -- leaving them with losses.
While many companies including top airlines have come clean on the losses, some analysts fear another wave may follow.
"I wouldn't be surprised if more state firms emerge with big derivatives trading losses. Otherwise SASAC wouldn't come out with such a radical move," said a Hong Kong-based derivatives analyst, who like most other industry officials and bankers declined to be named due to the high sensitivity of the issue.
A SASAC media official said on Monday that he was waiting for the "relevant department's" official comment before he can clarify to media. A government official said that the Bureau of Financial Supervision and Evaluation under SASAC was handling the issue. The official declined to be named and did not elaborate.
Spokespersons at Goldman Sachs and UBS declined comment, and media officials at Morgan Stanley and JPMorgan were not immediately available for comment. All are major global providers of commodity risk management.
No bank were named in the Caijing report. The SASAC media officer also declined to identify any specific banks.
"It's a handful of companies who are being encouraged by regulators to renegotiate," said a second banking source. "It's outrageous, but it's China, so everyone is treading very carefully."
For banks that are hoping to sell more derivatives hedges in China, the world's fastest-expanding major economy and top commodities consumer, the danger goes beyond the immediate risk to existing contracts to the longer-term precedent that suggests Chinese companies can simply renege on deals when they like.
The report follows an order from SASAC in July that required all central government-controlled state companies engaged in trading derivatives to make quarterly reports about their investments, including details of holdings and performance.
But the reported letter opened several important questions that could not immediately be answered.
"If we were among the banks receiving that letter, we would be very angry. But now the key is to find out more details on the letter: In whose name the letter was issued, the government or the corporate's? And under what was the reason for defaulting?," said a Singapore-based marketing executive with a foreign bank.
The source, whose bank did not receive a letter, said that Air China, China Eastern, and shipping giant COSCO -- among the Chinese companies that have reported huge derivatives losses since last year -- had issued almost identical notices to banks.
"If it's in the name of the government, the impact will be very negative," said the source, who declined to be named.
Beijing-based derivatives lawyers said the so-called "legal letter" has no legal standing -- SASAC as a shareholder has no business relationship with international banks.
"It's like the father suddenly told the creditors of his debt-ridden son that his son won't pay any of his debt," said a lawyer from the derivatives risks committee of the Beijing Lawyers Association.
It's also unclear why Chinese state firms, which have complained that their foreign banks sometimes did not disclose full information of potential risks when selling them complicated products, did not seek redress through the courts.
"If that is the case, these firms should seek through legal measures to safeguard their rights, instead of turning to the authorities for political interference," said a different lawyer.
SASAC took over the job of overseeing SOEs' derivatives trading from the securities regulator in February after several Chinese firms reported huge losses from derivatives.

LOL the Chinese are "FREAKING DOOMED"!!!!

Golden
2nd September 2009, 04:55
"It's outrageous, but it's China, so everyone is treading very carefully."

It's true then. China now owns USA.

2010 Silver eagles will have a 10 Chinese yuan nominal value. :)

valerb
2nd September 2009, 08:38
It's true then. China now owns USA.

2010 Silver eagles will have a 10 Chinese yuan nominal value. :)

They probably will if we let them get away with this BS.

I mean the balls of these people, they want to keep the derivatives that are profitable and default on the ones that are not!!!!

I'm guessing they are probably trillions in the red on commodities alone.

Wouldn't it be fair to pass along the U.S. bonds they hold to the owners of the derivatives they want to default on for payment. Then make those same U.S. banksters pay back some of the loot they have walked off with.

Five million ounces taken out of the ETF SLV in the past week. It kind of makes you wonder if someone in the know is heading for the hills before all hell breaks loose!

SilverHawk
2nd September 2009, 17:08
This Russian guy predicts this around July 2010....1045

Mylläri
2nd September 2009, 17:33
This Russian guy predicts this around July 2010....1045

America, **** YEA!!! Hopefully the Canadians will build some more ice rinks thoughout my home state of Illinois! :D

PlataTruth
2nd September 2009, 18:19
America, **** YEA!!! Hopefully the Canadians will build some more ice rinks thoughout my home state of Illinois! :D

Now that is a great Federal Project idea, good for the workforce and physical activity level of the northern states. The Canadians can hire Obama as a spokesman since he will be looking for work, we can all watch him land flat on his ass.:rolleyes:

TheLoneRanger
2nd September 2009, 18:40
It's true then. China now owns USA.

2010 Silver eagles will have a 10 Chinese yuan nominal value. :)

Only about 25% of all Federal Debt is foreign owned.. and China just recently pass Japan as the major debt holder.. not thats thats much comfort, with the newly elected party in power in Japan campaigned on a platform of gettng out of the dollar denominated debt. ( okay more of a colapsing dollar thing than a derivitive thing.. but still....)

They don't own us but they do have infulence.. except that they are trying to de-dollar their reserves by buying up 2000 One Billion dollar busineses. farms, and mines arround the world. The Chinese only have clout if we think they are going to buy our bonds and fund our deficits. If it really really boher me I would sell all my silver and gold and buy T bills so we didn't have to sell so many to the ChiComs.
I think everybody is just pulling stuff out of their butts in desperation, China's got a major bank and credit bubble and the Financials in China are way over leveraged.. they can't take the losses if they have to cover their CDS's , we are doing clunkers, the Brits are monitizing, Russians are devaluing.. everybody wants everything to be different than it is because it is all failing in on them so, hey, a new currency or rate tghtening or loosening or higher taxes or lower taxes .. slective defaults anything just try anything .. we are all freaking doomed.

goldsilber
21st September 2009, 11:50
Wouldn't it be fair to pass along the U.S. bonds they hold to the owners of the derivatives they want to default on for payment.

As far as I know, such owners are agencies of the chinese government. I guess there is no point in passing along US bonds from a government agency to another.

goldsilber
26th September 2009, 10:26
I mean the balls of these people, they want to keep the derivatives that are profitable and default on the ones that are not!!!!


If you are going to be cheated big time (cfr. the assertions of Geithner about the strong dollar policy of the US government...), maybe you'd grow such balls too...

Burticus
26th September 2009, 15:53
Our rebellious little band of gold/silver bugs had the privilege of dining with the all-knowing Mogambo Guru at the local Wing House, surrounded by large-breasted young women who will be forced to join his harem in the Mobambo Bunker of Last Resort (MBOL) after the place no longer accepts FRNs and closes due to the depression since he is the only one with enough silver, guns and food to protect and feed them after the loathsome Fed prints the FRN into the fiat graveyard and fiat Hell, so I know that he would say:

"Everybody knows that I can always be counted on to go ballistic about silver being such a Screaming Freaking Bargain (SFB) because of (according to the most recent Official Mogambo Count (OMC)) more than a dozen very good reasons, which is a lot of reasons, and that at $17-and-change per ounce, silver is loudly saying, “Buy me! Buy me!”

...followed by "We're freakin' doomed!, This investing stuff is easy!! and Hahahaha!!!" in fit of laughter rivaling that of a madman in a straightjacket and padded cell, and an elaboration about why he used three exclamation points!!!

valerb
26th September 2009, 17:32
If you are going to be cheated big time (cfr. the assertions of Geithner about the strong dollar policy of the US government...), maybe you'd grow such balls too...

That's like going 100,000 contracts long on COMEX and going 100,000 contracts short at the same time. So the price of Silver drops $5 and ounce and they want to default of the long contracts and still collect on the short contracts. It can't happen and I can't believe they'll get away with it in the derivatives market either.

Exactly how were the Chinese cheated that every other fool who invested in derivatives wasn't? That's a market that is one big crap shoot and people are getting crap all over their shoes.

It's a good thing we have so little money that we are forced into the physical market only, at least most of us!!

DaleFromCalgary
26th September 2009, 18:09
"It's a good thing we have so little money that we are forced into the physical market only, at least most of us!!"

It isn't just the people with little money who are in the physical market. Ref the Arabs, Russians, and Chinese going for the gold.

I fear little from a derivatives collapse because I'm close to 10% physical gold, aiming at 10% physical silver, have 10% physical conventional oil, 30% real estate (my house, paid off in 1997), and a couple months of preserved food. I'll get by. The question is, how will the Calgarians rushing to buy $600,000 townhouses on nothing down and 35 years of debt survive? (Unlike the USA, Canadian mortgages are recourse loans.)

valerb
26th September 2009, 19:06
"It's a good thing we have so little money that we are forced into the physical market only, at least most of us!!"

It isn't just the people with little money who are in the physical market. Ref the Arabs, Russians, and Chinese going for the gold.

I fear little from a derivatives collapse because I'm close to 10% physical gold, aiming at 10% physical silver, have 10% physical conventional oil, 30% real estate (my house, paid off in 1997), and a couple months of preserved food. I'll get by. The question is, how will the Calgarians rushing to buy $600,000 townhouses on nothing down and 35 years of debt survive? (Unlike the USA, Canadian mortgages are recourse loans.)

What is a recourse loan?

Now that you bring it up, yesterday was one of the best days of my life. I wired Wells Fargo my final mortgage payment. I'm free and clear after four houses and 42 years of mortgage payments. To top off the week, my wife got a $9,100 raise on Monday. No mortgage, no car payment, no credit card debt, just higher taxes. I can't remember the last time we had to file standard deductions, that's going to take a bite out.

maplesilverbug
26th September 2009, 19:17
What is a recourse loan?

Means you can't just walk away.
The corrupt MickeyMounties come after you and take everything you own or will own. No mortgage bailouts in the Great White North.

Congrats on not renting from the bank any longer!

DaleFromCalgary
26th September 2009, 20:05
In Canada, loans (unless agreed otherwise by the lender, not very likely) are recourse, meaning that if you default on a mortgage and walk away from your house, they can go after your other assets and garnishee your wages.

valerb
26th September 2009, 22:50
In Canada, loans (unless agreed otherwise by the lender, not very likely) are recourse, meaning that if you default on a mortgage and walk away from your house, they can go after your other assets and garnishee your wages.

Sounds fair to me. A contract is a contract. I assume you have the ability to file bankruptcy in Canada. Is it the same results if you go that route?

I really don't understand how people here in the US can just walk away from a loan and not have to pay the piper without going bankrupt.

The daughter of one of my wife's employees was upside down in her mortgage and she could afford the payments, but was pissed because the house wasn't worth as much as the mortgage and didn't think that was "fair". So she decided to get some of her money back and stopped making payments and lived rent free for ten months. Her comments, so what if it ruins my credit, everyone is doing it, so how bad can it be.

LETMYSILVERGO
26th September 2009, 23:16
I think i remember hear that they gave a 92 year old guy a 30 year mortage--

heres a plan-- when silver goes-- and u want to buy a home, but the banks likes to know WHERE YOU GOT THE MONEY AND THEY REALLY DO-- SO

you find some one that will sell on land contract & there should be lots of folks looking to sell their house any way they can-- and you just give the seller a little silver each month, and he,she can sell it

Relayer
27th September 2009, 00:04
said: "I really don't understand how people here in the US can just walk away from a loan...."

Relayer: "When it comes to doing business, its amercian as apple pie. Where do you think the chinese got the idea from? Wall Street? Nahhh!!"

Citi sues Morgan Stanley over CDS, claims $245 million

NEW YORK (Reuters) - Citigroup Inc (C.N) sued Morgan Stanley (MS.N) on Friday for breach of contract, saying the Wall Street firm owed it $245.4 million for protection it bought on a loan.

Citibank bought a credit default swap (CDS) from Morgan Stanley & Co International in 2006 on a $366 million revolving credit facility it provided to an issuer of collateralized debt obligations (CDO), according to the complaint filed in U.S. District Court in Manhattan.

The swap obliged Morgan Stanley to pay Citibank the money as a result of a payment default on the credit facility to the CDO, known as Capmark VI, it said in the complaint.

Liquidating the CDO collateral did not cover the entire amount, and Citibank said it exercised its right under the CDS to have Morgan Stanley make up for the shortfall, but it refused, according to the complaint.

Citibank paid Morgan Stanley about $750,000 for the CDS, according to the complaint.

Morgan Stanley could not immediately be reached for comment.

The case is Citibank NA vs Morgan Sanley & Co International PLC, U.S. District Court, Southern District of New York, No. 09-8197


PS.....your example of walking away from futures contracts addresses a very small part of the derivatives problem. It misses the point about the kind of consequences that could be inflicted on the banking system if china decides to retaliate. Think, Lehman Bros, AIG, Bear Stearns, Merrill Lynch, CITIBank, JPMorgan, Morgan Stanley. Think 15 counterparties linked to the same underlying asset!. Think counterparties being forced to come up with more capital than they could ever even dream about!! Over 1 Quadrillion dollars worth and still they are creating them.

Relayer
27th September 2009, 00:19
A.I.G. Bailout Priorities Are in Critics’ Cross Hairs

Article Tools Sponsored By
By GRETCHEN MORGENSON
Published: March 17, 2009

Every day, insurance companies sell policies to homeowners to cover the cost of damage in the case of fire. Why would those companies agree to pay out in full to a policyholder even if a fire had not occurred?

That is the type of question being asked about the federal government’s bailout of American International Group in which the insurance company funneled $49.5 billion in taxpayer funds to financial institutions, including Deutsche Bank, Goldman Sachs and Merrill Lynch. The payments, which amount to almost 30 percent of the $170 billion in taxpayer commitments provided to A.I.G. since its near collapse last September, were disclosed by the company on Sunday.

The company had resisted identifying the recipients of the taxpayers’ money for months, citing confidentiality agreements.

But instead of quieting the controversy, the disclosure of the amounts paid to A.I.G.’s customers has created still more questions and unease over the insurer’s rescue, arranged by the Federal Reserve Bank of New York and the United States Treasury.

Critics argue that the government’s decision to pay buyers of A.I.G. credit insurance in full and across the board was an inappropriate use of taxpayer money. In addition, these people say, options not pursued by the government could have allowed taxpayers to benefit from future gains or at least have done a better job of limiting the potential for losses.

The criticism surrounds the action taken by the government on credit insurance that A.I.G. had written and sold to large and sophisticated investors, mostly financial institutions. The banks that did business with A.I.G. bought credit insurance to protect against possible defaults on debt securities they held or had underwritten.

But when A.I.G.’s credit rating was cut last year, the company was required to post collateral on these insurance contracts. The need to quickly deliver cash that it did not have created the downward spiral that brought it to the brink.

What upsets some people is that the government paid the counterparties in full even though the underlying securities had not experienced widespread, or perhaps even any, defaults.

“It is inappropriate to be giving money to A.I.G. for them to give it out to their counterparties equally,” said Robert Arvanitis, chief executive of Risk Finance Advisors in Westport, Conn., and an expert in insurance. “If we decide that another bank will be in trouble because A.I.G. fails, then we should decide explicitly that the bank should be supported. We should not simply give everybody 100 cents on the dollar.”

When the government bought the underlying securities to cancel the insurance, the taxpayer became the owner of these pools of debt issues. Because the government chose to pay par or 100 percent of the face value, the taxpayer has downside risk if the securities lose value but virtually no upside.

Even if none of the debt securities in the pools experience a default, the taxpayer is likely to receive no more than par — what the government paid — when they mature.

Had the government negotiated for a lower price, say 75 cents on the dollar, the taxpayer might have been able to reap gains down the road.

The top three recipients of money from the government related to the credit insurance A.I.G. had written are Société Générale, a French bank, at $11 billion; Goldman Sachs, at $8.1 billion; and Deustche Bank, at $5.4 billion.

A.I.G.’s disclosure of payments to its counterparties did not provide any details of how the government arrived at the prices it paid for the underlying securities. If it overpaid, the taxpayer is at greater risk of loss and the recipients may have received more than they were due.

Another troubling aspect to some is that so many of the counterparties are foreign institutions. Indeed, of the 22 institutions that have received either collateral from the government or cash payments to close out credit insurance deals, 16 are foreign.

“I find it impossible to understand why we as taxpayers are bailing out foreign banks,” said Thomas H. Patrick, a founder of new Vernon Capital and a former top executive at Merrill Lynch. “If the shoe was on the other foot and major U.S. institutions were exposed to those banks, would the U.K. or the E.U. tax their citizens to pay off JPMorgan? There has to be some explanation of why we decided to do that.”

The decision to protect foreign institutions from losses in an A.I.G. collapse may reflect how interrelated the global financial markets have become. That is the view of Adam Glass, a partner at Linklaters in New York and co-head of the firm’s structured finance and derivatives practice.

“It is an interconnected world,” Mr. Glass said. “If UBS or these French banks collapsed, it is not just their problem. It is our problem because world economic activity would have been further impaired.”

Even though A.I.G. finally disclosed the names of the institutions that received so much of the government money that was thought to be going to A.I.G., the idea that it took six months still rankles some market participants.

“The system was undermined by asking the American people, under the veil of secrecy, to bail out one company when in fact they wanted to bail out someone else,” said Sylvain R. Raynes, an authority in structured finance and a founder of R & R Consulting, a firm that helps investors gauge debt risks. “The prospectus for the bailout was not delivered to the people. And it was not delivered because if it had been, the deal would not have gone through.”

SeekrBrnEvryMin
27th September 2009, 00:35
OK, $24.5B bill to you and me.

The stables were burning. Didn't Congress OK this?

valerb
27th September 2009, 00:37
said: "I really don't understand how people here in the US can just walk away from a loan...."

Relayer: "When it comes to doing business, its amercian as apple pie. Where do you think the chinese got the idea from? Wall Street? Nahhh!!"

Citi sues Morgan Stanley over CDS, claims $245 million

NEW YORK (Reuters) - Citigroup Inc (C.N) sued Morgan Stanley (MS.N) on Friday for breach of contract, saying the Wall Street firm owed it $245.4 million for protection it bought on a loan.

Citibank bought a credit default swap (CDS) from Morgan Stanley & Co International in 2006 on a $366 million revolving credit facility it provided to an issuer of collateralized debt obligations (CDO), according to the complaint filed in U.S. District Court in Manhattan.

The swap obliged Morgan Stanley to pay Citibank the money as a result of a payment default on the credit facility to the CDO, known as Capmark VI, it said in the complaint.

Liquidating the CDO collateral did not cover the entire amount, and Citibank said it exercised its right under the CDS to have Morgan Stanley make up for the shortfall, but it refused, according to the complaint.

Citibank paid Morgan Stanley about $750,000 for the CDS, according to the complaint.

Morgan Stanley could not immediately be reached for comment.

The case is Citibank NA vs Morgan Sanley & Co International PLC, U.S. District Court, Southern District of New York, No. 09-8197


PS.....your example of walking away from futures contracts addresses a very small part of the derivatives problem. It misses the point about the kind of consequences that could be inflicted on the banking system if china decides to retaliate. Think, Lehman Bros, AIG, Bear Stearns, Merrill Lynch, CITIBank, JPMorgan, Morgan Stanley. Think 15 counterparties linked to the same underlying asset!. Think counterparties being forced to come up with more capital than they could ever even dream about!! Over 1 Quadrillion dollars worth and still they are creating them.

That's my point regarding China and their intent to default on some derivatives and not others. If it's too large to deal with now, how in the hell can it be handled if a large or even small number of the losers default. There has to be a balance somewhere or everyone will go down with the ship, instead of most of the ships crew.

My bet is still on the world coming together and voiding all derivatives. 1.4 quadrillion dollars is not a reasonable amount to deal with unless we are going to settle them with Zimbabwe dollars. Greed has started thousands of wars. 1.4 quadrillion dollars, is that enough to start WWIII? I don't even believe the worlds financial system could handle just giving everyone back their original investments, which is just pennies on the dollar if that. It's been spent a long time ago.

What do these investors know that we don't, that are still buying these things?

Relayer
27th September 2009, 01:23
The majority are really just private contracts of insured risk. Here is a link to the bis site......click on #19 for a breakdown into categories.

There are many different types of these things and in several instances the market has dried up. Huge amounts of money are derived from from administrative fees, management fees, underwriting fees, accountant fees, lawyer fees, etc etc. Banks are no longer banks, and depend on these revenue streams to show a profit. I read that AIG is still holding another $180 billion in obligations related to derivatives gone bad. Like the first $180 billion, the money will go to the counter parties and not AIG.

http://www.bis.org/statistics/derstats.htm

valerb
27th September 2009, 01:38
The majority are really just private contracts of insured risk. Here is a link to the bis site......click on #19 for a breakdown into categories.

There are many different types of these things and in several instances the market has dried up. Huge amounts of money are derived from from administrative fees, management fees, underwriting fees, accountant fees, lawyer fees, etc etc. Banks are no longer banks, and depend on these revenue streams to show a profit. I read that AIG is still holding another $180 billion in obligations related to derivatives gone bad. Like the first $180 billion, the money will go to the counter parties and not AIG.

http://www.bis.org/statistics/derstats.htm

That's a nice chunk in Gold, 65 billion and another 18 billion in other precious metals. I would have to assume Silver is a big part of that 18 Billion.

Someday, a lot of that money is coming our way.

DaleFromCalgary
27th September 2009, 08:54
Bankruptcy in Canada means orderly repayment of debts, not total excusement. Some people do get away with it but it's not as easy to clean the slate as one thinks. Also, years later, if you want credit or a loan, the lenders will expect you to repay your previous debts, even if you were released from them by the judge. Bankruptcy works best for corporations, which can cease existence and leave nothing further to chase. Personal bankruptcy can haunt you the rest of your life, especially in this day and age of computer databases that keep your name on file forever. It also depends on how much you owe. Creditors are not likely to spend $20,000 on legal fees to collect $5,000 in bad debts.

LETMYSILVERGO
27th September 2009, 09:19
Bankruptcy in Canada means orderly repayment of debts, not total excusement. Some people do get away with it but it's not as easy to clean the slate as one thinks. Also, years later, if you want credit or a loan, the lenders will expect you to repay your previous debts, even if you were released from them by the judge. Bankruptcy works best for corporations, which can cease existence and leave nothing further to chase. Personal bankruptcy can haunt you the rest of your life, especially in this day and age of computer databases that keep your name on file forever. It also depends on how much you owe. Creditors are not likely to spend $20,000 on legal fees to collect $5,000 in bad debts.

IS IT SNOWING UP THERE YET??? IS YOUR SUMMER ABOUT 8 WEEKS LONG??

maplesilverbug
27th September 2009, 09:44
IS IT SNOWING UP THERE YET??? IS YOUR SUMMER ABOUT 8 WEEKS LONG??

Yes. A full 4/5ths of the Canadian economy is directly based on, or linked to, snow shovels and blowers. We also have a strong periphery economy built on mittens and toques (warm hats). Surprisingly, cold beer is still a big seller during the winter.

Relayer
27th September 2009, 12:42
They okay'd the money. They just didnt know what the government was going to do with it! Smart huh?

Relayer
27th September 2009, 17:24
Banks Made $5.2 Billion From Derivatives in 2nd Quarter
Published: Friday, 25 Sep 2009 | 1:20 PM ET
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By: AP

U.S. commercial banks earned $5.2 billion trading derivatives in the second quarter, as the level of risk eased in the global market for the complex financial instruments, according to a government report released Friday.

Bank

Derivatives, traded in an unregulated $600 trillion market, were partly blamed for the financial crisis that ignited a year ago. The value of derivatives hinges on an underlying investment or commodity — such as currency rates, oil futures or interest rates. The derivative is designed to reduce the risk of loss from the underlying asset. Derivatives trading is dominated by about 20 big banks worldwide.

A total of 1,110 U.S. commercial banks reported trading or holding derivatives at the end of the second quarter, up 47 from the first quarter, according to the Office of the Comptroller of the Currency, a Treasury Department agency. Still, five big banks — JPMorgan Chase [JPM 43.65 -0.72 (-1.62%) ], Goldman Sachs [GS 179.50 -3.56 (-1.94%) ], Bank of America [BAC 16.60 -0.38 (-2.24%) ], Citigroup [C 4.38 -0.05 (-1.13%) ] and Wells Fargo [WFC 28.19 -0.26 (-0.91%) ] — account for 97 percent of the total derivatives reported to be held by U.S. commercial banks.

Relayer: What does it mean when the Fed says these banks are too big to fail? Think derivatives!!


The $5.2 billion in banks' trading revenues in the April-June period was down from a record $9.8 billion in the first quarter, but a decline had been expected and was at least partly due to seasonal changes, the agency said. The second-quarter revenues were the sixth-largest since the agency began keeping records in 1996. Banks earned a total $1.6 billion in trading revenues in the second quarter of 2008.

At the same time, the primary measure of credit risk in derivatives trading — called net current credit exposure — fell $140 billion, or 20 percent, in the second quarter to $555 billion.

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The risk measure has decreased significantly over the first half of this year, "although by any standard these (credit) exposures remain very high," Kathryn Dick, the deputy comptroller for credit and market risk, said in a statement.

The narrowing of the gap between the rates at which banks are willing to lend and what borrowers are willing to pay, indicates that "the (credit) market feels better about the quality" of the banks that trade in derivatives, Dick said in a conference call with reporters.

Credit default swaps, a form of insurance against loan defaults, account for an estimated $60 trillion of the over-the-counter derivatives market. The collapse of the swaps brought the downfall of Wall Street banking house Lehman Brothers about a year ago and nearly toppled American International Group, prompting the government to support the insurance conglomerate with more than $180 billion in aid.

Contracts on interest rates and foreign exchange rates also figure prominently in the derivatives market.

valerb
27th September 2009, 17:48
Bankruptcy in Canada means orderly repayment of debts, not total excusement. Some people do get away with it but it's not as easy to clean the slate as one thinks. Also, years later, if you want credit or a loan, the lenders will expect you to repay your previous debts, even if you were released from them by the judge. Bankruptcy works best for corporations, which can cease existence and leave nothing further to chase. Personal bankruptcy can haunt you the rest of your life, especially in this day and age of computer databases that keep your name on file forever. It also depends on how much you owe. Creditors are not likely to spend $20,000 on legal fees to collect $5,000 in bad debts.

Well at least you don't have debtors prisons, but it sounds close.

maplesilverbug
27th September 2009, 18:35
Well at least you don't have debtors prisons, but it sounds close.

Yup. But...that is also one of the reasons why Canada has not experienced the kind of insane housing bubble mcmerica-mart took part in. Yes, we did have nutty, baseless price spikes, but we didn't have millions of people being granted nutty, baseless mortgages either. And we know what that led to... Hold your citizens a bit more responsible for their actions and they are a bit less likely to steer into the ditch.

valerb
27th September 2009, 21:56
Yup. But...that is also one of the reasons why Canada has not experienced the kind of insane housing bubble mcmerica-mart took part in. Yes, we did have nutty, baseless price spikes, but we didn't have millions of people being granted nutty, baseless mortgages either. And we know what that led to... Hold your citizens a bit more responsible for their actions and they are a bit less likely to steer into the ditch.


I live in the suburbs of Atlanta and we never experienced the housing bubble like many other parts of the country, subsequentially we have not experienced the collapse others are going through. My subdivision has about 200 houses and only one has been foreclosed on and that was because of a nasty divorce. There is only one for sale sign and one property sold in the last year. It could be that a dozen are in foreclosure and we haven't heard about it yet, but all seems normal. Maybe everyone works in the health-care industry or are government employees. That would explain a lot.

JCM6395
27th September 2009, 22:01
Yup. But...that is also one of the reasons why Canada has not experienced the kind of insane housing bubble mcmerica-mart took part in. Yes, we did have nutty, baseless price spikes, but we didn't have millions of people being granted nutty, baseless mortgages either. And we know what that led to... Hold your citizens a bit more responsible for their actions and they are a bit less likely to steer into the ditch.

Well over 90% of Americans pay their mortgages on time. So ease off the caffiene.

maplesilverbug
27th September 2009, 22:05
...only one has been foreclosed on and that was because of a nasty divorce.

That's how I got my house for close to 25% under market price.

Relayer
27th September 2009, 22:15
Nationwide, about 17 percent of FHA borrowers have missed at least one payment or in foreclosure, compared with 13 percent for all loans, according to the Mortgage Bankers Association.

http://www.google.com/hostednews/ap/article/ALeqM5iIR1Kx1yLRRkEydxgSBNqM-YxN3QD9AQEIEG0

SeekrBrnEvryMin
27th September 2009, 22:27
Nationwide, about 17 percent of FHA borrowers have missed at least one payment or in foreclosure, compared with 13 percent for all loans, according to the Mortgage Bankers Association.

http://www.google.com/hostednews/ap/article/ALeqM5iIR1Kx1yLRRkEydxgSBNqM-YxN3QD9AQEIEG0

OK, 87% of all loans paid on time. I would have thought less. Maybe they mean 87% of those who are still in their homes...

JCM6395
28th September 2009, 06:48
Nationwide, about 17 percent of FHA borrowers have missed at least one payment or in foreclosure, compared with 13 percent for all loans, according to the Mortgage Bankers Association.

http://www.google.com/hostednews/ap/article/ALeqM5iIR1Kx1yLRRkEydxgSBNqM-YxN3QD9AQEIEG0

Well then I stand corrected then. Let the panic begin!

goldsilber
28th September 2009, 07:13
I live in the suburbs of Atlanta and we never experienced the housing bubble like many other parts of the country, subsequentially we have not experienced the collapse others are going through.


"Georgian Bank, Atlanta, Georgia was closed today by the Georgia Department of banking and finance making it the 95th FDIC victim of the year and the 19th in Georgia.
To protect the depositors, the FDIC entered into a purchase and assumption agreement with First Citizens Bank and Trust Company, Inc., Columbia, South Carolina, to assume all of the deposits of Georgian Bank.
The five branches of Georgian Bank will reopen on Monday as branches of First Citizens Bank. Depositors of Georgian Bank will automatically become depositors of First Citizens Bank. Deposits will continue to be insured by the FDIC, so there is no need for customers to change their banking relationship to retain their deposit insurance coverage. Customers should continue to use their existing branches until First Citizens Bank can fully integrate the deposit records of Georgian Bank."


19 of 95. More than 20% of the 2009 foreclosed banks in the USA were in Georgia. How do you explain that? (Don't get upset. I'm not challenging you. And don't forget I'm sensitive and insecure.)
Is there now in Atlanta a lot of talking about this bank, or was it a secondary one so that no one is caring about it?

Argyria
28th September 2009, 07:17
19 of 95. More than 20% of the 2009 foreclosed banks in the USA were in Georgia. How do you explain that? (Don't get upset. I'm not challenging you. And don't forget I'm sensitive and insecure.)
Is there now in Atlanta a lot of talking about this bank, or was it a secondary one so that no one is caring about it?

That is a bit weird. 1/5 of all failures in 1/50 of the nation. Different banking practices, or a different population that doesn't trust banks and makes runs on them?

valerb
28th September 2009, 08:56
"Georgian Bank, Atlanta, Georgia was closed today by the Georgia Department of banking and finance making it the 95th FDIC victim of the year and the 19th in Georgia.
To protect the depositors, the FDIC entered into a purchase and assumption agreement with First Citizens Bank and Trust Company, Inc., Columbia, South Carolina, to assume all of the deposits of Georgian Bank.
The five branches of Georgian Bank will reopen on Monday as branches of First Citizens Bank. Depositors of Georgian Bank will automatically become depositors of First Citizens Bank. Deposits will continue to be insured by the FDIC, so there is no need for customers to change their banking relationship to retain their deposit insurance coverage. Customers should continue to use their existing branches until First Citizens Bank can fully integrate the deposit records of Georgian Bank."


19 of 95. More than 20% of the 2009 foreclosed banks in the USA were in Georgia. How do you explain that? (Don't get upset. I'm not challenging you. And don't forget I'm sensitive and insecure.)
Is there now in Atlanta a lot of talking about this bank, or was it a secondary one so that no one is caring about it?

Georgia is loaded with small ma and pa type banks. Two of the three banks we have checking accounts in are both under ten branches each. One of these banks has been bought out by larger banking groups twice and we are still less than ten branches. For that reason, Georgia will in all likelihood continue to head the nation in bank closures. The third bank we are with is Wachovia, now part of Wells Fargo and one of the largest in the country. It may very well be that Wells Fargo will fail before the other two tiny banking groups I'm with. The bank in this article is typical with only five branches.

goldsilber
30th September 2009, 10:29
I mean the balls of these people, they want to keep the derivatives that are profitable and default on the ones that are not!!!!




I still like the concept that was mentioned during the Clinton administration. If we get into serious trouble, we just convert all of the outstanding short term federal notes into 30 year notes.

... speaking about balls...

valerb
1st October 2009, 00:02
... speaking about balls...
"I still like the concept that was mentioned during the Clinton administration. If we get into serious trouble, we just convert all of the outstanding short term federal notes into 30 year notes."

That's a great trick, not as good as what the Chinese are threatening to do with derivatives.

I'd really like the Chinese to follow through with their derivative defaults, that should make for some interesting fireworks. Maybe even start a world wide trade war on top of a quadrillion dollar nightmare. Oh yes, it could really get interesting. Can you imagine how many Americans and Europeans that would be forced back into the labor market, if we had to stop depending on China for everything? No sense waiting for the current financial crisis to settle down before we are drug into another one even larger. I say we have a 1921 style depression, let the chips fall where they may and get on with life. This 1930's approach really sucks for far too many world wide. Let the dollar turn to dust along with most if not all fiat currencies. Gold and Silver will be kings of the hill, if only for a little while.

Watching everything come unglued would be like having ring side seats to the Hindenburg disaster.