5 Years After the Financial Crisis, The Big Banks Are Still Committing Massive Crimes

[Kimura]

I'm responsible for a large portfolio of illiquid investments. Our accountants don't think they're worthless.

But if your bank has illiquid assets you think are worth $0, PM me and maybe we can strike a deal.

I was trying to be a wise ass. It didn't work.

Seriously, though, many of the banks I mentioned have a boatload of illiquid assets. Many speculators and buyers aren't exactly lining up to purchase these assets. And there's the derivatives issue, which is problematic as I'm sure you'd agree.

I was trying to be a wise ass. It didn't work.

You're right, you came off as a dumbass, by definition.

Seriously, though, many of the banks I mentioned have a boatload of illiquid assets.

Doesn't make them insolvent.

And there's the derivatives issue, which is problematic as I'm sure you'd agree.

Why is it problematic?

These banks have yet to move the toxic assets hidden in their SIVs back on their books.

They are insolvent. They exist as wards of the state when we really think about it. As a matter of fact, they've been insolvent for many years, carrying these toxic assets around, having had their equity capital wiped out back in 2008, with obligations greater than actual assets, etc. We call them zombie banks for a reason.

Derivatives permit bullshit accounting practices, distort markets, massively increase risk, massively increase leverage and debt ratios, and they dupe people into believing they can actually remove risk from the equation.

 

[Toddsterpatriot]

I was trying to be a wise ass. It didn't work.

Seriously, though, many of the banks I mentioned have a boatload of illiquid assets. Many speculators and buyers aren't exactly lining up to purchase these assets. And there's the derivatives issue, which is problematic as I'm sure you'd agree.

I was trying to be a wise ass. It didn't work.

You're right, you came off as a dumbass, by definition.

Seriously, though, many of the banks I mentioned have a boatload of illiquid assets.

Doesn't make them insolvent.

And there's the derivatives issue, which is problematic as I'm sure you'd agree.

Why is it problematic?

These banks have yet to move the toxic assets hidden in their SIVs back on their books.

They are insolvent. They exist as wards of the state when we really think about it. As a matter of fact, they've been insolvent for many years, carrying these toxic assets around, having had their equity capital wiped out back in 2008, with obligations greater than actual assets, etc. We call them zombie banks for a reason.

Derivatives permit bullshit accounting practices, distort markets, massively increase risk, massively increase leverage and debt ratios, and they dupe people into believing they can actually remove risk from the equation.

These banks have yet to move the toxic assets hidden in their SIVs back on their books.

Which ones? Be specific.

They are insolvent.

having had their equity capital wiped out back in 2008

They raised capital since then.

with obligations greater than actual assets, etc. We call them zombie banks for a reason.

The reason is usually based on your feelings, not facts.

 

[Kimura]

These banks have yet to move the toxic assets hidden in their SIVs back on their books.

Which ones? Be specific.

BofA, Goldman, Citi, JPMorgan Chase.

They are insolvent.

having had their equity capital wiped out back in 2008

They raised capital since then.

Without the discount window and government guaratees, they'd be out of business. Done. Over. Finito.

with obligations greater than actual assets, etc. We call them zombie banks for a reason.

The reason is usually based on your feelings, not facts.

Right....derivatives played no part in the financial crisis. I'm clearly talking out my ass. They don't make control fraud easier, nor do they distort markets. How dare I!

 

[Toddsterpatriot]

These banks have yet to move the toxic assets hidden in their SIVs back on their books.

Which ones? Be specific.

BofA, Goldman, Citi, JPMorgan Chase.

They are insolvent.

having had their equity capital wiped out back in 2008

They raised capital since then.

Without the discount window and government guaratees, they'd be out of business. Done. Over. Finito.

with obligations greater than actual assets, etc. We call them zombie banks for a reason.

The reason is usually based on your feelings, not facts.

Right....derivatives played no part in the financial crisis. I'm clearly talking out my ass. They don't make control fraud easier, nor do they distort markets. How dare I!

BofA, Goldman, Citi, JPMorgan Chase.

They still have SIVs out there? Are you sure?

Without the discount window and government guaratees

Ancient history. They aren't borrowing from the Discount Window now. Haven't for many years.

Right....derivatives played no part in the financial crisis.

Which banks failed because of derivatives?

I'm clearly talking out my ass.

Pretty much.

 

[Kimura]

They still have SIVs out there? Are you sure?

Yes, there are still SIVs out there

Ancient history. They aren't borrowing from the Discount Window now. Haven't for many years.

I think Goldman had to go to the discount window five times. The last time was in 2011 if I'm not mistaken

Which banks failed because of derivatives?

Banks are bigger then ever, and they continue to trade derivatives in the same fashion as they did before the crash, but on a much bugger scale with the same risks. We're talking 700 trillion worth of derivatives and zero transparency.

If we learned anything from 2008, we learned that you can lose a big percentage of the notional amount in derivatives if things go south, specifically if these bets are linked, which results in other losses by other firms as well.

 

[Toro]

Illiquid assets are worthless by their very definition; that's why they're illiquid.

I'm responsible for a large portfolio of illiquid investments. Our accountants don't think they're worthless.

But if your bank has illiquid assets you think are worth $0, PM me and maybe we can strike a deal.

I was trying to be a wise ass. It didn't work.

Seriously, though, many of the banks I mentioned have a boatload of illiquid assets. Many speculators and buyers aren't exactly lining up to purchase these assets. And there's the derivatives issue, which is problematic as I'm sure you'd agree.

We certainly are. Dodd-Frank and Basel are forcing banks to rid themselves of non-core and problematic loan books. They're still playing extend and pretend in Europe, but stuff is starting to shake loose, including CMBS and RMBS. Parts of the market are frothy, i.e. large syndicated loans, but pockets of both the performing and distressed markets are still very attractive on a risk-adjusted basis.

 

[Toddsterpatriot]

They still have SIVs out there? Are you sure?

Yes, there are still SIVs out there

Ancient history. They aren't borrowing from the Discount Window now. Haven't for many years.

I think Goldman had to go to the discount window five times. The last time was in 2011 if I'm not mistaken

Which banks failed because of derivatives?

Banks are bigger then ever, and they continue to trade derivatives in the same fashion as they did before the crash, but on a much bugger scale with the same risks. We're talking 700 trillion worth of derivatives and zero transparency.

If we learned anything from 2008, we learned that you can lose a big percentage of the notional amount in derivatives if things go south, specifically if these bets are linked, which results in other losses by other firms as well.

Goldman Sachs Group Inc. (GS) tapped the Federal Reserve’s discount window at least five times since September 2008, according to central bank data that contradict an executive’s testimony last year.

Goldman Sachs Bank USA, a unit of the company, took overnight loans from the Federal Reserve on Sept. 23, Oct. 1, and Oct. 23 in 2008 as well as on Sept. 9, 2009, and Jan. 11, 2010, according to the data released today. The largest loan was $50 million on Sept. 23 and the smallest was $1 million on the most recent two occasions.


Goldman Borrowed From Fed Discount Window at Least Five Times, Data Show - Bloomberg

Today, there is far less leverage. The off-balance-sheet units, such as the so-called structured investment vehicles, are a thing of the past. Moreover, the banks can no longer dictate the rules by which they are governed.

Five years on, big US banks are back | Business Spectator

We're talking 700 trillion worth of derivatives and zero transparency.

There isn't $700 trillion worth of derivatives out there and I noticed you left out the list of banks that failed because of derivatives.

 

[Kimura]

I'm responsible for a large portfolio of illiquid investments. Our accountants don't think they're worthless.

But if your bank has illiquid assets you think are worth $0, PM me and maybe we can strike a deal.

I was trying to be a wise ass. It didn't work.

Seriously, though, many of the banks I mentioned have a boatload of illiquid assets. Many speculators and buyers aren't exactly lining up to purchase these assets. And there's the derivatives issue, which is problematic as I'm sure you'd agree.

We certainly are. Dodd-Frank and Basel are forcing banks to rid themselves of non-core and problematic loan books. They're still playing extend and pretend in Europe, but stuff is starting to shake loose, including CMBS and RMBS. Parts of the market are frothy, i.e. large syndicated loans, but pockets of both the performing and distressed markets are still very attractive on a risk-adjusted basis.

Complex accounting rules have magnified the problem. Using lawyers and accountants, banks can find ways around regulations while remaining within the law so to speak. Since rules have grown increasingly complex, they've ended up giving banks the ability to avoid giving investors the information they need to make decisions based on the the bank's portfolio and risk.

We need to break up the big banks and return to Glass-Steagall. If we don't, we both know we're in for more of the same.

 

[Kimura]

They still have SIVs out there? Are you sure?

Yes, there are still SIVs out there



I think Goldman had to go to the discount window five times. The last time was in 2011 if I'm not mistaken

Which banks failed because of derivatives?

Banks are bigger then ever, and they continue to trade derivatives in the same fashion as they did before the crash, but on a much bugger scale with the same risks. We're talking 700 trillion worth of derivatives and zero transparency.

If we learned anything from 2008, we learned that you can lose a big percentage of the notional amount in derivatives if things go south, specifically if these bets are linked, which results in other losses by other firms as well.

Goldman Sachs Group Inc. (GS) tapped the Federal Reserve’s discount window at least five times since September 2008, according to central bank data that contradict an executive’s testimony last year.

Goldman Sachs Bank USA, a unit of the company, took overnight loans from the Federal Reserve on Sept. 23, Oct. 1, and Oct. 23 in 2008 as well as on Sept. 9, 2009, and Jan. 11, 2010, according to the data released today. The largest loan was $50 million on Sept. 23 and the smallest was $1 million on the most recent two occasions.


Goldman Borrowed From Fed Discount Window at Least Five Times, Data Show - Bloomberg

Today, there is far less leverage. The off-balance-sheet units, such as the so-called structured investment vehicles, are a thing of the past. Moreover, the banks can no longer dictate the rules by which they are governed.

Five years on, big US banks are back | Business Spectator

There still in business precisely because of the bailouts. Get it?

There isn't $700 trillion worth of derivatives out there and I noticed you left out the list of banks that failed because of derivatives.

The OTC derivatives market has a notional value of at least 700 trillion dollars as of 2013.

Um, dude, derivatives were one of the primary causes of the 2008 financial crisis.

 

[Toddsterpatriot]

Yes, there are still SIVs out there



I think Goldman had to go to the discount window five times. The last time was in 2011 if I'm not mistaken



Banks are bigger then ever, and they continue to trade derivatives in the same fashion as they did before the crash, but on a much bugger scale with the same risks. We're talking 700 trillion worth of derivatives and zero transparency.

If we learned anything from 2008, we learned that you can lose a big percentage of the notional amount in derivatives if things go south, specifically if these bets are linked, which results in other losses by other firms as well.

Goldman Sachs Group Inc. (GS) tapped the Federal Reserve’s discount window at least five times since September 2008, according to central bank data that contradict an executive’s testimony last year.

Goldman Sachs Bank USA, a unit of the company, took overnight loans from the Federal Reserve on Sept. 23, Oct. 1, and Oct. 23 in 2008 as well as on Sept. 9, 2009, and Jan. 11, 2010, according to the data released today. The largest loan was $50 million on Sept. 23 and the smallest was $1 million on the most recent two occasions.


Goldman Borrowed From Fed Discount Window at Least Five Times, Data Show - Bloomberg

Today, there is far less leverage. The off-balance-sheet units, such as the so-called structured investment vehicles, are a thing of the past. Moreover, the banks can no longer dictate the rules by which they are governed.

Five years on, big US banks are back | Business Spectator

There still in business precisely because of the bailouts. Get it?

There isn't $700 trillion worth of derivatives out there and I noticed you left out the list of banks that failed because of derivatives.

The OTC derivatives market has a notional value of at least 700 trillion dollars as of 2013.

Um, dude, derivatives were one of the primary causes of the 2008 financial crisis.

The OTC derivatives market has a notional value of at least 700 trillion dollars as of 2013.

I bet $10 on the Bears game. My bet has a notional value of about $2.2 billion. So what?

Um, dude, derivatives were one of the primary causes of the 2008 financial crisis.

So it should be easy for you to find a list of banks that failed because of them, right dude?

 

[Kimura]

I bet $10 on the Bears game. My bet has a notional value of about $2.2 billion. So what?

Oh gawd.

So it should be easy for you to find a list of banks that failed because of them, right dude?

Sure, Lehman and AIG come to mind.

 

[Toddsterpatriot]

I bet $10 on the Bears game. My bet has a notional value of about $2.2 billion. So what?

Oh gawd.

So it should be easy for you to find a list of banks that failed because of them, right dude?

Sure, Lehman and AIG come to mind.

Notional value still confuse you?

Lehman and AIG weren't banks. Lehman didn't fail because of derivatives. Try again?

 

[Kimura]

Notional value still confuse you?

Not at all

Lehman and AIG weren't banks. Lehman didn't fail because of derivatives. Try again?

Um, sorry to burst your bubble, derivatives were intricately involved in the Lehman debacle.

Lehman: One Big Derivatives Mess

The fallout from the bankruptcy of Lehman Brothers

 

[Toddsterpatriot]

Notional value still confuse you?

Not at all

Lehman and AIG weren't banks. Lehman didn't fail because of derivatives. Try again?

Um, sorry to burst your bubble, derivatives were intricately involved in the Lehman debacle.

Lehman: One Big Derivatives Mess

The fallout from the bankruptcy of Lehman Brothers

Thanks for the link. Of course nothing in there backs up your claim.

The thing about Lehman is they had an enormous bond potfolio.
They funded it with overnight loans. They got in trouble, the bonds dropped in value.
No one wanted to loan them money anymore, they went bankrupt.
It had nothing to do with losses on derivatives.