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Is Citi The Next AIG?
Earlier today, when we were conducting a routine check with the Office of the Currency Comptroller's on the total notional amount of derivatives held at the Big 4 banks in the context of the "JPMorgan break up" story, we found something stunning: using the latest, just released Q3 OCC data, JPMorgan is no longer America's undisputed derivatives king. Well, it still is at the HoldCo level, where it is number one in terms of notional derivatives with $65.5 trillion, but when one steps a level lower, namely the FDIC-insured commercial bank (the National Association or N.A.) level, something quite disturbing emerges. This:
As the chart above, which references Table 1 in the Q3 OCC report, shows Citigroup, or rather its FDIC-insured Citibank National Association entity, just surpassed JPM and is now the biggest single holder of total derivatives in the US. Furthermore, as the charts below show, while every other bank was derisking its balance sheet, Citi not only increased its total derivative holdings by $1 trillion in Q2, but by a whopping, and perhaps even record, $9 trillion in the just concluded third quarter to $70.2 trillion!
Here is Citi in context:
What is the reason for the surge in total derivative exposure? was it futures, options, forward or CDS? Neither. The answer: OTC traded swaps...
... which soared by $5 trillion in Q2 and over $8 trillion - or a massive 20% in just one quarter - in Q3 to a whopping $49 trillion, $16 trillion more than the OTC swaps held by JPMorgan or Goldman Sachs, and more than double the swaps held by Bank of America!
And that's not all: perhaps what is most bizarre is that Citigroup is the one bank whose HoldCo holds less derivatives, or $64.8 trillion, than its FDIC-insured N.A. OpCo which has $70.3 trillion in derivative notional exposure. For those wondering: this was not the case in the second quarter when the HoldCo ($61.8 trillion) held more derivatives than Citi's FDIC-insured bank ($61.1 trillion).
Then we started thinking:
Citigroup... swaps... Citigroup... swaps...
and a lightbulb click, because we remembered that it was none other than Citigroup that crafted the legislation on the swaps push-out provision which passed Congress without nary a peep from either side of the aisle, and which put taxpayers on the hook for FDIC-insured derivative exposure - and in Citi's own case a soaring $70 trillion as of September 30, 2014:
We also revealed that, not surprisingly, the main backer of the bill is notorious Wall Street puppet Jim Himes (D-Conn.) the man BusinessWeek branded "Wall Street's Favorite Democrat" who also happens to be a former Goldman Sachs employee.
And yet, despite all these critical recollections, many questions remains, such as:
- Why does Citi's FDIC-insured bank suddenly have more derivative notional exposure than its HoldCo: something which is generally without precedent?
- Why, when every other Big 4 bank is derisking its balance sheet and reducing its derivative exposure in light of far more stringent capital requirements, is Citigroup adding to its derivative notional and swap exposure at an unprecedented, feverish pace, which saw the bank boost its OTC Swaps holdings by 20% in just one quarter?
- When Congress was voting for the swaps push-out legislation, the Q3 OCC data was not yet publicly available. Was anyone in Congress aware that some $9 trillion had been added to the tally of taxpayer insured derivatives held at Citibank NA as of September 30.
- What is Citigroups and Citibank's total derivative and total swap exposure as of December 31, and has it continue to soar at a rate of roughly $10 trillion per quarter?
And perhaps most impotantly: what is the underlying trade that requires Citigroup to keep adding to its swap exposure at a time when increasing volatility is forcing all other banks to unwind swaps in order to minimize VaR and be in compliance with Fed capitalization requirements?
And then another lightbulb went over our heads: the last entity to do this was, drumroll, JPMorgan, in early 2013, just before its London whale trade imploded and when the bank's attempt to corner the IG9 market failed miserably but not before JPM's CIO trading desk doubled down, then doubled down again and doubled down some more taking their total derivative exposure to several hundred billion... before it all came crashing down.
Now, we are not saying Citigroup is in the same boat as JPM's infamous CIO which led to congressional hearings and what not - especially since $250 billion was manageable; $50 trillion will not be - but we do wonder: just what is going on behind the massivaly margined scenes if Citi is following every page in the London Whale book and on top of everything it also had to lobby and petition Congress to change the law just so whatever it is that Citigroup is doing, it could continue to do, and what's more: with explicit taxpayer-funded backing.
Which leads us to the final question:
- Is Citigroup about to become the "New Normal" AIG?
Source: OCC
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I recommend they panic.
Break up the larges 25 banks with none of them being any bigger than the 26th largest bank.
Sherman Anti-trust!
Reading the endless conspiracy theories and vulgar, knee-jerk rants on this blog, one comes away with the impression of a group of angry prepers and zit-faced teenagers projecting their dissatsfaction onto the world by blaming senior and respected politicians and business leaders for every ill in the world. No wonder this blog isn't taken seriously by resputable media outlets and investment professionals. This oweners of this website and thier readers need to do some serious work on their credibility, or they risk becoming completely marginalised.
I'm over 50 years old, single, and I live in my Mom's basement.
Good to see MDB has not lost his touch in the new year.
MOAR IS BETTER....BIGGER IS EVEN MOAR BETTER
Congress is a bunch of fools
Well, this is just great. Had a discussion with my colleagues today how crappy this whole economic "science" is. Some folks have spent dozens of years writing economics books, students spend years studying supply and demand etc. I mean, for god's sake, look at the oil price and try to define the moves with supply/demand or any other bull**it. The bottom line is that when some folks want Citi or oil price to go down then they will go down. We, including myself, are just useful idiots as one guy long time ago said. But at least it is nice to make a smart face and try to look like we know what is going on.
In the time of the Roman Empire, the rich used chicken entrails to divine the future (beware the Ides f March), today they use 'charts' and 'algorithms'. The Romans got to eat the chickens so they have some advantage over the current lunacy.
Looks like some bonuses are in order.
It's almost as if Citi knew a law would come along and let them off the hook.
MDB you are needed on the Congress thread.
BTW, how was it when you first arrived in DC? Everything you dreamed?
https://www.youtube.com/watch?v=VI6tBwVjyOY
MDB you are needed on the Congress thread.
BTW, how was it when you first arrived in DC? Everything you dreamed?
https://www.youtube.com/watch?v=VI6tBwVjyOY
I'm surprised Cit hasn't taken on $750T in derivitives.
@RegularJoe
Robert Kiyosaki is spot on in this interview. This collapse that the doomers have been warning about ad nauseam is not a financial problem, but an educational problem.
The education system is stuck in the Agrarian Age and teaches Industrial Age concepts that are obsolete. Our politicians are Industrial Age minded trying to solve Information Age problems.
The schools are lacking a FINANCIAL education, and that is why we have so many problems in society.
http://youtu.be/MQbhemM8_JA?t=7m6s
Might want to bone up on a bit of Charlotte Iseybut.
The educational system is as designed.
You mean Charlotte Iserbyt.
Just watched Robert Kiyosaki -- Good stuff, Yellen must have read his books. She said same thing, poor hard working people just need to get some assests so they can have an income even when they lose their job. Geniuses.
https://www.youtube.com/watch?v=zvc1js9m-iY
"We, including myself, are just useful idiots ..."
When you stop being useful, its time to panic. Can't get by these days just being an idiot.
This is a Great Catch (and analysis). Christopher Story used to rail against CITI as the actual center of all that's wrong with the Bankster shift. Thus, any oddity of large sort, and this is large sort, must be suspected by me of being fundamental to the character of shady operations. Dig away Tylers! This is why I read ZH.
Damn blasted CITI got its pass the buck legislation through, too...
Shame on the American people...
Well it is not the Morgue selling them to Citi.
The real point is who is selling them to Citi?
GS is getting lighter and the Citi is getting heavier.
GS is setting Citi up like they setup Lehman...
Citi is "dead man walking" and GS will tell the US when to kill it and have the taxpayers get back on QEn.
Interesting point
My money is still on DB as the "sucker" not Citi.
If I'm fearful of another currency collapse in say...Brazil...I would be putting my money in Citigroup.
GS shines JPM's shoes...and that's where the debt problems all lay. Chicago, Texas, "commodity speculations"...that's GS buying from JPM in my view.
Plus JPM, BofA and MS have huge brokerage businesses now.
GS is a minnow in that ocean.
Might get some good opportunities to buy GE really cheap here...
The Cocksuckers are deliberately going to default and they know it! But $70 Trillion can't be backed up by anyone so something very smelly is being planned inside the US Government. Nobody can survive this bankruptcy and it's going to blow up the derivative market and everything linked to it.
*** They are planning to sink Citi in this in a global default, but GS and some of the others are planned to survive! ***
The Federal reserve GAO report showed that Citi in 2008 recieved like a $1.7 Trillion bailout. However official numbers were only 1/100 of that amount.
"Well it is not the Morgue selling them to Citi.
The real point is who is selling them to Citi? "
The FED.
The FED has been selling Interest Rate Swaps for years.
There comes a point, and I think we have reached it, when the money being sloshed around in the derivatives 'market' becomes so large that it is meaningless.
Fer crissake what does 70 trillion mean? $10 for every man woman and child on earth held by one company!!!.
The whole thing is ridiculous and cannot continue. But when it all comes crashing down, guess who will be maimed by the flying debris.
Wrong, 70 trillion US$ ( 7.10^13, 70.000 billion, or 70.000.000.000.000 ) divided by 7 billion people makes 10.000 US$ per head of the world population. Fasten your seatbelt when all THAT comes crashing down. And these are the derivatives exposures of 1 bank ONLY, there are others around ....
Sooo sorry kids, not my exposure......... oh wait.........
Remember how they changed the Bankruptcy Law just before the Mortgage Meltdown brought about Bankruptcies. As for Increases in Derivatives, sure, now that its clear losses go on the Taxpayers Tab, after the winners get 100 cents on the dollar
Hendrick,
Omigod, you are right. I got my billions and trillions all mixed up.
Now its beyond ridiculous, its terrifying.
Mandel,
There are only 7 Billion people by which to divide - so it's $10k per person.
for someone who uses fractals as a profile pic and refs Mandebrot as a handle, it's kinda funny to see him stumble over a 2rd grade division problem. i couldn't help but laugh.
Aww, give him break. I mean really, what are a few decimal places between friends?
sliderulez
You guys are merciless, but I deserve it.
If you can get beyond focussing on my math blunder, the fact remains that the amount of money controlled by just one or two TBTF banks is insane. When this house of cards comes down, there is no way in hell the system can be saved.
There just isn't enough money in the whole world to bail out even one of these banks.
Wars have begun over much less.
+1.....bullish Max2205
Yes , but well within the price range of the average middle class american, at least untill they are indoctrinated .
"Good to see MDB has not lost his touch in the new year".
Back tanned, rested and ready!..
-now that was refreshing.
Funny that MDB only raises his head to stomp any stories that might contain a glimmer of truth in conjecture. I am guessing MDB is an elitist beneficiary of Obummer's .001% status quo and has disdain for the burdened masses who speak out against the unfair crony system.
As a staunch liberal, I was appalled until I read that Jim Himes backed the bill to bail out these banks derivatives exposure. Since then, I am all for it because we just need more democrats, preferably those with dual citizenship.
You make a good point my friend. Unlike many of my brothers on the left, I have always taken a strong stance in favor of government measures to support our financial system. We on the left want to help the needy, provide for the choice-less, helpelss poor, and make a real difference in the world. If we want to continue to make progress at the same rate as we have over the last 50 years, we need to ensure that the institutions underlying our economy are strengthened and reinforced in every way possible. A strong economy rests on a strong financial system, a healthy agricultural sector, a booming housing market, and well-financied government departments with happy, satisfied public servants. Each and every one of these pillars must be nurtured and supported, so that we have a strong economic, moral and social framework on which to build our future.
MDB you are needed on the Congress thread.
BTW, how was it when you first arrived in DC? Everything you dreamed?
pods
MDB is the ultimate "poo flinging monkey".
MDB+Liberal=IJustCame
but most important is that he gets his million dollar bonus.
otherwise, cancel all that benevolence and rape the poor.
MillonDollarBoneUs There, fixed that handle for you.
The two of you tag-teaming this thread has left me in tears.
I'm so happy I'm crying.
“The powers of financial capitalism had (a) far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent meetings and conferences. The apex of the systems was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world’s central banks which were themselves private corporations. Each central bank…sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world.”
Carroll Quigley, member of Council on Foreign Relations (CFR), mentor to Bill Clinton, quote from “Tragedy and Hope”, 1966
I think I need to pull that book back out and reread it, as it's obviously very topical right now.
We're being eaten alive in slow motion. I wish the fantasy in which MDB dwells really existed... a lot of people are too cowardly to face the truth.
You just gave a description of the situation we are NOT in today. We are now in the situation as described in Ayn Rands book, "Atlas shrugged", where all able people have grown so demotivated by all this redistribution bullshit they just quit their jobs and disappear, with as a consequence an economy coming to a complete standstill.
Albeit a novel, but the high level producers chose their own time to exit and accepted their kindred when they chose to leave, on their own terms, often pennyless, ready to start building again on their own terms.
I hardly think that government driven. fairy dust financed derivative manufacturing masters of the universe would be welcome into the Colorado enclave.
Not put very succinctly, not even my own thought, but a strong statement that I got from somewhere:
All things of value come from the ground.
Demotivation is an excuse for failure.
The problem with Atlas Shrugged is that Ayn's work of fiction claims that "producers" will just up and quit one day, and the "parasite" working class will all rot.
That's beyond absurd and totally assbackwards because the "productive" class enjoys this system.
The Waltons have more wealth than the bottom 150 million Americans COMBINED. Their business model is heavily dependent on corporate welfare and tax breaks, and their consumers use EBT to shop in their stores.
The Fortune 500 loves the way this economic system is, that is why they constantly lobby for it. the gap between the Randian "producers" and we the useless employee class is widening by the day, yet ZHers will cry foul when the minimum wage goes up a measly 15 cents an hour.
It's like what planet are these Ayn followers living on? They constantly have an axe to grind with the Fed, yet their policies reflect Objectivism quite well considering Greedscam was a butt buddy protege of Ayn.
Too much doublethink gives me a headache around here.
And the part about an engine that draws energy from thin air - I found that totally unbelievable. It's almost as if Atlas Shrugged was completely a work of fiction!
Yep.
I've noticed your posts before I think... keep posting doc... you make sense.
MDB for president.
Foodstamps for all the hungry people in the world!
And a government job for all the unemployed!
Is he trolling or writing Obummer's speeches?
You're new... this is one of the biggest mega-trolls on ZH for the last several years. Best fit for what you'll see from him: what's described in Poe's Law
He isn't a troll. He is a comic genius.
That's your best work of the year, and it will be tough to top. Well done sir!!
Yeah, but they're OTC deriviatives that are regulated, so everything's cool. Move along. Nothing to see here.
I'm over 50 years old, married with children, and dug out a basement under my moms house which we now live in. We hope to upgrade the dirt floor to concrete later on this year...
If you can afford the "extra expense" of reinforced concrete, maybe there's the possibility of a "sub-basement", that you might even be able to sub-let (so creating a black-market revenue stream?? :-) )
If nothing else, a two-level basement might be quite a good living environment - "a little like a 2-storey house, but underground". No windows? That's what those big flat screen TVs would be excellent for - "A room with a (fake) view" - http://www.planar.com/products/lcd-video-walls/
I guess you're saying no zits, eh?
Is your mom single?
You don't like this website the GTFO.
And the drag screams as MDB hooks another one!
pods
I feel it's my duty to educate and enlighten the misguided. Most of them won't listen, but maybe, just maybe, some of them will see the light, and that is worth the world to me. Nothing in this world is more rewarding helping people distinguish truth from falsehood, right from wrong, and good from evil. This is my purpose in life, and this is my calling. And that, my friends, is why I am here today talking to you.
Ah, so you've become the resputable one...
He better coin that one quick.
#resputable
With MDB there are no accidents.
Then why the NEED for Derivative/Insurance?
MDB, that post is as ironic as a hipster with style. Carry on.
Haha you sound like a child abuser going to the church.
I see the light MDB.... Like a bright nuclear flash.
MDB=Tokyo Rose.
He is more like Comical Ali
https://www.youtube.com/watch?v=yfAeMtcURg0
I have read a lot of MDB's posts, and it looks like it's not the same person as before...
Agreed, the style is a bit off, but the brain-dead left wing thought patterns are the same.
It's like Spartacus... We are all MDB...
you are repeating yourself. brain-dead and left wing are synonymous.
Was the underscore always there?
has been for years, yes.
There have been a few versions of MDB.
I think the original was MillionDollarBaby. In any case, inferior trolling so far. The MDB of months past would of been way more over the top, but with that aroma of actually sounding like he/she knew wtf was going on.
I would love to meet this MDB fella...if he is a real person. Not sure that he is.
Interesting point. Algor ithems are very AI now.
We stimulated some folks by putting a light bulb in their ass
Didn't know I asked for your help. My IQ is north of 170, Ph.D. in chemistry, and pretty freaking self-reliant as I grew up dirt poor in Southern Iowa in the 60s and 70s.
So I politely ask that you ease your mind and don't worry about my enlightenment. I'm sure I'll get by on my own with the help of family and friends - the only way I'll have it.
MGO
Not a good screen name........Just sayin........
.
That's what's great about MDB. He generously offers help to those who need so much help that they don't even recognize their own need for help. He's building up a ton of good karma, and it's accredited karma.
With credentials like that, you'll certainly understand where he's coming from and agree with his philosophy. MDB hammers the point that, in any given field or subject, you should take advice only from accredited experts.
You can't go wrong with that.
Marginalization is getting a margin call
Another masterpiece in sarcasm.
I love us.
MDB makes me want to become a troll....
.
...but first, are you accredited?
Have you ever been accredited?
Well, he has...
https://www.youtube.com/watch?v=RK8N6DjJccc
Haha I can only laugh in your face. Million dollar Bonus I guess youre a wannebee? If the FED gets it their way you can buy a box of cheap cigars for that. Assuming you are not extremly dumb and did not bother to verify the facts posted in this blog I guess you have a monetary stimulus to post his kind of crap.
Oh, I think there's a much bigger stimulus at work here, farmboy.
Good to see you posting more frequently.
FDIC was changed to OAP seven years ago you fucking monkey turd- LOL!!! MDB shows up right before the shit blows up in the liberal retards faces.
Prepare!!
Not one fact in your post to support your point of view. Why bother? Zit faced teenagers and angry preppers require information to form an opinion.
How nice to have MillionDollarBonus back. Nobody does deadpan humor as well as he does.
'senior and respected politicians' lol
What's the matter? Afraid break up the banks might get traction?
BTW -- What respected business leaders are you referring to? The ones that are too big to jail?
MillionDollarBonus_
The dryness of your sarcastic wit never gets old; thanks for contributing.
"No wonder this blog isn't taken seriously by resputable media outlets and investment professionals."
They didn't take Cassandra seriously, either.
I remember when Bernanke said it was confined to sub prime. It wasn't. Did any of the reputable media outlets question Bernanke's comment at the time? Do they question Yellen's comments, or do they just quote them and go on to the next story?
Corporate malfeasance didn't come out in the reputable media, until the Nasdaq crashed. Same with the housing bubble. It will be the same this time around, too.
Zero Hedge is ahead of the curve, not behind it, like the reputable media.
I always enjoy reading MDB's comments and the shitstorm of replies of those who fail to see the sarcasm.
"Resputable" media outlets?? LOL.....fuckin' dumbass.
MDB: "Reading the endless conspiracy theories and vulgar, knee-jerk rants on this blog... This owners of this website and their readers need to do some serious work on their credibility, or they risk becoming completely marginalised."
The most interesting part of MDB's blog is not his comments themselves, but the roughly 40:60 split it generated.
If I were Tyler's Marketing specialist, I'd use this as a signal that the ZH demographics is changing to allow for a Segmentation to occur. For lack of a better word, I'll call it ZH and ZH-lite. Where the former has serious market & finance articles, and the latter is aimed more at a socially and politically interested audience. The ads would also differentiate and be more attracted to one audience or the other.
Personally I'm attracted to ZH for the former, but either put up with or indulge in a bit of the latter when in a cynical or pissy mood. I know of a number of people who are basically aligned with ZH views, but are turned off by the vulgar responses, and therefore do not take ZH as seriously as they otherwise would. One exec I know, stated that ZH has devolved into a financial National Enquirer, and would therefore not recommend it to his peers for that reason. Ouch!
Food for thought.
For my money, MDB's bang is in his humor value per se.
But your thought has me wondering twice at the appearance--out of the mists of time--of the actual Tyler Durden icon Itself. Haven't seen that one in a verrrrry long time.
Sent my heart aflutter! I was wondering if the new corporate borg (which I don't complain about much aside from the onslaught of shit ads) had not gotten that in its apparent purchase of the place.
This article is definitely the good shit, though, imo.
Classic ZH.
"resputable media outlets"??
I think you meant Rasputable media outlets...
MDB how I have missed your educated and enlightening comments. Welcome back MDB how I miss my daily laughs. Too bad we cannot get a good comment from robotrader to make my day complete.
"Reading the endless conspiracy theories and vulgar, knee-jerk rants on this blog, one comes away with the impression of a group of angry prepers and zit-faced teenagers projecting their dissatsfaction onto the world by blaming senior and respected politicians and business leaders for every ill in the world. No wonder this blog isn't taken seriously by resputable media outlets and investment professionals. This oweners of this website and thier readers need to do some serious work on their credibility, or they risk becoming completely marginalised".
You are spot on with this statement. Unfortunatley I can't believe I agree with you for once. The comments on this site are mostly repetitive sarcasm and with little to know thought. Not even a few years ago is was one great read. It's almost like all the veterans left, not before telling kids and preppers to go check out zero hedge. Freaking college class rebellion now.
In a long enough time line all good things turn to sh!t....
You can always start with yourself. Contribute good comments and others will post good comments too.
Not a single congressman read the bill prior to signing and all the other Banks thought is was a great idea until they find out that CITI is ready for Government takeover further screwing up the whole recovery story.
So MillionDollarBonus_ why do you even read the articles or comment ? You are argumentative by birth and spend lots of time finding people that you do not agree with to pick fights. You are really depressed and this is your only form of human contact and you found by agreeing you do not get enough attention. You are a paid shill for the FED or CIA, whether you know it or not. You are an IVY league Professor bored out of your mind with the poor academics of your pupils. Anyone else have reasons why a healthy person would exhibit this form of behavior.
Try Gardening or even join a Garden club
OMG...there's a "reputable media outlet" out there???
We scape-goated some folks...
Make that not just banks, but all 25 corporations, public and private, to be smaller than the 26th corp. Thugs, all of them.
Do we break up the largest 25 banks once or every year? If we do it every year it will only take a few year to have all banks no bigger than the local credit union.
William, you da man....I love your work. Fuckan brilliant!
Looking more and more like Jim Willie nailed it with his prediction that 2015 is the year that the END GAME finally arrives...
Sept. 13.
Shemitah.
LaGarde...7's.
Not to worry. Those trillions are backed by the American taxpayer, so its all good.
Really and just how are they going to collect it.
Its clear that derivatives are something the bankers get hooked to like coke-ain.
Easy pickins and bad endings. Hand and glove.
Derivatives do produce unlimited blow and hookers to the bankers, well until they don't and need us here to bail them out. As a slave, I personally find it useful that I can help my fellow banker with those pursuits when called upon.
They just want to make sure congress puts everybody in the blast zone, the money version of mutual assured destruction with the village idiot holding the launch codes. In the very worst case scenario it could even take down the Fed which would almost make it worthwhile.
It is very simple, as Reggie would say, their margins are tightly compressed on all of their customary services. The only way they can get scale and leverage to pay for their fat fucking bonuses is by selling derivatives.
Well William,
compression leads inevitaby to repression of opposites, as the boomerang of popular reaction comes back with a vengeance that nobody wants to meet head on : duck you suckers!
That's where a master of ceremonies of the absurd like you comes into his own.
The more one squeezes the fleece of sheeple the more one becomes the Leviathan; dancing on the head of a needle with an ass the size of a T-rex !
When does THAT bubble burst?
Jurassic park goes ISIS on the run (along with its paymasters who have no tinsel curtain to protect their mad dogs hiding the civilized string-puller).
When bubbles froth beyond their imposed limits.
Maybe in Greece ! Now that would be a return to origins !
I recommend they swap them out for physical Gold.
Bullish!
So, go all in Citi?
Check. Whole stack buy order for Citi
Remind me again...how much doese the FDIC have to cover....ahem..losses?
~$100bln
pre-recession i would have been seriously pissed at recent legislation backstopping TBTFs casino bets
now? of course, we're going to bail them out ... again. Might as well get it done in orderly fashion (rather than dropping market 500 points a day till legisaltors see the "light" ... ala TARP)
Bail them out how? The derivitives market is so large that the entire world economy couldn't bail them out if things really tank.
Unless they bail them out with more derivatives. I mean there's not limit right?!?!
Jubilee is the only derivatives bailout mechanism, and M&A afterwards (guided and mandated of course).
It's all OK. I don't have the money either.
Please please please please....Pretty please.
Tylers, I discovered the notional amount of derivatives a few years ago when I was getting sued by a TBTF. I was well aware of the whole N.A. thing, because under the laws that they are chartered, they get to export their state's usury rates. (That's a dirty bit of business, with lobbying states, such as SD to change their usury laws to the bank's benefit, but that's another story.) Cramming these things into their NA FDIC insured subsidiaries is not new.
Q1, 2011: http://www.occ.gov/topics/capital-markets/financial-markets/trading/deri...
They're in the NA subsidiary. Same as with JPM and BofA. This was even so in Q1, 2001.
http://www.occ.gov/topics/capital-markets/financial-markets/trading/deri...
But none the less, I'm glad that you're pointing out that they're crammed into subsidiaries that are "insured" by the FDIC, i.e. the taxpayer.
"NA" (ntl assn) simply means the bank received its charter from the OCC inside the US Treasury Dept. rather than the state bank licensing authority in whatever state the bank is headquartered. Federal chartering traces back to the National Bank Act passed as a federal govenrment funding mechanism during the Civil War. Prior to that Act, all banks recieved their charters from their respective states. After the Act, banks could choose either a federal or state charter depending on which authority offered the better (i.e., more lax) terms and they could and did switch back and forth as those terms changed.
Right, and under all of that, they get to export their home state's usury laws and because of that legislation, all of its amendments plus other legislation, and they're going to be FDIC insured. If you see N.A. at the end of a bank's name, all of the above, and a bunch more bullshit applies. Citibank, NA is headquartered in Sioux Falls, SD. It's not there because SD weather is so nice. It's there because, back in the '80s, they basically bribed SD's legislator to pass laws that made usury laws that they could export to other states favorable to Citi. In SD, there is a maximum amount of interest that can be charged, unless the deal is done in a written contract. Well, SD law specificially states that a credit card agreement is a written contract, even though the agreement is not cemented by them sending you the cardholder agreement, it is cemented when you use the card. If you argue otherwise in court, the attorney for the other side is going to stand up, state "Use of the card constitutes acceptence of the terms," cite a shitload of case law if you make a big deal out of it, and you'll lose. And if that card is from Citi, and you argue usury, they're going to point to both federal legislation and the cardholder agreement that say that when it comes to usury, SD law applies, no matter what state you're in.
no way the taxpayer can insure shit, they are living paycheck to paycheck.
Well, ok. But they're gonna share the profits with us since we have their backs, right ?
Bag Holder!
"just what is going on behind the massivaly margined scenes if Citi is following every page in the London Whale book and on top of everything it also had to lobby and petition Congress to change the law just so whatever it is that Citigroup is doing, it could continue to do, and what's more:with explicit taxpayer-funded backing."
Citi execs were worried of getting 7 figure bonus rather than 8 figure