Is a new crisis looming ?

[CultureCitizen]

Yes, if you're going to claim that a few billion in potential losses is going to cause banks with TRILLIONS IN EXCESS RESERVES to become insolvent, your lack of backup information makes your claim opaque.

Trillions ? JPMorgan which is one of the big banks has only 163 Billions
JPMorgan Chase may need another 20 billion after Fed sets new rule - Fortune
Do you have any source to support your statement?

I'm not sure what is the exact leverage of oil companies, they've been sustaining losser for several years. Sure enough they have sufficient capital to withstand the oil prices at the current level for several quarters, but if this prices are maintained for mor than a year it could be catastrofic.

 

[Toddsterpatriot]

Yes, if you're going to claim that a few billion in potential losses is going to cause banks with TRILLIONS IN EXCESS RESERVES to become insolvent, your lack of backup information makes your claim opaque.

Trillions ? JPMorgan which is one of the big banks has only 163 Billions
JPMorgan Chase may need another 20 billion after Fed sets new rule - Fortune
Do you have any source to support your statement?

I'm not sure what is the exact leverage of oil companies, they've been sustaining losser for several years. Sure enough they have sufficient capital to withstand the oil prices at the current level for several quarters, but if this prices are maintained for mor than a year it could be catastrofic.

Trillions ?

Yes. Federal Reserve Member banks have over $2.5 trillion in excess reserves.
You think that's a sign that the banking system will collapse and need a bailout? LOL!

JPMorgan which is one of the big banks has only 163 Billions

Sounds like they're on the edge of insolvency.

Do you have any source to support your statement?

Sure enough they have sufficient capital to withstand the oil prices at the current level for several quarters, but if this prices are maintained for mor than a year it could be catastrofic

Some of the smaller producers will go under. Others will merge or be bought out.
Billions will be lost by investors, bond holders, even banks.
It's hardly comparable to the housing crisis.
And in the mean time, the drop in oil prices is a huge benefit to the vast majority of consumers and businesses.

 

[CultureCitizen]

And in the mean time, the drop in oil prices is a huge benefit to the vast majority of consumers and businesses.

The losses will be greater than the beneffits...But, fair enough , you provided the proof of the reserves. So I'll agree with you regarding the posibility of another bank crash . The risk is a lot smaller than 6 years ago.

 

[Toddsterpatriot]

And in the mean time, the drop in oil prices is a huge benefit to the vast majority of consumers and businesses.

The losses will be greater than the beneffits...But, fair enough , you provided the proof of the reserves. So I'll agree with you regarding the posibility of another bank crash . The risk is a lot smaller than 6 years ago.

The losses will be greater than the beneffits...

We consume much more oil than we produce. The benefits of lower prices are greater than the benefits of higher prices.
It's not even close.

So I'll agree with you regarding the posibility of another bank crash . The risk is a lot smaller than 6 years ago.

Glad to improve your understanding.

 

[CultureCitizen]

The losses will be greater than the beneffits...

We consume much more oil than we produce. The benefits of lower prices are greater than the benefits of higher prices.
It's not even close.

So I'll agree with you regarding the posibility of another bank crash . The risk is a lot smaller than 6 years ago.

Glad to improve your understanding.

An article I've just read has changed my estimate of the damage this oil collapse could cause.

Oil Plunge Can Trigger Subprime Debt Crash

"The International Energy Agency (IEA), in a report of July 29, 2014, made clear that since 2008, the oil industry has been borrowing about 20% of the cash it needs, or about $100 billion a year, net new debt. Its total debt has rocketed to about $1.6 trillion, with revenues of under $600 billion a year at $110/barrel average. If the oil price remains in the $60-70 range, that would become $1.6 trillion in debt based on less than $400 billion in revenues—a ratio perilously close to the definition of “unsecured leveraged lending” in banking terms."

"Whether the debt collapse will be mini or maxi, may be determined in the markets for $20 trillion in commodity derivatives exposure. About $4 trillion of that exposure is energy commodity derivatives exposure of the half-dozen largest U.S.-based banks. And because the shale energy producers have bought derivatives contracts from these banks to protect themselves against a plunge in oil prices, there is good reason to believe that the big banks’ $4 trillion energy derivatives exposure consists largely of bets in the wrong direction now."

Now we are in the trillions scale on both ends : junk assets and bank capital.

 

[Toddsterpatriot]

The losses will be greater than the beneffits...

We consume much more oil than we produce. The benefits of lower prices are greater than the benefits of higher prices.
It's not even close.

So I'll agree with you regarding the posibility of another bank crash . The risk is a lot smaller than 6 years ago.

Glad to improve your understanding.

An article I've just read has changed my estimate of the damage this oil collapse could cause.

Oil Plunge Can Trigger Subprime Debt Crash

"The International Energy Agency (IEA), in a report of July 29, 2014, made clear that since 2008, the oil industry has been borrowing about 20% of the cash it needs, or about $100 billion a year, net new debt. Its total debt has rocketed to about $1.6 trillion, with revenues of under $600 billion a year at $110/barrel average. If the oil price remains in the $60-70 range, that would become $1.6 trillion in debt based on less than $400 billion in revenues—a ratio perilously close to the definition of “unsecured leveraged lending” in banking terms."

"Whether the debt collapse will be mini or maxi, may be determined in the markets for $20 trillion in commodity derivatives exposure. About $4 trillion of that exposure is energy commodity derivatives exposure of the half-dozen largest U.S.-based banks. And because the shale energy producers have bought derivatives contracts from these banks to protect themselves against a plunge in oil prices, there is good reason to believe that the big banks’ $4 trillion energy derivatives exposure consists largely of bets in the wrong direction now."

Now we are in the trillions scale on both ends : junk assets and bank capital.

An article I've just read

A Larouche article? LOL!

About $4 trillion of that exposure is energy commodity derivatives exposure of the half-dozen largest U.S.-based banks.

I doubt the figure is that high.

And because the shale energy producers have bought derivatives contracts from these banks

Let's examine the "logic" behind this claim. Banks lend to small shale producers. The banks don't want the producers to default because of a drop in oil prices, so they insist the producer hedge their production at the high price of a few months ago. For instance, a producer might have entered into a contract to sell 20,000 barrels per day at $100 a barrel for 360 days. Now, if the price of oil tanks, the bank can still be assured that the producer makes enough to pay the loan.
The producer is hedged. But now the bank is unhedged.
Why would the bank feel safer by transferring the price risk from the borrower to themselves?

 

[CultureCitizen]

Why would the bank feel safer by transferring the price risk from the borrower to themselves?

Maybe not to themselves but to another bank.

and the paranoid part :

Citigroup Wrote the Wall Street Giveaway The House Just Approved Mother Jones

http://www.nytimes.com/2014/12/12/b...ve-to-aid-big-banks-in-funding-bill.html?_r=0

So , if there is no risk that the banks will need another bailout due to a failing derivatives market , then why push this funding bill ?

I hope I am wrong , but when it looks like a skunk and acts like a skunk and smells like a skunk...

 

[Toddsterpatriot]

Why would the bank feel safer by transferring the price risk from the borrower to themselves?

Maybe not to themselves but to another bank.

and the paranoid part :

Citigroup Wrote the Wall Street Giveaway The House Just Approved Mother Jones

http://www.nytimes.com/2014/12/12/b...ve-to-aid-big-banks-in-funding-bill.html?_r=0

So , if there is no risk that the banks will need another bailout due to a failing derivatives market , then why push this funding bill ?

I hope I am wrong , but when it looks like a skunk and acts like a skunk and smells like a skunk...

Maybe not to themselves but to another bank.

Or maybe to themselves and then to the futures exchange. Profitably.
The most likely scenario is the banks hedged their clients then hedged themselves and made money on the deal.

So , if there is no risk that the banks will need another bailout due to a failing derivatives market , then why push this funding bill ?

Why would they need a bailout on a small portion of their business with trillions in excess reserves?
Why would they want to repeal a portion of an idiotic, harmful law?

 

[CultureCitizen]

Why would they want to repeal a portion of an idiotic, harmful law?

Please clarify . I am sure that from the bankers perspective the law was idiotic and harmfull.
From the average taxpayer perspective ... not that much.

 

[HenryBHough]

In oil-patch areas skookum landlords dumped their rental properties the day oil went below $100/bbl.

Too late now.

Save enough to buy stamps to mail the keys to the bank.

 

[Toddsterpatriot]

Why would they want to repeal a portion of an idiotic, harmful law?

Please clarify . I am sure that from the bankers perspective the law was idiotic and harmfull.
From the average taxpayer perspective ... not that much.

Please clarify . I am sure that from the bankers perspective the law was idiotic and harmfull.

From our economy's perspective as well.
Dodd and Frank wanted to punish banks for their derivatives trading because not a single bank went under from derivatives. They'd rather not punish them for their mortgage positions, because they (Dodd, Frank, Fannie & Freddie etc.) were to blame for some of the stupidity they pushed to increase homeownership.
Now Obama wants to lower standards again to encourage new home buyers.
Banks make money trading. Dodd and Frank want to reduce bank trading.
They want banks to hold more reserves, then they whine that banks aren't lending enough. Ridiculous.