Ratigan On A "Theft Driven Derivative Economy Supported By Trillions Of Dollars Of Taxpayer Money"

Tyler Durden's picture

Dylan Ratigan sums it better than any financial analyst has been able to do so far: "giving people $23 trillion in taxpayer money, especially the banks, it makes their stock price go up."

And some observations on the Chairman's Moral Hazard Doctrine: "Ben Bernanke said he would print an unlimited amount of money, against the future of our taxpayer, that's why our dollar continues to collapse, to support the banks which is working pretty well."

Dylan: CNBC misses your optimism.

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Veteran's picture

Screaming at a wall

Enkidu's picture

At least he's screaming...

Anonymous's picture

The deadly derivative default cabal...

faustian bargain's picture

Can someone point me to a link that tallies up that $23T? I have heard it challenged other places; but being ignorant, I just want to verify it for myself.

faustian bargain's picture

ok, the Barofsky estimate came out in July...is there any update since then? I mean, my gut tells me it's coming true, but is there some evidence or logic supporting the notion that the $23.7T number will be maxed out?

Thanks again

Anonymous's picture

What if the next 'lehman' is the United States of America?

Cheeky Bastard's picture

is that a rhetorical question ?

Cognitive Dissonance's picture

I can't remember where I read (about 6 years ago) what I'm about to present so call it my opinion. But the article was laying out the case that the cost to "fix" each major banking crisis since the "Year of our Fed" (1913) increases each time by a factor of 20. The article then went into detail about each major crisis and the "cost" to live another day.

So it seems fitting that the S&L crisis wound up costing $1.2 Trillion and this time around we are hearing $23.7 Trillion.


Anonymous's picture

The argument against these numbers was that this was a "worst-case scenario" where everything melted down at once, but IMO that misses the point entirely. I don't see how anyone with a conscience could justify ANY business, much less banks and investment firms, having a $23.7 trillion line of credit on the taxpayers' wallet.

The fact that the Obama administration didn't strangle this in the crib is proof enough that they are bought off the same way the Bush administration was. Now that their hedge bet that unemployment would stabilize at 8% and they cold credit the "stimulus" for being the cause has been blown ot of the water, holding that line of credit in place to keep the stock market going up is all they have left.

Well, that and keeping their fingers crossed that it all doesn't come apart at the seams during the next 3.25-7.25 years.

Cognitive Dissonance's picture

Personally I think Obama promised NOT to strangle this in the crib and that was why Obama suddenly jumped in the poles, had a lot more money and the media started kissing his feet.

Let's think about this. When did most financially aware people begin to see that this "crisis" was much bigger and potentially much more destructive then even we had thought it would be in late 2007.

I know I had been expecting serious problems since 2005 but it was very late in 2007 when I began to think it could go beyond my worse case scenario.

And when did Obama suddenly become a real contender to Hillary and when did the media start treating him as the next savior. I distinctly remember there was a thrust forward for Obama. Before that point, he was 3rd or 4th in line.

Come on people, help me out here. We all know Presidents aren't elected, they are made.

Cheeky Bastard's picture

just read his unofficial biography and take note who was his first employer. nuff said ...

Cognitive Dissonance's picture


I know you're ahead of the curve. I'm trying to get other people caught up. To get them thinking. I've done a lot of research on Obama, including reading Webster Tarpley's unofficial bio, and Obama isn't what he says or appears to be.

As Webster says, the ultimate Manchurian Candidate.

Cheeky Bastard's picture

yes CD i know; but you need to know that the Obama worshipers who see in him a reincarnation of Baby Jesus will say that we are crazy conspiracy theorist, and that Ariana Huffington is the source and stream of all knowledge. These fanboys are ready to die for him if he says them to. That is the scary part; he is their hero, their Jesus; but propaganda methods distinct him not from Hitler; and his Goebbels is Brzezinski. Unfortunately i will get flamed for expressing this, but i really don't give a shit. It is the truth.

Cognitive Dissonance's picture

Then let them flame me as well because I agree. I've been watching him since his keynote speech at the Democratic convention in 2004 (I think that was the one).

I was watching his campaign rallies during the Summer last year and I watched very carefully the eyes and body language of many of the people attending. It reminded me of religious revival meetings, not a gathering of inspired political followers.

I come into contact with many followers of Obama and they simply can not see any flaws in their man. They are too emotionally invested to do so. I would say they are desperate to find someone to fix what's wrong with the world.

But here is the key. His followers want Obama to fix the country without them having to suffer at all. In fact because they are true believers, they should be rewarded for their loyalty.

I studied totalitarianism and appeasement in the world for the 30 years that led up to and surrounded Nazi Germany. The parallels are frightening. 

sgt_doom's picture

I believe (seriously, I'm not making this up) it was after his meeting with the CEO of UBS and he was given their official seal of approval.

Then his polls really shot up....

Anonymous's picture

right....the 23.7t usd represents loc or promises
provided to myriad beneficiaries which if exercised
would lead to a total 23.7t....

it represents more potential unfunded liabilities....

at this point it appears unlikely that the full
23.7t will be drawn upon but we are still in the
depression and we have no idea whether more of that
money will be required....i think the most likely
estimate is 2-4t which is an enormous amount
of fascist funding for an elite group of banksters
with broken business models....

why should the taxpayer support fraud and incompetence?
he shouldn't and the people should take to the
streets and start lynching politicians and
banksters....the raping and pillaging is precisely
what the vandals, ostrogoths and other barbarians
did to rome...

Anonymous's picture

A trillion here a trillion there whats it matter? They'll make more ink.

Cheeky Bastard's picture

combination of speed and acid does that ...

Gilgamesh's picture

CB - read this today and thought it was something you might enjoy, if you haven't so far:


Anonymous's picture

Thanks for this book link last week.

I finished it just now.
It has changed my perspective on the world more than "Atlas Shrugged" affected Reagan.

JohnKing's picture

  OCC’s Quarterly Report on Bank Trading and Derivatives Activities
                                     Second Quarter 2009
Executive Summary
  •  The notional value of derivatives held by U.S. commercial banks increased $1.5 trillion in the second
     quarter, or 0.7%, to $203.5 trillion.
  •  U.S. commercial banks reported revenues of $5.2 billion trading cash and derivative instruments in the
     second quarter of 2009, compared to a record $9.8 billion in the first quarter.
  •  Net current credit exposure decreased 20% to $555 billion.
  •  Derivative contracts remain concentrated in interest rate products, which comprise 85% of total
     derivative notional values. The notional value of credit derivative contracts decreased by 8% during the
     quarter to $13.4 trillion.




Benny could end up printing a lot more than 23T, the banks create these dollars with side bets and "exposure" but the dollars don't really exist until something goes wrong and Benny bails out his criminal friends. Screw him, this is ridiculous.


Joeman34's picture

Notional value is misleading when discussing derivative exposure as many trades are offset with opposite trades, canceling exposure.  Net exposure is the important figure and is a small fraction of the notional, though I don't have specific numbers to offer...

MinnesotaNice's picture

I believe notional value is pertinent because all derivative trades and their offsets are not going to be equally distributed throughout the system... hence the net exposure may vary widely between institutions... and if a big bank is loaded up on the wrong end of the trade it could be the domino that starts the cascade... and they all fall down... because clearly many have not set aside enough reserves to cover some of these derivative trades.   The spread between the notional value and net exposure of the entire system gives us an idea how likely it is the first domino could fall... and how quickly chaos could result.

Anonymous's picture

exactly....while there is some merit to the
preceding argument your comments are the most
pertient because in a tbtf economy the worst
case scenario is highly relevant....my life is
now affected by the corporate communism and
as a backstop for this these extortionist companies
i consider black swan scenarios the the most

sgt_doom's picture

"..many trades are offset with opposite trades, canceling exposure.."

But the weak point to that comment is what happens upon a bankruptcy of say....Lehman Bros?????  Trillions of dollars worth of opposite trades, which now have not only NOT cancelled exposure, but have reintroduced the major risk!

sgt_doom's picture

"Benny could end up printing a lot more than 23T..."

Great point, JohnKing, as JPMorgan, GS, Citi and Morgan Stanley have continued derivatives trading (of questionable value, etc.).  There will be a neverending glut of worthless CDSes, naked swaps, and on and on.....

Anonymous's picture

Here's the source doc for that figure. I can't recall where the money table is in this, but it's in there.


sgt_doom's picture

This is an incomplete list of just some of the Fed's free money/bailout disbursement funds (total equals approximately $13 trillion to $14 trillion):

1. Maiden Lane, LLC (I and II) For Bear Stearns bailout.

2. Term Auction Facility (TAF)

3. Central Bank Liquidity Swaps (CBLS)

4. Primary Dealer Credit Facility (PDCF)

5. Term Securities Lending Facility (TSLF)

6. Term Securities Lending Options Program (TOP)

7. Asset-Backed Commercial Paper MMF Liquidity Facility (AMLF)

8. Commercial Paper Funding Facility (CPFF)

9. Money Market Investor Funding Facility (MMIFF)

10. Term Asset-Backed Securities Loan Facility (TALF)

11. Outright ownership stake in AIG

12. Numerous other "loans" to JPM, Citi and BofA after the Lehman Bros. collapse

13. Outright monetization of Fannie/Freddie MBS and debt

14. Outright monetization of U.S. Treasuries

15. Expansion of TALF to support Treasury/FDIC/Fed program to offload dead, toxic "assets" from banks.

This congress critter mentioned clearinghouses to "solve" the problem --- but these clearing houses (ICE US Trust) always seem to be owned by Goldman Sachs, JPMorgan, Morgan Stanley et al. --- peculiar how I don't find this a trustworthy solution!

buzzsaw99's picture

Pretty funny actually.

Sancho Ponzi's picture

It's real estate doom and gloom at the Huff Post. Is it me, or does their website look like it was designed by Ozzy Osbourne? 


Anonymous's picture

It's not just you. Whenever I go over there my computer grinds to a halt. Too many widgets, links, popups, sales pitches; it tries to be the Fed of news digest sites, giving us everything we don't want. Drudge template (and Zed Hedge) is best - simple.

Whizbang's picture

Sorry to get off topic here, but denninger just posted this. Check it out!




If this stands a precident, this could result in some of the largest lawsuits in history. Also, it means that 50% of the feds balance sheet is worthless. GREEN ShOOts!

TumblingDice's picture

thats what I thought would happen. Long wouldn't change his decision now that things have gotten so much better. This is huge and I'm not quite sure what happens now that this decision is affirmed. I will surely piss off a lot of people and it isn't that certain that the ruling will be readily enforced. It has got to get appealed ...somehow. Anyways the law is the law and while we may lose valuable GDP points when we enforce it, it is still worth it for the stability and confidence in our economy ...and stuff.

Whizbang's picture

If I were a securieties attorney, I would be salivating like crazy right now. This means that literally trillions of dollars in securities were sold fraudulently to investors. It's crazyness.

Cognitive Dissonance's picture

This, or another similar ruling, will eventually make it's way to the supreme court. And I have little doubt that once it gets there it will be struck down because the supreme court understands who has bought and paid for it and where it's bread is buttered.

As crazy as that may sound, the supreme court has a very long history of siding with the government in times of great economic stress. Perhaps more importantly, it understands and supports our economic system and those who make (and benefit from) the rules. The supreme court is just as corrupt as the rest of American government.

When the rich and powerful have their backs against the wall, the supreme court has (and will again) supported them. The court will most certainly let individual or small groups of powerful people crash and burn but not the entire class. Won't happen. And a ruling such as this would hurt the class.

The only wild card here is if the powerful are able to completely off load these "endangered" toxic loan assets to the taxpayer. Then the supreme court will not over turn it, letting the taxpayer take the bath. Some engineered inflation will do the rest. 

The "supremes" as I affectionately call them have egos as big as you and I and they also socialize. And they don't socialize with the middle class but with the rich and powerful. They will not wish to be known as the ass holes who destroyed a couple of Trillion dollars of the rich and powerful assets. So much better to let the taxpayer pay the freight.

It would be very easy to rule against the lower courts on a technicality, forcing these cases to be settled. Years later, another case comes to the court and suddenly the court does the right thing and says "Oops, my bad."

Of course, Humpty Dumpty can no longer be put back together again but justice is eventually served. Except for all those who were screwed by their first ruling. Who says life is fair when you're poor, unemployed and have no power?

Welcome to the Banana Republic of the United States of America.


Zé Cacetudo's picture

"off load these "endangered" toxic loan assets to the taxpayer."

Couldn't that be one of the (hidden) goals of dumping residential MBS garbage into the money market funds?

Cognitive Dissonance's picture

My thought exactly when I read they were planing to mine the MM funds.

MinnesotaNice's picture

Since there are very few funny things in this entire economic mess... I find this very humorous... I bet even Long chuckled a little bit to himself before he affirmed his decision... thank god for the judicial branch... it should be fun to watch the big players scramble and desperately try to but the 'shredded mortgage docs' back together... piece by tiny piece... :-) 

Miles Kendig's picture

The Orange County firms docs are already sold off to Russia and China.. Good luck for them!

MinnesotaNice's picture

Is that true Layne (sorry... I'm with Cheeky... you'll always be Layne) ... if so that is even funnier... good luck with the paste and glue if you don't even have all the pieces  :-)

Miles Kendig's picture


Full packet info ID sells for a buck a copy.  Did you really think New Century or Quick Loan Funding would pass this up going out the door?  Heck, Colonial, IndyMac, WaMu, Golden West.. The list is long.  First lose them to protect from fraud charges and this.  ROFLMAO X 10K +!

BTW, I dream of having that kind of amplitude, but I am just a humble writer of shady governmental/corporate happenings.  )

Miles Kendig's picture

MnN, besides, I can just imagine the hustle & bustle at JPM & WFC over who is holding the post merger bag.  I wonder if JPM remembered to have the FDIC retain it in the WaMu deal.  If not then the fallout could be sompthin'

TumblingDice's picture

I may just be paranoid...indeed I know I am...but I still have wonder what else has been sold off to beyond our borders:


chet's picture

What are the practical implications?  That these people can't be foreclosed on?  If that's the case, then I wish my mortgage had been carved up and sold off.