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Introducing The Gigantic And Dangerous Wall Street Loophole You’ve Never Heard Of
By Mike Krieger of Liberty Blitzkrieg
Introducing the Gigantic and Dangerous Wall Street Loophole You’ve Never Heard of
This spring, traders and analysts working deep in the global swaps markets began picking up peculiar readings: Hundreds of billions of dollars of trades by U.S. banks had seemingly vanished.
The vanishing of the trades was little noted outside a circle of specialists. But the implications were big. The missing transactions reflected an effort by some of the largest U.S. banks — including Goldman Sachs, JP Morgan Chase, Citigroup, Bank of America, and Morgan Stanley — to get around new regulations on derivatives enacted in the wake of the financial crisis, say current and former financial regulators.
The trades hadn’t really disappeared. Instead, the major banks had tweaked a few key words in swaps contracts and shifted some other trades to affiliates in London, where regulations are far more lenient. Those affiliates remain largely outside the jurisdiction of U.S. regulators, thanks to a loophole in swaps rules that banks successfully won from the Commodity Futures Trading Commission in 2013.
Many of the CFTC employees who were lobbied in these meetings went on to work for banks. Between 2010 and 2013, there were 50 CFTC staffers who met with the top five U.S. banks 10 or more times. Of those 50 staffers, at least 25 now work for the big five or other top swaps-dealing banks, or for law firms and lobbyists representing these banks.
The lobbying blitz helped win a ruling from the CFTC that left U.S. banks’ overseas operations largely outside the jurisdiction of U.S. regulators. After that rule passed, U.S. banks simply shipped more trades overseas. By December of 2014, certain U.S. swaps markets had seen 95 percent of their trading volume disappear in less than two years.
– From the excellent Reuters article: U.S. Banks Moved Billions of Dollars in Trades Beyond Washington’s Reach
The following story is guaranteed to make you sick. Once again, we’re shown that following trillions in taxpayer funded bailouts and backstops, TBTF Wall Street banks immediately went ahead and focused all their attention obtaining loopholes in order to transfer risk and make billions upon billions of dollars in the financial matrix, as opposed to adding any benefit whatsoever to society.
From Reuters:
NEW YORK – This spring, traders and analysts working deep in the global swaps markets began picking up peculiar readings: Hundreds of billions of dollars of trades by U.S. banks had seemingly vanished.
“We saw strange things in the data,” said Chris Barnes, a former swaps trader now with ClarusFT, a London-based data firm.
The vanishing of the trades was little noted outside a circle of specialists. But the implications were big. The missing transactions reflected an effort by some of the largest U.S. banks — including Goldman Sachs, JP Morgan Chase, Citigroup, Bank of America, and Morgan Stanley — to get around new regulations on derivatives enacted in the wake of the financial crisis, say current and former financial regulators.
The trades hadn’t really disappeared. Instead, the major banks had tweaked a few key words in swaps contracts and shifted some other trades to affiliates in London, where regulations are far more lenient. Those affiliates remain largely outside the jurisdiction of U.S. regulators, thanks to a loophole in swaps rules that banks successfully won from the Commodity Futures Trading Commission in 2013.
For large investors, the products are an important tool to hedge risk. But in times of crisis, they can turn toxic. In 2008, some of these instruments helped topple major financial institutions, crashing the U.S. economy and leading to government bailouts.
After the crisis, Congress and regulators sought to rein in this risk, and the banks fought back. From 2010 to 2013, when the CFTC was drafting new rules, representatives of the five largest U.S. banks met with the regulator more than 300 times, according to CFTC records. Goldman Sachs attended at least 160 of those meetings.
Many of the CFTC employees who were lobbied in these meetings went on to work for banks. Between 2010 and 2013, there were 50 CFTC staffers who met with the top five U.S. banks 10 or more times. Of those 50 staffers, at least 25 now work for the big five or other top swaps-dealing banks, or for law firms and lobbyists representing these banks.
The lobbying blitz helped win a ruling from the CFTC that left U.S. banks’ overseas operations largely outside the jurisdiction of U.S. regulators. After that rule passed, U.S. banks simply shipped more trades overseas. By December of 2014, certain U.S. swaps markets had seen 95 percent of their trading volume disappear in less than two years.
While many swaps trades are now booked abroad, some people in the markets believe the risk remains firmly on U.S. shores. They say the big American banks are still on the hook for swaps they’re parking offshore with subsidiaries.
Still, the banks’ victory on the swaps loophole leaves a concentrated knot of risk at the heart of the financial system. The U.S. derivatives market has shrunk but remains large, with outstanding contracts worth $220 trillion at face value. And the top five top banks account for 92 percent of that.
In 2009, President Barack Obama tapped Gary Gensler, then 51 years old, to chair the CFTC. Liberals grumbled about Gensler’s résumé. The son of a cigarette and pinball-machine salesman in working class Baltimore, Gensler, at 30, had become the youngest banker ever to make partner at Goldman Sachs.
Among other jobs, he oversaw the bank’s derivatives trading in Asia. Later, as an undersecretary of the Treasury, Gensler helped push through the 2000 law that had banned regulation of derivatives markets.
Kenneth Raisler, a former Enron lobbyist representing JP Morgan, Citigroup, and Bank of America, argued in a letter that the CFTC should allow U.S. banks to do things overseas “even if those activities were not permissible for a U.S. bank domestically.”
“Kenneth Raisler, a former Enron lobbyist representing JP Morgan, Citigroup, and Bank of America.”
You just can’t make this stuff up. Gold Jerry, gold.
Meanwhile, Obama was hard at work as always proving himself to be a capable banker coddler in order to ensure his payday upon leaving office.
In his place, Obama nominated a long time aide to Democratic Senator Harry Reid, Mark Wetjen. Gensler and other pro-reform allies assumed that the veteran Democrat would vote with the Democrats on the commission.
Wetjen, a derivatives newcomer, was not a conventional liberal. He came with an endorsement from the U.S. Chamber of Commerce, an opponent of the Dodd-Frank Act. As his policy adviser, Wetjen hired Scott Reinhart, former in-house counsel at the structured credit products division at Lehman Brothers – the bank whose collapse in 2008 set off the financial crisis.
Rosen, the banks’ lead lawyer, discussed Wetjen often on calls with his bank clients. The newcomer, Rosen told them, was key to swinging the commission in the banks’ favor.
Banks got dramatically more face time with commissioners after Wetjen’s appointment. In 2010, Gensler had met with the top five U.S. banks 13 times, and in 2011, 10 times. That was still more than any other staffer or commissioner at the CFTC.
In the year after Wetjen’s appointment, Wetjen aide Reinhart met with the top five banks 36 times, more than anyone else at the CFTC. Wetjen himself met with the top banks second-most often, 34 times. Gensler met them less than half as frequently, as did nearly every other commissioner and staffer, according to the records.
In June, Reinhart left the CFTC to join Rosen’s practice at Cleary Gottlieb.
Gensler had little patience for the bank-friendly Wetjen, former CFTC officials say. As their disagreements sharpened, Wetjen’s pro-bank views seemed to harden, these people said.
“Mark was struggling a little with the substance,” one former CFTC official said. “Gary treated Mark like he was a moron, and then Mark refused to budge.”
“The fight over this provision was one of the biggest policy fights in all of Dodd Frank,” said Kelleher, of the think tank Better Markets. “Once the banks got that loophole, then a lot of that predatory behavior migrated overseas to wherever there was less regulation.”
Goldman had already started moving to restructure its trading operations to get around Dodd-Frank. In March 2012, it sent out a four-page letter to its derivatives clients with an unusual demand. Goldman wanted clients to sign off on giving the bank standing permission to move a client’s swaps trades to different affiliates around the world, whenever and wherever the bank saw fit.
Goldman called the letter the “Multi-entity ISDA Master Agreement.” It meant that a client might strike a derivatives deal with Goldman in New York in the morning, and that afternoon, with no disclosure, a Goldman office in London or Singapore or Hong Kong could take over the deal. With each shift, the trade could fall under different regulators.
Perhaps I should ask John Hilsenrath whether it is “anti-Semitic” to point this out.
Just in case you need a reminder of how incredibly putrid and corrupt Banana Republic America has become…

The global inter-dealer market for interest rate swaps in Euros is one of the largest derivatives markets in the world. U.S. banks’ monthly share of the market had plunged nearly 90 percent since January 2013, from over $1 trillion to $125 billion, according to ISDA.
The data were misleading. U.S. banks were still trading as vigorously as ever. But their trades, booked through London affiliates, without any credit guarantees linking them back to the U.S., were now showing up in the data as the work of European banks.
In mid 2014, the Securities Industry and Financial Markets Association, a banking lobby in Washington, circulated a private memo to its members. The memo consisted of talking points banks could use to justify the de-guaranteed contracts and shifting of trades if questioned by regulators and lawmakers.
Where have you heard about the Securities Industry and Financial Markets Association, or SIFMA, before? Recall the following from the post, Ex-NSA Chief Keith Alexander is Now Pimping Advice to Wall Street Banks for $1 Million a Month:
So what is Mr. Alexander charging for his expertise? He’s looking for $1 million per month. Yes, you read that right. That’s the rate that his firm, IronNet Cybersecurity Inc., pitched to Wall Street’s largest lobbying group the Securities Industry and Financial Markets Association (SIFMA), which ultimately negotiated it down to a mere $600,000 a month. In case you need a refresher on how much of a slimy character this guy is, I suggest you read the following posts…
What would we have done without the bailouts…
For related articles, see:
Why Obama Allowed Bailouts Without Indictments by Janet Tavakoli
Why Bailouts are Anti-American in One Minute by Max Keiser
Wall Street Moves to Put Taxpayers on the Hook for Derivatives Trades
The U.S. Department of Justice Handles Banker Criminals Like Juvenile Offenders…Literally
Why Obama Allowed Bailouts Without Indictments by Janet Tavakoli
Elizabeth Warren Confronts Eric Holder, Ben Bernanke and Mary Jo White on Bankster Immunity
Even Washington D.C. Insiders Admit Eric Holder is a Bankster Puppet
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Personal responsibility is a rare animal on WS.
Almost extinct.
Yeah, very dirty. Banksters seeking out loopholes and corruptible officials. But not for us.
* * *
Trump did indeed stiff his creditors (bankruptcy four times). But, he identified his counterparties when he said they were sharks too:
Banksters
"Greed is good." -- Gordon Gekko
We either riot, which will not improve things and only hurt good people more than bad. Or we vote ALL the politicians out. All, even the perceived good ones. And hopefully all the new faces will act work to do the peoples work. We might need to do this a few election cycles, but it is really our only chance. Plus put in term limits, so no one gets their pole polished too much.
At first glance I thought the headline said "Gigantic and Dangerous Wall Street ASS HOLE"
And thought it was another one about Krugman..
You don’t want to waste a bullet on them and they are not worthy even of a thieves noose.
Hmm.. blades can be re -sharpened.
Maybe the Saudi’s and ISIS are on to something with their ultimate punishment..
just need to make sure the punishment administrator takes his mandatory ten mulligans.
One word....Iceland
When Americans are growing more cynical about Wall Street and the American political class than people in Europe, it's fair to say something big is happening.
Working on it at least.
Voting them out is good, but unless they have solutions that will work power will wind up re-centralized in the bankster's hands. Here is a blueprint for how to keep that from happening.. http://www.amazon.com/dp/B00B0GACAQ
We are so well beyond a political solution.
Prepare for the worst scenario you can think of.
On the federal level yes, but do you think that every town and county in the United States is going to descend into chaos? And even if it does, shouldn't there be some principles discussed by which men can restore civilization in a way that avoids the mistakes which got us here? That is what that link was about. National solutions are out of reach, but local ones aren't. Someday, enough local solutions can become a new national solution, and people can be protected from chaos there in the meantime.
The problem with voting is, they are the ones counting the votes.
In my home state one of our largest counties elected an Independent as Sheriff. Republicans and Democrats were counting the votes, but they were local ones. The Republicans were in the run-off with this guy and they wanted to beat him in the worst way. The US Senator et al were running radio spots endoring the Republican in a county sheriff's race. Did not matter. People rejected candidate connected to the DC party system. Yes, they have got Presidential politics rigged. That is not what I am talking about.
Food and water first.
You'll survive the first wave.
Then fight for you life.
Somehow Diebold is no longer tallying the election results? I never got the memo.
I will begin voting when I hear that "With one more vote for candidate X, the Ohio results would have been different and Y would have lost the Presidency."
Their not known as the "Squid" for nothing. They wrap themselves around all things and suck the life out of whatever they attach themselves to. Also, once they are threatened they spew out ink (Like printing B/S to cover threir tracks) to hide behind.
This is exactly how they rehypothecated RMBS 16 times pre 2008 using
their London based affilliates.Surely after the stiff jail sentences handed out
last time, they wouldn't do such a thing again ?
Oh wait..........
He's the new bus driver, just no tools.
Instead of wasting money on lobbying against laws, GS should move its trading desk to a submarine that slowly circles the Earth in international waters.
There's no place to hide, not even at a sub shop.
I drove my chevy to the levy, but the levy was dry.
This is how the world's illegal arms trades works also, you just conveniently move it outside of the view of the public using an outside country to facilitate movement. I'm willing to bet this alleged loophole was written by the bankers, just like all those tax loopholes you always hear about, but are somehow never closed. Magic merely requires an ability to be good at sleight of hand....
This is what happens when you put Jews in charge. They corrupt and pollute everything they touch - the financial system, legal system, culture, etc.
Satan and his hoard have been around longer than the Jews.
This evil is going spiritual soon.
Don't worry because this must happen.
Jesus will rule as King on Earth soon.
Satan is dead.
It has always been spiritual. Part of the plan, IMO. You get a front roll seat of a world without the Truth of God.
Ephesians 6:12
For we wrestle not against flesh and blood, but against principalities, against powers, against the rulers of the darkness of this world, against spiritual wickedness in high places.
"Personal responsibility is a rare animal on WS. Almost extinct."
That's what guillotines are for.
Zion is a scheme, not an ethnicity.
For the bankers...it's all about enhancing their hold over every important institution in this country and enabling the continued U.S. Taxpayer support for the Palestinian Holocaust.
Sounds like it's time to re-instate the Death Penalty for financial crimes. Make it federal so the fraudsters can't escape their fate by running across the state line.
I would pay good money to see a Rothschild bite the dust
Don't forget our complicit CONgresscritters and the despicable twins, Gary Gensler and Bart Chilton who helped make it possible.
Fuck You Bart Chilton!
Why do you think Israhell exists? It's a criminal state designed to shield criminals if the world ever gets wise to its crimes. That and to hold the world hostage by threatening to blow it up with its nuclear weapons.
Thanks for the excellent who's who of scumbaggery...
;-D
Orientals know how to deal with thieving banksters.
http://beforeitsnews.com/alternative/2015/04/another-banker-bites-the-du...
http://politicalvelcraft.org/2013/07/31/china-sentences-6-bankers-to-dea...
If you didn't wake up after 2008. You are hopeless. Since most of the people in my circle , who I used to consider intelligent, didn't wake up , I realized they are all hopeless. This used to make me angry. But no more. People deserve it.
That is exactly why many of us here are hoping for a complete financial meltdown.
Just like people need to be shot for doing nothing, cause they deserve it.
"People deserve it." Ultimately yes but you have to give most people sympathy for succumbing to very sophisticated mind control techniques. People that have been under overwhelming and long lasting repeated propaganda become automatons. They are conditioned to react in predictable ways such as refusing to consider any factual evidence that is in opposition to the propaganda. You can see this at work when someone has a visceral reaction to a statement you make which he has been programmed to reject.
The bottom 80 percent are so stupid they actually have no defense against mind control. It's as if they were born to be slaves to others. No need to feel sorry for them. Just as cattle are born to be hamburgers, the 80 percenters are born to labor and be used by their betters. Such is life.
Yes, people should be made to understand that there are consequences for their inaction. That said, you should cut them some slack and be considerate, kind, tolerant and forgiving, and you may discover that they gradually wobble their way to respecting and perhaps even agreeing with and supporting your viewpoint. The information/insights you provide may at least cause them to put their guard up even if they don't fully understand or accept your views. Different people learn at different rates for a variety of reasons. Many have not learned to trust what they are seeing, relying on "experts" to interpreted what is occurring, much less acting upon it and making life-changing decisions because of it. I blame the drone makers in the public school structure for much of this inability to evaluate data and information and act based on their decisions. It is probably a major difference between Joe Six Pac and the elite. Use persuasion and patience. Don't write them off. You may find that you need them.
Old news. Nothing to see here.
Move along folks.
"Introducing the Gigantic and Dangerous Wall Street Loophole You Never Heard Of"
Is this headline a competition? Seems to me a $16.5 trillion dollar bailout was a pretty big loophole.
The lobbying blitz helped win a ruling from the CFTC that left U.S. banks’ overseas operations largely outside the jurisdiction of U.S. regulators.
So let me get this straight . . . with laws like FACTA the clowns at .gov can go after all the little people all over the globe to steal their money due to "tax obligations" but they have no jurisdickshun over the accounts of US banks held offshore??? This is the kind of shit that is going to get a lot of bankers and .gov officials in real trouble when the crap eventually hits the fan.
One can only hope.
One can only hope.
When the grid goes down and the sheeple can't use their Iphones and Notes anymore maybe, just maybe, they'll turn to more rewarding pastimes like hunting down and arresting criminal bankers and corrupt government officials. This is all hypothetical of course . . . .
This really emphasizes how any potential QE.4 to the sheeple would represent a terrible moral hazard, slippery slope.
When you think it cant get any worse......... it gets worserer!
Looking at 3rd world countries who are run by dictators who impoverish the people, I could never understand how the masses were so subdued and seemingly accepting of the shit they lived in .... . now I know.
Brooksley Born saw this coming years ago.
http://www.pbs.org/wgbh/pages/frontline/warning/interviews/born.html
Greenspan, Larry Summers, and Bob Rubin ran her ass right out of town!
We're gonna' need a lotta' rope.
Nahh.. We need to take a lesson from North Korea about using antiaircraft guns in firing squads.
I thought we were a couple months ahead and it read: Hundreds of billions of dollars of deposits in U.S. banks had seemingly vanished.
I'm completely in support of a division of the US military that wishes to reclaim the United States of America from the banksters and throw them all into prisons.
Why do you advocate implementation of Martial Law? We the People must do it!
For the sake of legitimacy.
I think some people warned us about this, wrote books about it, and then were conveniently silenced using trumped up charges.
Saying wealthy people and politicians should obey the law makes you a racist anti-semetic bigoted neo-nazi
If that didn't make you puke, this will.
Apple Kangaroo bond orders exceed $3b
APPL holds 89% of it's profits offshore.
Wouldn't you?
Probably. What pisses me off is these are the same guys that are lobbying for lower corp. tax rates.
Our corp. tax system is riddled with loopholes.
I'll vote for first person who says "why doesn't Apple pay taxes"?
This weekend, I'm reading about the history of the county in which I live. So far, I'm up to right after the civil war.
At the time there were 63 landowners and 9,138 slaves. The civil war devastated the slave owners, because it says the economic value of the slaves was approximately 3 times the economic value of the slave owner's land holdings.
Apparently because they had to start paying the slaves instead of just providing welfare assistance to keep the slaves alive so they could work for them, it put a lot of those slave owners out of business.
Slave labor was pretty cheap once you had a slave but the cost to aquire slaves was very high.
I'm with this guy. He knows we're fucked which is why he's putting the pen down!
crickets chirping...
It is heart-warming to know that trillions of dollars of new debt was added to the generous Amerikan debt load so that international bankers could pocket more for their personal gain.
A just society would claw back every nickel and leave bankster families as paupers on the street, while their bread-winning thieving crook spouses were locked in labor camps.
This type of story immediately throws the recent bank data sharing post into a whole new realm of LIBOR-like possibilities for the future.
Which time line are we on again?
“The vanishing of the trades was little noted outside a circle of specialists. But the implications were big. The missing transactions reflected an effort by some of the largest U.S. banks — including Goldman Sachs, JP Morgan Chase, Citigroup, Bank of America, and Morgan Stanley — to get around new regulations on derivatives enacted in the wake of the financial crisis, say current and former financial regulators.”
Why is this a surprise? Private emission of credit is based on the profit motive. It is easy enough to do illegal and immoral deals under the cover of darkness since private credit is not legal money. Private money power plus psychopathic criminal minds equals murder and evil unleashed upon civil society.
Federal Reserve Notes are not legal treasury money; they are an IOU, emitted as Credit from banking corporations. When the IOU is paid back, the credit as money disappears. Derivatives are bets, and the bet is backed up by the ability to be first to grab money from supply. Only, bets far exceed money supply’s ability to pay. This grabbing of money to pay financial bets is grabbing YOUR transaction medium; labor needs a medium to trade their output, otherwise labor loses its livelihood.
The trades hadn’t really disappeared. Instead, the major banks had tweaked a few key words in swaps contracts and shifted some other trades to affiliates in London, where regulations are far more lenient. Those affiliates remain largely outside the jurisdiction of U.S. regulators, thanks to a loophole in SWAPS rules that banks successfully won from the Commodity Futures Trading Commission in 2013.
SWAPS is the key word here. Bankers have the MAGICK power to do swaps, where PRESTO WHAMMO, one unlike item is traded/swapped for another unlike item. However, due to the MAGICK of double entry legerdemain the two unlike items are declared EQUAL.
Yaaah, equal! The great equal sign does work in math, but it doesn’t work in Economics, it especially cannot code for time.
So, in addition to allowing private corporations to control emission of credit, we’ve given them a patina of law by having their credit be good for paying taxes. We stupid humans have given them the power to settle OUR contracts with their IOU money.
At the moment of hypothecation, a gap is formed, where more must be paid back to the banker than it emitted. This is fundamentally fraud on top of fraud. Banks get MOAR and you get harvested.
Then, we give them more power by allowing the creation of fraudulent financial vehicles, and these vehicles may then be SWAPPED MAGICALLY for something real.
It is a giant confidence game… a parasite injected into humanities blood stream. Humanity has been conned by a small group of psychopaths. Wake up and take the red pill.
There is no fixing private emission of credit, it has to be shit canned. It is fraud to its core and designed to take rents, to then fund a group of psychopaths intent on tikkun control of the world.
Fraudulent financial capitalism cannot survive anyway, it is at its end. The equation Labor+ Earth = Goods is now Smart Machines+ Earth = Goods.
Goods and Services make prices, and those prices fetch “credit” money from supply. Those that own Capital will own all machines and then enclose land. This enclosure will happen with debt harvesting cycles, as can already be seen.
As machines become smarter and smarter, labor cannot use its skill to make prices.
Shit-can private finance capitalism, or humanity is headed for endless war. A fraud system should not be directing us. We DO respond to prices and money volume as our signaling - so the money power needs to be taken seriously.
That the nature of money is law, or how it channels never enters popular discussion. Money does not have to be debt to make some credit. This debt as money paradigm is hypnotic suggestion and an integral part of the con.
www.sovereignmoney.eu
I stopped reading after: "The following story is guaranteed to make you sick. "
Is this wrong to stop here?
Cliff Barnes is the loser who fucked JR Ewing around
It is all staged.
Damn it feels good to be a bankster
Damn it feels good to be a bankster
Scarface is a ZH favorite; known for his excellent performance as Upgrayedd The Pimp in Idiocracy.
Speaking of bankers and bailouters... consider Jeb B: http://www.ibtimes.com/election-2016-jeb-bush-got-13m-job-lehman-after-florida-shifted-pension-cash-bank-2059224 Election 2016: Jeb Bush Got $1.3M Job At Lehman After Florida Shifted Pension Cash To Bank