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“We Are in a Cabal... Five or Six Players ... Own the Regulatory Apparatus. Everybody Is Afraid to Regulate Them"
Harold Bradley - who oversees almost $2 billion in assets as chief investment officer at the Kauffman Foundation - told the Reuters Global Exchanges and Trading Summit in New York that a cabal is preventing swap derivatives from being forced onto clearing exchanges:
There is no incentive from the moneyed interests in either Washington or New York to change it... I Indeed, as I wrote last May:
believe we are in a cabal. There are five or six players only who are
engaged and dominant in this marketplace and apparently they own the
regulatory apparatus. Everybody is afraid to regulate them.
In at least one area - one of the most important causes of the financial crisis - reform has already been defeated.
By way of background, the derivatives industry has volunteered (once again) to regulate itself.
As Newsweek noted April 10th, the big boys were using bailout money to aggressively lobby against the regulation of credit default swaps:
Major Wall Street players are digging in against fundamental changes.
And while it clearly wants to install serious supervision, the Obama
administration—along with other key authorities like the New York
Fed—appears willing to stand back while Wall Street resurrects much of
the ultracomplex global trading system that helped lead to the worst
financial collapse since the Depression.
At issue is whether trading in credit default swaps
and other derivatives—and the giant, too-big-to-fail firms that traded
them—will be allowed to dominate the financial landscape again once the
crisis passes. As things look now, that is likely to happen. And the
firms may soon be recapitalized and have a lot more sway in
Washington—all of it courtesy of their supporters in the Obama
administration...
The financial industry isn't leaving anything
to chance, however. One sign of a newly assertive Wall Street emerged
recently when a bevy of bailed-out firms, including Citigroup,
JPMorgan and Goldman Sachs, formed a new lobby calling itself the
Coalition for Business Finance Reform. Its goal: to stand against heavy
regulation of "over-the-counter" derivatives, in other words customized contracts that are traded off an exchange...
Geithner's
new rules would allow the over-the-counter market to boom again,
orchestrated by global giants that will continue to be "too big to
fail" (they may have to be rescued again someday, in other words). And
most of it will still occur largely out of sight of regulated
exchanges...
The old culture is reasserting itself with a
vengeance. All of which runs up against the advice now being dispensed
by many of the experts who were most prescient about the crash and its
causes—the outsiders, in other words, as opposed to the insiders who
are still running the show.And today, Treasury gave the financial giants exactly what they wanted. As Bloomberg writes in an article entitled "Wall Street Derivatives Proposals Adopted in Treasury Overhaul ":
Wall
Street’s largest banks are getting what they want in the U.S.
Treasury’s plan to regulate over-the-counter derivatives by making all
market participants adhere to the same capital requirements...
“The
banks appear to wish to maintain the intra-dealer market and raise
barriers to new entrants to keep the OTC business as compartmentalized
as possible and to protect their profitable market conditions,” said Brad Hintz, an analyst at Sanford C. Bernstein & Co. in New York. “The Street’s lobbyists appear to be asking for a ‘club’ structure in OTC trading.”...
The
bank-written plan, titled “Outline of Potential OTC Derivatives
Legislative Proposal” and dated Feb. 13, said the systemic regulator
“shall promulgate rules” requiring “capital adequacy,” “regulatory and
market transparency” and “counterparty collateral requirements.”
Hintz
said Wall Street revenue from trading fixed-income, commodities and
currency swaps in the over-the-counter market may be reduced by 15
percent under the Treasury’s changes. “Limiting
potential competition” in the market “may not be an unreasonable
position to take” by the banks due to the potential loss of income, he
said...
Investment banks fought regulation of OTC
derivatives for more than a decade because the contracts provide a
significant portion of bank earnings.Do you get it?
Instead of "blowing up or burning" over-the-counter CDS - as nobel economist Myron Scholes
urged - or making any other real changes which would help the economy
and the consumer, the rule changes are mainly a p.r. effort by the
derivatives industry itself (like the stress tests were a p.r stunt
by the banking industry.) The "changes" will do virtually everything
the derivatives industry asked for, including guaranteeing the big
banks' profits in selling CDS by keeping out smaller competitors.
Regulation of over the counter CDS has already failed.
And see this.
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It doesn't matter if you regulate or not they are 100 steps ahead of any legislation. They will try to stop regulation and if that doesn't work they will come up with a whole new scheme. These 5-6 players are just instruments to siphon off money for more control through subversive means. Greed is a human character by which most people can be controlled.
Sometimes I wish I could undue everything I've learned in the last 7 or 8 years. Just erase it from my mind and proceed in blissful ignorance. It just gets so depressing sometimes to see how broken and corrupt everything is. What makes it worse is the feeling that there is no cure, no relief, no hope for change or correction.
We are lost. Lost.
Both currency and possibly the entity of the United States of America as we know it is almost certianly doomed in the long term, and for that there is justifiable mourning. I have to choke back tears from time to time reading the posts here, knowing what's coming for the unprepared. But as others here have said, with knowledge comes responsibility - first to your family and those you love, then to your community, then as a new citizen of the new state/country/entity that arises from the rubble (if you choose to stay here - but let's face it, unless you want to go outside the developed world, this is problem that's global in scope and it's going to be extremely hard to run from.)
I have a friend who has a double Master's degree - in epistemology and economics. We're both big fans of the Austrian school, in particular of Von Mises and Hayek. He loves to talk about how "right" Austrian theory is, how if the people in the Fed had not followed Keynesian theory, we wouldn't be in the mess we're in. But I argue he's missing the point - economic theory is useless unless you do something with it now to improve the current situation.
So my question to you is, what are you doing - first as a family member, then as a friend, then as a citizen - right now - to weather the coming storm and position yourself well going forward? Because ultimately, the only thing you have control over is your own destiny.
As Oprah Winfrey once said, "Luck is when preparation meets opportunity."
You must engage. Take your frustration and turn it into action. Everywhere I look I see kindred spirits. The Austrian School of economics and its adherents are more numerous than you think. Prepare for what's coming by engaging in the process of government. It is amazing what can be accomplished at the state and local level by a determined group. Start now.
Absolutely.
Start a Libertarian party chapter. Join a freedom group (e.g. http://www.swarmusa.com ). Check out a tea party (you may be surprised who's there).
Call you rep and tell him to invoke the freaking 10th amendment NOW (read the Constitution!).
And mark my words, when the banks and government have FINALLY been reined in, the burst of pent up creativity and entrepreneurship that will come forth will be astounding to all.
Hell no! Come on, think of the edge you have. Sure you don't have the joy of ignorance but the world is what it is and knowing it gives you a massive advantage. Knowing about the ponzi allows you to try to get out in front of the herd and not stampede off the cliff with them. We in the know, we who understand are these that are truly blessed.
I'm as pessimistic as they come about the future of the USA, but I'm super happy that I can try to steer my future and the future of my family to safety. Sure I would love to fix the whole system but this ship of state is already sinking. Everyone needs to see to their own lifeboat first then help others. If you prepare think of how much worse off you would be if you had remained ignorant.
As DrKrbyLuv wrote last September in response to Is China decoupling from the $530 trillion derivatives time bomb? on the Chris Martenson blog, and I agree:
The international banking cartel was not making enough money via fractional banking and traditional fraud so they had to devise another way to multiply their profits at our expense. The solution, the mega-multiplying notational trading. Why limit yourself to a 10:1 fractional creation when you can bet with ratios like one thousand or one million to one.
Thus the derivatives beast was created. The monster was crafted to remain unregulated and off the balance sheets.
The numbers are staggering and evidently it is "we the people" who are the on the hook for losses in magnitudes of the global GDP. Many have suggested that the plug be pulled on all derivatives, bets off so to speak. Our banking masters want the game to continue and so it looked like we were sitting on a time bomb - extorted to bail-out failing banks in order to keep the derivatives from exploding. If one of the big banks that are major derivative players were to default, the whole system could collapse like dominoes…
With this warning from DKL: END the FED before it ENDS US
http://www.chrismartenson.com/forum/china-decoupling-530-trillion-derivatives-time-bomb/26743
Derivatives, valued at 10x the global GDP, trade in a market worldwide and share a big part of the blame for the ongoing financial crisis. Regulatory oversight of this $684 trillion market is not the answer. This is not investing; it is a big casino for investment bankers and traders throughout the world and would never have been possible without the Fed banking cartel. It is gambling with the assets and future of innocent people. It must be stopped. It would have triggered a collapse of the global economy if the American people had not been put on the hook for its implosion, to the tune of trillions in bank bailouts, lowered standards of living for the average American and the near destruction of America's middle class. Never again!
And lest anyone forget, about 80% of the derivative assets and liabilities carried on the balance sheets of 100 companies reviewed by Fitch in 2009 were held by five banks: JP Morgan Chase, Bank of America, Goldman Sachs, Citigroup, and Morgan Stanley. Those five banks also account for more than 96% of the companies' exposure to credit derivatives.
It CANNOT be stopped!
The real economy is no longer growing but credit MUST GROW.
Thus, the synthetic economy.
It's not actually gambling, it's a symptom of an underlying systemic flaw in the monetary system.
I think you're right. Derivatives enabled ever-increasing leverage, and that leverage enabled the system to continue to grow ever more excessively. This "growth" was desired by dot gov as a means of financing wars of aggression. Now we are faced with a deleveraging event that no one wants to allow, least of all the banks. Fuck the banks.
remember the iraqi playing cards with most wanted? how about a most wanted deck for politicans and one for manipulators
+10
Coalition for Business Finance Reform
Oh, I like that name!
GW, regulation of OTC derivatives may be important, but they are very useful to certain industries. The utilities industry uses OTC derivatives almost exclusively to hedge electricity prices. Use the plant as collateral to make a short position in the market. Since they produce the electricity, they can make good on the short. Pushing all derivatives onto exchange with uniform liquidity requirements would fundamentally change electric power. Google "Utiltied OTC" to read up on this. Push all this onto an exchange and utilities will either have to post collateral or engage in liquidity arrangements with banks. Check Reliant with ML in 2008 and Constellation with Lehman to see evidence.
Us against 5 or 6.... The odds don't look good for them, when are we going to "call them Out".
The opinion of a failed portfolio manager working in a backwater is hardly worth mentioning.
But he happens to be right.
This is a failed state. Time to re-set.
"We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. — That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, — That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness. Prudence, indeed, will dictate that Governments long established should not be changed for light and transient causes; and accordingly all experience hath shewn that mankind are more disposed to suffer, while evils are sufferable than to right themselves by abolishing the forms to which they are accustomed. But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security. — Such has been the patient sufferance of these Colonies; and such is now the necessity which constrains them to alter their former Systems of Government. The history of the present King of Great Britain is a history of repeated injuries and usurpations, all having in direct object the establishment of an absolute Tyranny over these States. To prove this, let Facts be submitted to a candid world."