US Bank Counterparty Risk Soars After Energy MTM Debacle

Tyler Durden's picture

A few dots are starting to be connected now that we have exposed the debacle of The Fed's decision to allow banks to mark-to-unicorn their energy loans. "Something" was wrong in recent weeks as the TED-Spread surged (implying rising counterparty uncertainty among banks) and then the last week - since The Fed's alleged meeting with banks - has seen financial credit and stocks crash.

Coincidence? We don't think so. In the week since The Fed gave the nod to banks to hide losses on energy loans, credit risk has spiked and stocks tumbled...

It is clear banks are hedging against one another's systemic risk.

Simply put, it's 2008 all-over-again as "when in doubt, sell 'em all" is back for the US financial system. When you know/question one bank (or some banks) is not transparent in their loan losses (and implicitly their capital ratios) then contagion (and collateral chains) tells any good fiduciary to sell them all - and the banks themselves will enable a vicious circle as they hedge.

And of course, the unintended consequence of The Fed's decision to enable cheating in the banks' energy loans is a surge in financial system instability as banks and the price of oil now become systemically more coupled.

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roisaber's picture

After predicting 12 of the last 0 US dollar collapses, could this be the real deal? I mean, who would know better than the cheaters that the cheaters are running out of cheat capacity?

Ham-bone's picture

Federal Reserve Responsible for Oil Glut...China Responsible for Weakening Oil Demand...and everybody blames OPEC?!?

Goebbels would be so proud to see someone has taken his advice to heart.

macholatte's picture


$20 Trillion debt hasn’t destroyed the USA yet. Let’s try $25 Trillion.


This last year of the Soros-Obama administration will indeed be historic. The slow train-wreck destruction of the country over the past 7 years has been merely a prelude to what is about to happen. The ground work is in place. The tracks have been laid. Barry will do more things that will surprise even the most left wing weirdo and all the while he will give speeches telling the Sheeple about how he’s doing it for the good of the country and the Sheeple of the world and the MSM will praise him. Wall Street has his back and he has theirs. His buddy Eric Holder is whoring the banker crowd while Barry mops up. The Oligarchs will continue to prosper grotesquely and so will he. His Marxist roots have been compromised by the thrill of real power and wealth. When he’s out of office he’s going to make the Clinton Confidence Game look like an Organ Grinder and Monkey. 


Back in 2008 did you think things would be like this just 7 years later?

We are so fucked.


tarabel's picture



20 T at 2% hasn't done the job but 20 T @ 7% would be a different brand of lollipop. 

Mr Pink's picture

I always thought that the sharp decline in oil prices was going to cause some big problems for the banks holding the debt of oil producers and this was going to be the catalyst for the next collapse.

Maybe I wasn't wrong afterall

Bunga Bunga's picture

It's a misconception that the Dollar will collapse in a credit crisis. The debtors are struggling to aquire Dollars in order to service their debt.

aurum4040's picture

I don't think it's a misconception. What you are referring to is a stage not the end result. Prior to oil trading for an inflation adjusted  $15 a barrel, the world already made numerous moves to position itself for a post USD world. That 'world' has never been closer. And, now, in addition to every issue the USD has that has, countries are accepting roughly $15-$17 inflation adjusted dollars for a barrel of oil - do you think they are pleased with this or the amount anyone receives for most irreplaceable commodities? No, not even close. If anything we are closer than ever to USD collapse 

nidaar's picture

US has been the monopsony in the world market for a long time. Everyone was selling to US consumers and collecting dollars. Due to high debt and decreasing consumption, US imports has been stagnant (hence the low shipments). This put a pressure on all production export based economies like China. Added to that the low oil prices pressing oil exporters, everyone is suddenly short of dollars.

BRICS saw this coming and have been working on sparking consumption in their societies and bilateral trade without USD between themselves and others. We are at a stage where that has not reached a critical mass. If they cannot start a functioning trade (like the old commonwealth), they will start seeing color revolutions, wars and back to US monopsony and the hegemony of the petrodollar backed by brutal military.

The other option is a collapse for USD and the western civilization as we know it.

Rehab Willie's picture

"I'm short your future" Hitlery 20:16

Arnold's picture

Cattle futures are down.

Everyman's picture

Same as it ever was:  "save the bankers, blow up the bond holders (stock holders)".

Investors be damned, we need to save the "fee servicers".

We live in a surreal time where paper shufflers make more money and have more protection than producers, or people that are actually "taking the risk" with "their money".

That would NOT be bankers or financial types.  THEY ALL SUCK!

New England Patriot's picture

We need Jesus to come in and overthrow their table.

Everyman's picture

Right, but NOW there is NO asset that is NOT suspect on valuation.  RE and energy is where almost all bond valuations are, and I would suspect 50% of economy.  I am not the sharpest tool in the shed, but I know what this means, it means ALL assets are marked to fantasy.

The FED RES just stated ALL asset valuations are unknown and UNKNOWABLE and if yoou were smart, YOU WOULD SELL EVERYTHING NOW, first thing tomorrow morning, the DOW and S&P should just dump.

ALL asset classes are now polluted and are nuknowable in avalue, that is the Mark to myth outcome across these two borader markets.



Tejano's picture

I think I'll not sell gold and silver.

Everyman's picture

I have a nice lake you could lose them in.

Global Douche's picture

Me thinks you will be extremely blessed by making such a decision now. Just keep the location a SECRET and be prepared for a world where reality has spun out making a 180 degree fishtail.

rfbear's picture

"but I know what this means, it means ALL assets are marked to fantasy"

Nothing new under the sun...has been so since March 2009, when the latest bullshit market started.


I already overturned their tables in 08. And Jesus was not a Social Engineer imbued with knowledge of Quantum Behavioural Economics like moi. Moreover, he was not raised by a Chartered Accountant either.

Bazza McKenzie's picture

Won't get Jesus but we will get Trump.

kiwigal's picture

It doesn't seem like anything was learnt at all from the last crisis. The book The Big Short gives a detailed analysis of just how crooked the U.S. financial system is(no doubt all countries). The agencies that should be on the side of right just don't care, a system of subterfuge and skullduggery.  If the Federal Reserve can not be trusted then the system is broken.

azusgm's picture

We are in the Jubilee Year. Plan on a lot of debt money evaporating. Should be epic.

Dragon HAwk's picture

Try ignoring your Mortgage... they will take your house so fast your head will spin. Bankers are Special...

   as in Special kind of Putrid Horse Shit..

Seasmoke's picture

Not any more. 3-4 years minimum. And if enough people finally wake up and get pissed off in 2016. Hopefully they take no more !!! Fuckers should have Been hanged in 2008. But the home of the brave ain't so brave !!!

Bunga Bunga's picture

Yeah, free housing! I want mine.

Lord Koos's picture

If they can't produce the deed they can't take the house...

Kagemusho's picture

So, in short: due to their fortunes being tied to crude prices, the banks  are now eyeing their depositor's accounts like cannibals sizing up some naive pith-helmeted Western explorer entering their territory. Bail-ins to occur in short order.

GRDguy's picture

When both parties to a paper promise are in deep shit, there is no hedge.

buzzsaw99's picture

the big banks have nothing to fear. they never have to mark anything down and the fed and congress will always bail them out.

Kagemusho's picture

Because the means The State has to extort funds by force (a.k.a. taxes and civil forfeiture) makes each taxpayer into 'collateral' for the banks comprising the Fed. Every dollar is a receipt for a slave, one living now and a receipt for those unborn. The only manumission from this slavery is death...or the collapse of the system.

Bazza McKenzie's picture

They are creating a backblast that will sweep Trump into power and he is going to be happy to provide the mob with trials of the Wall Street and government malefactors while he gets on trying to restore the real US economy.

They really do have themselves by the short and curlies this time.

Dr. Engali's picture

Bend over future tax payers, you're about to be fucked again.

Fester's picture

I just hope it's not the fat TSA guy @ DFW who cradled my balls last week.

Global Douche's picture

It seems SFO should cradle my Crown Jewels the best, yet they're being seriously outdone, getting downright disgusting in Ratlanta. I'm thinking of making sharp, eerie sounds on my next free fondle, but it might turn on some of those fruit loops!

Seal's picture

The dysfunctional Fed has  created a cockroach hotel

scubapro's picture



but but but  bank earnings just reported were so good and they'll be getting so much free money from excess reserves in the coming months, why are the nice banks being puniched so much, they are making so much money in the past

TulsaTime's picture

It would be so unfair to the banks that have mode those loans to the energy sector, let's just make all the banks suspect. Things will work out so much better that way.


NoWayJose's picture

Ummmm, someone has to be left holding all those hundreds of millions in upcoming energy loan defaults... It's banks, unless Janet can figure out how to buy 'em!

pakled's picture

I think instead of taking in a re-run of The Wonderful World of Disney on this rainy Sunday afternoon I might just fire up a copy of Margin Call for the family's viewing pleasure.

surf@jm's picture

So the school marm at the FED is allowing social promotions at the banks......

Before long the school marm won`t even require bankers to learn writing cursive....

And reading their diploma`s won`t be a requirement either.....

But, the bankers will all get participation trophys at least....

neuronius's picture

This is equivalent to a bail out of the oil industry.  

Global Douche's picture

Not just that, but consider the Dollar's role in petroleum. This is a last gasp to remain relevant, spare stacks of them being used in settling paper garbage derivatives and trying to hold off the inevitable, even if they don't really believe it will occur.

Dragon HAwk's picture

Why aren't the derivatives Blowing Up ?

Global Douche's picture

They will be, even if the bank$ters don't want this paper garbage marked to unicorn. Math is against derivatives. The Counterparties simply can't cough up enough for their end of the bargain! This was proven in '08 I warned those few in Little Rock who would listen in 2009 and I'll be vindicated. GATA will be vindicated for their incredible insight and fact gathering regarding how US Gold has been sold to the Chinese. Jim Sinclair will be vindicated with anyone else who saw just how close to getting the Screw Job of the Ages in '08, yet the Fed somehow pulled it off. This time it can't be done. Most derivatives are too far out of control for any PPT. I very seriously doubt the Fed wanting a mark-to-unicorn will work. They've proved they're out of ammo, yet they committed Russian Roulette to their collective craniums with their stupid face-saving 25 basis points hike. 

Humpty Dumpty has fallen and he ain't gettin' put back together again, even with helicopter $$!


Quebecguy's picture

FDIC pays bank derivetives creditor first in seniority over depositors.



azusgm's picture

Exactly. People will be taken by surprise if one of the banks blows up.

sageOwexford's picture

Another solid, legal reason to abolish the Fed. They are a Central Bank operating under its own rules, rules that they make up as they go along AND WITH DISASTROUS RESULTS. Here we have criminal prosecution threats to corporate executive and board members for falsifying quarterly reporting releases, and on the left hand, the Federal Reserve instructing energy-loan banks to do the opposite AND FUDGE THEIR ENERGY LOAN LOSS RESERVES. TIME FOR THESE ACADEMICS TO GET REAL JOBS IN THE REAL WORLD THAT THEY HAVE BEEN SCREWING OVER FOR THE LAST 30 YEARS!! The mob headed their way in the unfolding Depression will be sure to give them a nice shiny rail for their ride out of town. Disgusting to live in lawless America. Why pay taxes?! Let's all escrow our First Quarter 2016 tax payments and see what Washington does besides puke a giant hairball.