Three Principal Targets On Wall Street:

MikeK

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(Excerpt)

By Shah Gilani, Capital Waves Strategist, Money Morning

I've already expressed my desire to embrace the Occupy Wall Street movement. I said last week that I would join in whole-heartedly if I knew exactly what the protesters were trying to achieve. But I don't know - and I'm not convinced they do, either.

Still, that doesn't mean we should dismiss them entirely. After all, there are millions of Americans who sense there's something terribly wrong with our capitalist system, but they can't pinpoint exactly what it is either.

But I can.

Bad actors have done bad things to good institutions and our capitalist system. Today, I'm going to let you in on who three of those bad actors are.

You see, part of the problem is that when we think of the "bad guys" on Wall Street, or in Washington for that matter, we don't often think of specific people. We talk about "them" as faceless men we might imagine sitting in luxurious high-rises chewing on cigars and laughing as they rake in millions, or even billions of dollars on the backs of hardworking Americans.

I intend to fix that. I want to shed light on the faces of the people who are gaming the system and lay out before you the tools they're using to get away with it.

So, I'm going to start today with three of the biggest perpetrators of the mess we're in.


The Three Bears
There are hundreds of bad actors on Wall Street, but three in particular tell the inside story of how appallingly corrupt our country has become. They are:


•Robert Rubin, who spent 26 years at Goldman Sachs Group Inc. (NYSE: GS), before becoming Treasury Secretary in the Clinton administration.

•Lawrence Summers, who came out of the World Bank and was Deputy Secretary of the Treasury under his pal Rubin before becoming Treasury Secretary himself in 1999.

•And Phil Gramm, once a practicing economist who served as a Republican Senator for Texas from 1985 to 2002.
These are the men who - with help of then-Federal Reserve Chairman Alan Greenspan - interfered with the Commodities and Futures Trading Commission (CFTC), an important regulatory body, to squash any regulation of derivatives.

And now the notoriously murky derivatives market, which was hugely responsible for the 2008 financial crisis, has grown into a $600 trillion trouble spot for the economy.

This group of very influential and powerful men made sure there was no oversight of derivatives products and markets. None.


(Close)

Read the full article here: These Three Men Represent Everything That's Wrong with Wall Street - Money Morning
 

Katzndogz

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I would just love to see every firm on Wall St close their doors and move out of the country. Go offshore, they can do business on a barge if they decided to. Go to China, India, Moscow if it comes to that. Hand Wall St off as the permanent party site. Fire everyone who worked there right down to the night janitor. Then there won't be anyone to complain about the raw sewage in the street.
 

expat_panama

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I would just love to see every firm on Wall St close their doors...
That's pretty much what they want. The overwhelming bulk of America's personal income comes from the very same corporations that are under siege. The nation is destroying itself and the current regime is leading it.
 

editec

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It's about forking TIME to start naming names.

What happened to our economy was not organic, it happened because powerful players in government and the commercial banking industry created the conditions leading to this economy.

I'd throw Bill Clinton into the pile of folks who have to assume a major part in the responsibility,

Had his administration not prtected the DEREIVATIVES industry from oversight, this meltdown might never have happened in the way it did.

Yes RE would have folded, anyway, but the cascading effect that had on the REST of the economy took the DERIVATIVES market to lead the way.
 

Richard-H

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This economic crisis has happened because 30 years ago Ronald Reagan & Co. started to popularized a free liberatarian ideology. This growing ideology slowly but surely undermined the economy of this country.

In the 50 years before Ronald Reagan, the people knew that pure capitalism was a catastrophic failure and that socialism was just as bad. They concieved an alternative to both - regulated capitalism with limited socialism.

This formula worked - the U.S. became an economic power house as never existed before.

Unfortunately, the conservative movement took advantage of people's greed and stupidity to slowly but surely destroy the American economic system.

You can list hundreds of individuals and individual acts that served their part to destroy our system. But it was the overall the popularity of the liberatarian/conservative ideology during these years that added up to the eventual economic failure that we are experiencing today.

Americans must learn that in a complex industrial society, only a carefully architected balance betwen capitalism, regulation, public-private partnerships and socialism can provide us with a healthy and fair economy.
 

sparky

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It's about forking TIME to start naming names.

What happened to our economy was not organic, it happened because powerful players in government and the commercial banking industry created the conditions leading to this economy.

.
well, for starters, we could stop appointing ex-banksters to official positions in our governance ...~S~
 

sparky

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2nd, people ought to realize just what they've been let to do>

Do you want to know the real reason banks aren't lending and the PIIGS have control of the barnyard in Europe?

It's because risk in the $600 trillion derivatives market isn't evening out. To the contrary, it's growing increasingly concentrated among a select few banks, especially here in the United States.

In 2009, five banks held 80% of derivatives in America. Now, just four banks hold a staggering 95.9% of U.S. derivatives, according to a recent report from the Office of the Currency Comptroller.

The four banks in question: JPMorgan Chase & Co. (NYSE: JPM), Citigroup Inc. (NYSE: C), Bank of America Corp. (NYSE: BAC) and Goldman Sachs Group Inc. (NYSE: GS).

Derivatives played a crucial role in bringing down the global economy, so you would think that the world's top policymakers would have reined these things in by now - but they haven't.

Instead of attacking the problem, regulators have let it spiral out of control, and the result is a $600 trillion time bomb called the derivatives market.

Think I'm exaggerating?

The notional value of the world's derivatives actually is estimated at more than $600 trillion. Notional value, of course, is the total value of a leveraged position's assets. This distinction is necessary because when you're talking about leveraged assets like options and derivatives, a little bit of money can control a disproportionately large position that may be as much as 5, 10, 30, or, in extreme cases, 100 times greater than investments that could be funded only in cash instruments.

The world's gross domestic product (GDP) is only about $65 trillion, or roughly 10.83% of the worldwide value of the global derivatives market, according to The Economist. So there is literally not enough money on the planet to backstop the banks trading these things if they run into trouble
.


Four US banks hold a staggering 95.9% of U.S. derivatives: The $600 Trillion Time Bomb That's Set to Explode
 

editec

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The Real Estate meltdown was the pebble that started the DEREIVATIVES avalanche.

The ONLY reason that the avalanche has not brought dfown the entire banking system is because the FED and TREASURY pledged to backstop these toxic assets with an UNKNOWABLE value.

We haven't really saved the system, we've managed only to keep it suspended from total collapse.

How long we can continue this scam, I don't know.

Sooner or later some nation or some bankster is going to go down, and when they do?

Chain reaction time.
 

expat_panama

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The Real Estate meltdown was the pebble that started the DEREIVATIVES avalanche...
Land we can see and price. We all agree what a mortgage is. "Derivatives" are anything that a loony leftist says it is so it makes a terrific distraction to get people's minds off the disaster wrought by the current Marxist adgenda in Washington.
 

waltky

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The next big global financial crisis? - $1.2 quadrillion in derivatives...
:eek:
Big Risk: $1.2 Quadrillion Derivatives Market Dwarfs World GDP
6/09/10 - One of the biggest risks to the world's financial health is the $1.2 quadrillion derivatives market. It's complex, it's unregulated, and it ought to be of concern to world leaders that its notional value is 20 times the size of the world economy. But traders rule the roost -- and as much as risk managers and regulators might want to limit that risk, they lack the power or knowledge to do so.
A quadrillion is a big number: 1,000 times a trillion. Yet according to one of the world's leading derivatives experts, Paul Wilmott, who holds a doctorate in applied mathematics from Oxford University (and whose speaking voice sounds eerily like John Lennon's), $1.2 quadrillion is the so-called notional value of the worldwide derivatives market. To put that in perspective, the world's annual gross domestic product is between $50 trillion and $60 trillion. To understand the concept of "notional value," it's useful to have an example. Let's say you borrow $1 million to buy an apartment and the interest rate on that loan gets reset every six months. Meanwhile, you turn around and rent that apartment out at a monthly fixed rate. If all your expenses including interest are less than the rent, you make money. But if the interest and expenses get bigger than the rent, you lose.

You might be able to hedge this risk of a spike in interest rates by swapping that variable rate of interest for a fixed one. To do that you'd need to find a counterparty who has an asset with a fixed rate of return who believed that interest rates were going to fall and was willing to swap his fixed rate for your variable one. The actual cash amount of the interest rates swaps might be 1% of the $1 million debt, while that $1 million is the "notional" amount. Applying that same 1% to the $1.2 quadrillion derivatives market would leave a cash amount of the derivatives market of $12 trillion -- far smaller, but still 20% of the world economy.

Getting a Handle on Derivatives Risk

How big is the risk to the world economy from these derivatives? According to Wilmott, it's impossible to know unless you understand the details of the derivatives contracts. But since they're unregulated and likely to remain so, it is hard to gauge the risk. But Wilmott gives an example of an over-the-counter "customized" derivative that could be very risky indeed, and could also put its practitioners in a position of what he called "moral hazard." Suppose Bank 1 (B1) and Bank 2 (B2) decide to hedge against the risk that Bank 3 (B3) and Bank 4 (B4) might fail to repay their debt to B1 and B2. To guard against that, B1 and B2 might hedge the risk through derivatives.

In so doing, B1 and B2 might buy a credit default swap (CDS) on B3 and B4 debt. The CDS would pay B1 and B2 if B3 and B4 failed to repay their loan. B1 and B2 might also bet on the decline in shares of B3 and B4 through a short sale. At that point, any action that B1 and B2 might take to boost the odds that B3 and B4 might default would increase the value of their derivatives. That possibility might tempt B1 and B2 to take actions that would boost the odds of failure for B3 and B4. As I wrote back in September 2008 on DailyFinance's sister site, BloggingStocks, this kind of behavior -- in which hedge funds pulled their money out of banks whose stock they were shorting -- may have contributed to the failures of Bear Stearns and Lehman Brothers. It's also the sort of conduct that makes it extremely difficult to estimate the risk of the derivatives market.

How Positive Feedback Loops Crash Markets
 
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R

rdean

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The Real Estate meltdown was the pebble that started the DEREIVATIVES avalanche...
Land we can see and price. We all agree what a mortgage is. "Derivatives" are anything that a loony leftist says it is so it makes a terrific distraction to get people's minds off the disaster wrought by the current Marxist adgenda in Washington.
After deregulation and an accounting scandal at Freddie/Fannie, more than 70% of the mortgage market was moved to Wall Street, who handed out mortgages to anyone who could sign their name.

These mortgages were bundled together, and sold overseas as "securities". The securities were insured against failure. Of course they failed. They were created to fail. So the deregulated Wall Street could collect on that insurance. That's why they are called "derivatives". Why the fuck do you think insurance companies went under???????????????

This scam just brought down the world economy and you are questioning whether or not it even exists?????????????????????????????

What the fuck is wrong with you people?????????????????????
 

expat_panama

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...more than 70% of the mortgage market was moved to Wall Street, who handed out mortgages to anyone...
Interesting.

Something else is that 98.4% of the numbers on these threads are made up with no basis in fact, link/sources, nor supporting data. In the mean time we've got most of America working for a living versus a powerful faction controlling the White House and the Senate that's settled into a parasitic attachment to the working host.
 

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