This page has been archived and commenting is disabled.

And Now, A Present: "Are The Brokers Broken?" - A Reprise

Tyler Durden's picture


Often times we are asked "why does Zero Hedge prefer to provide information in piecemeal increments and isolated snapshots (of irregularity) rather than write comprehensive articles (or even a book) that explain, from beginning to end why everything is broken - the end?" There are two answers - a short and a long one. The short answer is that finance, more so than any other field, changes so rapidly that the nuances are always and constantly on the margin, which in turn is stable only for the period of time that it is observed, and then it becomes part of "technical analysis." (Indeed, the Schrodinger wave function collapse is just as alive and well in finance as it is in the quantum arena). As such, we adhere to the paradigm describing the distinction between giving a man a fish and teaching a man to fish: we believe that it is far more useful to demonstrate all that ways in which the market (and global economy) works, or rather doesn't, than engage in extended exercises of vanity, which serve as much to stroke the author's ego, and demonstrate one's knowledge of SAT words, as they do to elucidate the matter at hand. By sharing our own views of events as they transpire in real time, be they right or wrong, we hope to provide our readers with the "connect the dots" patchwork required to evaluate relevant financial events as they occur in real time, instead of describing them in the in vitro vacuum of moody brooding. (As for a book, we are more than confident enough "independent" bloggers out there will succumb to the very system their protest against, and pen a few hundred pages on the goal-seeked topic of their choosing - the last thing the vast upcoming book pyre needs is our own intellectual self-pleasuring). The long answer is far longer, and, ironically, deserves a post of its own. But this is neither the time nor the place. What then is the purpose of this post is to break away from our tradition, but also not to recreate the wheel, as many others find delight in doing. Instead, as a special present to our readers, we share the seminal analysis by Citigroup's Matt King from September 5, 2008, titled "Are The Brokers Broken?" which in one place explains, better than anyone else has ever done, why the system is terminally broken, and why the best anyone can hope for is to keep kicking the can down the road until it all comes crashing down.

The report, which came out ten days before the Lehman collapse, was according to some, one the primary catalysts for the collapse of Lehman and the subsequent near collapse of the entire house of cards, as it explained better than anything to that point (and arguably since), just how hollow and broken the one all important component of modern finance - the multi-trillion shadow banking system is.

Sure enough, once the majority of analysts and traders out there, who for the most part are simple automatons who only push buttons all day and can barely see beyond the 8th screen on their Bloomberg terminal, comprehended the irreparable nature of the systemic break in terms even they would understand, the panic commenced, and resulted in a full blown run on every form of liquidity which also happens to be synonymous with quote unquote bank: yes, Lehman, on the simple visible side, but far more importantly, on money markets, that primary conduit (along with repos) of the shadow banking system. It was this, far more than the Lehman collapse (whose end they had greenlighted), that stunned the powers that be, who did not anticipate any of the aftershocks that would start cascading through the US shadow banking system which according to our estimates is about $15 trillion most recently (well above total traditional liabilities which are still below $14 trillion) , while according to others when one adds the rehypothecation "value" of various commingled assets, could be up to $4-6 trillion larger.

So while we all partake in the spirit of goodwill to man and festive joy (however brief), if for no other reason than because "we should", our present to our readers is that most important gift - knowledge, and the understanding of the truth behind the headlines which the traditional media will never provide, for fear of the all out panic that would ensue if the general public, just like the specialized financial industry, in the days after September 5, 2008, were to understand just how futile the actions of the Fed and the global banking cartel are when presented with all the facts.

In summary: the following report was 100% correct when it first came out and predicted the Lehman, and all other collapses; it is even more correct now, as nothing has changed, only the stakes have now gotten that much ('infinitely' some would say since every central bank is now all in on preserving the fake reality that is artificial central planning) greater. Unfortunately, because nobody listened and nobody learned from the events in late 2008, the next time around there will be no redo.

To understand why, read on (pdf).



- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Sun, 12/25/2011 - 12:25 | 2010357 diogeneslaertius
diogeneslaertius's picture

Thank You.

Sun, 12/25/2011 - 13:09 | 2010431 Manthong
Manthong's picture

Nice blast from the past.. thanks.

“now leaves regulators worried, given the scale of repo’s importance.”

Maybe the regulators aren't worried this time around because they are all on the payroll.

I have a suggestion for the name of the next policy maneuver.

I propose it be called the Progressive Overnight Notational Zirp Interchange.

Sun, 12/25/2011 - 13:27 | 2010449 Oh regional Indian
Oh regional Indian's picture

This is what I find interesting about news reportage and analysis in general.

It now seems to be common knowledge that AIG and MFG both failed due to excessive leverage, specifically in their London units where it is apparently legal to hypothecate the same collateral a hundred or more times over, to different parties. Or so MAx Kieser and Stacy told me.

What the heck is the point in any of these long winded discussions and papers and arguements?

There is a fractional collateralization scam being played out in London. Kill that loophole perhaps? First? That is huge. It has caused two humongous, system threatening shocks.

Are the brokers broke. No they are not, they are over-hypothecated.



Sun, 12/25/2011 - 13:36 | 2010462 LowProfile
LowProfile's picture

Are the brokers broke. No they are not, they are over-hypothecated.

Which actually means they are broke * 100.

Sun, 12/25/2011 - 14:30 | 2010500 spiral_eyes
spiral_eyes's picture

All I want for Christmas is free market capitalism. 

Sun, 12/25/2011 - 15:52 | 2010593 LeonardoFibonacci
LeonardoFibonacci's picture

To Lowprofile:  Hate to disappoint you, but brokers are still buying $250k Ferrari's by the truckloads!

Sun, 12/25/2011 - 17:42 | 2010692 e_goldstein
e_goldstein's picture

I wonder why, you can't eat Ferraris.

Sun, 12/25/2011 - 18:21 | 2010725 KickIce
KickIce's picture

I'm sure they are still charging commisions but if they are indeed losing money how much longer can they keep their clients.  I believe we saw this scenario played out several times in 2008 as well.

Sun, 12/25/2011 - 19:27 | 2010781 Sudden Debt
Sudden Debt's picture

Problems explained / Simplistic view

This rather brilliantly cuts thru all the political doublespeak we get.
This puts it into a much better perspective .

This shows how long daddy government can still fund the banks fucked up behavior:

* U.S. Tax revenue: $2,170,000,000,000
* Fed budget: $3,820,000,000,000
* New debt: $ 1,650,000,000,000
* National debt: $14,271,000,000,000
* Recent budget cuts: $ 38,500,000,000

Let's now remove 8 zeros and pretend it's a household budget:

* Annual family income: $21,700
* Money the family spent: $38,200
* New debt on the credit card: $16,500
* Outstanding balance on the credit card: $142,710
* Total budget cuts: $385

Sun, 12/25/2011 - 20:45 | 2010833 TheSilverJournal
TheSilverJournal's picture

Sudden debt, Rick Santelli basically agree with your numbers. If someone needs a video of it, click here to Watch Rick Santelli Make Government Math Easy.

Sun, 12/25/2011 - 20:50 | 2010839 strangeglove
strangeglove's picture

Intrest on debt 142710.00 @ .00025%=$35.0

Lobster for dinner

Sun, 12/25/2011 - 21:19 | 2010857 KickIce
KickIce's picture

Yeah, but I'm still the boss and have a kick ass health plan compared to my peasants.

Mon, 12/26/2011 - 14:05 | 2011944 ZeroPower
ZeroPower's picture

Wierd, our brokers over here are the ones buying us a friday lunch of wahtever we want (ordered in, of course) week in week out, just so that the next time someones looking for a fill on xy equity or credit product, we do it through Tullett as opposed to BGC as opposed to Cantor as opposed to THE LIST GOES ON. These brokers have nermous lawsuits against each other already, just because they try and win clients back since a lunch doesnt exactly keep a trader satisfied for long...

So no, i dont actually think brokers are buying Ferraris by the truckload.

Sun, 12/25/2011 - 18:17 | 2010719 KickIce
KickIce's picture

No, it means the ponzi will continue as long as there is not a run on PMs and food commodities stay reasonably priced.

 Commodity prices are key to this ponzi as is not waking the sheeple

Sun, 12/25/2011 - 22:46 | 2010968 Rynak
Rynak's picture

food commodities stay reasonably priced.


Sun, 12/25/2011 - 22:59 | 2010989 KickIce
KickIce's picture

With the amount of money printed I'd have to say very reasonable.

Sun, 12/25/2011 - 23:11 | 2011010 Rynak
Rynak's picture

You're not living in one of the countries to which inflation is "exported", hmm?

How about - 33% foodstuffs price inflation in one year? VERY REASONABLE? WTF? Technically, this is something in-between "typical fiat rip-off inlation" and "hyperinflation" (and together with static wages, in-between business as usual, and hyper-stagflation).

When does stuff stop being "very reasonable" to you - when it goes BOOM!?!?

Mon, 12/26/2011 - 00:32 | 2011156 Manthong
Manthong's picture

Those edible iPads are coming down in price a bit.

Sun, 12/25/2011 - 15:34 | 2010466 GeneMarchbanks
GeneMarchbanks's picture


The point of these 'long winded discussions', is that they are exceptionally helpful for those of us who are interested in the actual inner-workings of shadow banking. The hyper re-hypothecation scam has been a revelation into the horribly flawed logic with which this cotton candy 'financial innovation' fiasco.

Since much of the resources have now been fully backed into the financial sector in London, the rest of the UK has been marginalized as has been evident for the past thirty years or so. Cameron has to stand behind the collapsing banking oligarchs no matter what. Good-bye UK.

Sun, 12/25/2011 - 16:28 | 2010631 Al Gorerhythm
Al Gorerhythm's picture

I feel you ORI. After replying angrily to a poster about his demands of proof of manipulation of the PMs markets and you replied to my post offering empathy over my frustrations, it got me thinking about the anger in my reply and it made me realize that some of us have known or understood "The Game" for some time. What I have to remember is that the awakening has only just started and that there are literally billions of folk who don't have the message yet. It will be a long road and I just have to put aside my frustrations and hope that articles like this get the attention of one more sheep.

Are the brokers broke? The global reply to that is; if the world's monetary system is predicated on credit or debt or promises to settle accounts, rehypothecated promises, leveraged promises, and that account was opened on credit, and the credit was accepted without the means to settle (just like the $US since 1971), then the account holder is bankrupt from the start. How will the entire world settle a promise that has nothing backing the promise? It literally can't and we were warned by many.

It is obvious that the system is a sham but you can only see the sham if you accept the system as it really is and not how it has been portrayed. That takes a quantum leap.


Sun, 12/25/2011 - 18:14 | 2010709 Rusty_Shackleford
Rusty_Shackleford's picture



Are the brokers broke? The global reply to that is; if the world's monetary system is predicated on credit or debt or promises to settle accounts, rehypothecated promises, leveraged promises, and that account was opened on credit, and the credit was accepted without the means to settle (just like the $US since 1971), then the account holder is bankrupt from the start. How will the entire world settle a promise that has nothing backing the promise? It literally can't and we were warned by many.

The force is strong with this post. 



There is no spoon.

Sun, 12/25/2011 - 21:42 | 2010886 buckethead
buckethead's picture

This is my first exposure to this article. I must say, the language within would have been indiscernible to me just a few months ago. Reading ZH among others is a means for laypersons like me to educate ourselves.

I'm truly grateful for the re-run. It also helps to remind me that even within these corporations there are good people willing to call it like they see it.

I suppose that is what Tyler(s) is/are to begin with.

As grateful as I am for this site, part of me wants to take the blue pill.

Seeing a glimpse of truth is frightening.

Sun, 12/25/2011 - 23:08 | 2011006 StychoKiller
StychoKiller's picture

In essence, Shakespeare was right:  "Neither a borrower, nor a lender be."

Mon, 12/26/2011 - 09:29 | 2011597 Debt-Is-Not-Money
Debt-Is-Not-Money's picture

Quite correct.

With the exception of our coin on which no interest is due, there is no money!


Mon, 12/26/2011 - 10:23 | 2011653 ZDRuX
ZDRuX's picture

There's limits on how many times you can rehypothecate something in the U.S. - the difference is in London you can do it virtually an unlimited number of times.


Rehypothecation is not "necessarily" a bad thing as its used in finance all the time to provide things like leverage accounts (you deposit $1000, but get to play with $3000). But there has to be a limit on this, and unlimited rehypothecation is an obvious and clear problem, especially when it comes to physical assets used as collateral by multiple parties.


For example your house is used as collateral by YOU, and then rehypothecated by the bank since it's on their balance sheet as "possibly" being theirs, so they use it as collateral as well. This is where it all starts becoming a cluster fuck as there's only a limited number of physical assets, but 10 "potential" claimaints to that asset.

Sun, 12/25/2011 - 15:31 | 2010566 mkkby
mkkby's picture

Excellent.  Thanks ZH.

It would be great to see something similar on 2 other current topics -- derivatives and hypothecation at brokers.  Then mere mortals might actually understand the broker business.

Sun, 12/25/2011 - 12:25 | 2010359 rajat_bhatia
rajat_bhatia's picture

Man! You just couldn't resist, could you? Let just one day be filled with intoxicating Hope.. however fucked up the world may be...

Sun, 12/25/2011 - 12:39 | 2010375 I think I need ...
I think I need to buy a gun's picture

there is some hope out there,,,,,mcdonalds stock has a great trend line and walmart appears like it just broke out,,,,these two retailers appear to have a fantastic future right now

Sun, 12/25/2011 - 14:04 | 2010480 lynnybee
lynnybee's picture

Yup, WALMART does have a great future ....... in other countries.     I'm deliberately avoiding WALMART like the plague.    It's obvious they don't need my money; after all, CHINA awaits.    This country has been WALMARTIZED .    Let someone else support that company ...... i'm out.     what little i have left goes straight into local business or physical metal & foodstuffs.   

Sun, 12/25/2011 - 15:49 | 2010589 DaveyJones
DaveyJones's picture

you said it.

Sun, 12/25/2011 - 15:50 | 2010590 mkkby
mkkby's picture

Too late for that.  The big retailers have taken out most of the locals.  It's about time people started learning that.  Their own greed to save a few fiat cents resulted in the walmatization of USSA. 

OTOH, it was entirely predictable for stupid TV hypnotized sheep to go where they were herded.

Sun, 12/25/2011 - 18:09 | 2010713 Tijuana Donkey Show
Tijuana Donkey Show's picture

Two words: flea market. Avoid local sales taxes, regs, and registration, and get ready for your black market future. We have ICE agents running around at ours, big brother is watching.......

Sun, 12/25/2011 - 19:43 | 2010797 WonderDawg
WonderDawg's picture

Lynnybee, I'm with you. I think we're on the cutting edge of a movement that will gain traction with more and more people.

Sun, 12/25/2011 - 19:59 | 2010806 Theosebes Goodfellow
Theosebes Goodfellow's picture

You nailed it, Lynnybee. Let me advise that people begin now to develop those relationships with local retailers. When TSHTF they might be highly selective with whom the choose to do busniess. It would be most wise for you to be one of them. The future of economies is not global, it's local and way smaller than you can guess.

Sun, 12/25/2011 - 21:37 | 2010881 Spigot
Spigot's picture

Each $ spent at a big box store yeilds about $2 in economic activity for the community. Each $ that "goes local" (ie - is recirculated as local purchases for local goods and services yeilds $7 in economic activity for the community.

By doing repeated, habitual bargain hunting at places like Walmart we have been spending ourselves poor.

We need to understand how we have, by our minor, daily purchasing habits, ruined this country...

...and then change that mind set and rebuild our communities.

Each of us can do that, now. We must in order to win back our economic freedom.

Mon, 12/26/2011 - 12:28 | 2011804 RiverRoad
RiverRoad's picture

It's a comforting thought to know though that the big international US companies are getting screwed right now with their money earned overseas sitting there in Euros.  They desperately want it back here tax-free, of course, which ain't happening so far even though Jeff Imelt suddenly became Obama's BFF.

Mon, 12/26/2011 - 02:40 | 2011354 nowhereman
nowhereman's picture

Until you can't afford the gas to get there.

Mon, 12/26/2011 - 09:39 | 2011610 Debt-Is-Not-Money
Debt-Is-Not-Money's picture

Maybe thats why the Dollar Stores are becoming more popular (I don't shop at them or own shares). This only shifts the cause of the problem from Wal-Mart to a different source, local businesses are still screwed.

Sun, 12/25/2011 - 13:34 | 2010459 LowProfile
LowProfile's picture


I hope that the public is educated to the point that they understand the crime of debt-based money, that the whole thing collapses literally overnight, and then a lightning-fast reform is implemented, with a functioning, constructive system put in place.

What the Hell were you hoping for?

Sun, 12/25/2011 - 15:54 | 2010594 boattrash
boattrash's picture

rajat...The fuc@#$% Hope was elected about 3yr ago. Many/most of us detest that word now. Thanks, and Merry Christmas to ya!

Mon, 12/26/2011 - 21:39 | 2012516 ThrivingAdmistC...
ThrivingAdmistCollapse's picture

Yes it is very detestable.  The one has brought about the collapse of American Power in the world.

Sun, 12/25/2011 - 12:26 | 2010360 CalibratedConfidence
CalibratedConfidence's picture

Spot on Tyler.  The underground world of intelligence thanks you for your contributions and continued awesomeness.  Thank you also for the foresight to remain annoymous and focus on "connecting the dots".  Rock on through 2012 ZeroHedge!

Sun, 12/25/2011 - 12:27 | 2010362 GeneMarchbanks
GeneMarchbanks's picture

'As for a book, we are more than confident enough "independent" bloggers out there will succumb to the very system their protest against, and pen a few hundred pages on the goal-seeked topic of their choosing - the last thing the vast upcoming book pyre needs is our own intellectual self-pleasuring'


Sun, 12/25/2011 - 12:28 | 2010364 Gloomy
Gloomy's picture

This is just such a nice, clear explanation of the mechanism of European QE.

Sun, 12/25/2011 - 15:47 | 2010588 Rusty Shorts
Rusty Shorts's picture

O/T, not sure if this has been confirmed...


Julian Assange is dead (kidnapped and killed)

Sun, 12/25/2011 - 16:07 | 2010614 GeneMarchbanks
GeneMarchbanks's picture

If true, we're in for a grim last week of 2011 and beyond...

Sun, 12/25/2011 - 17:24 | 2010676 emsolý
emsolý's picture

I like this one (Detlev Schlichter, Paper Money Collapse):


Sun, 12/25/2011 - 12:33 | 2010365 francis_sawyer
francis_sawyer's picture

Don't call 'em 'BROKErs' for nuthin...

Sun, 12/25/2011 - 12:43 | 2010378 youLilQuantFuker
youLilQuantFuker's picture

Are the brokers broken? How can I read on? This is what I see:

Nothing. Broken. No link. Room for improvement.

Sun, 12/25/2011 - 12:46 | 2010384 Tyler Durden
Tyler Durden's picture

Probably due to that ad blocker, which in addition to preventing us from generating revenue, is also helping you stay uninformed.

Sun, 12/25/2011 - 12:49 | 2010394 Almost Solvent
Almost Solvent's picture

I click a few ad links daily just for your traffic

Sun, 12/25/2011 - 16:01 | 2010606 mkkby
mkkby's picture

I do too, and not for any other site.

Sun, 12/25/2011 - 21:57 | 2010904 buckethead
buckethead's picture

Tx for reminder

Mon, 12/26/2011 - 00:32 | 2011158 DaveyJones
DaveyJones's picture

almost solvent's comment should have 500 greens 

Sun, 12/25/2011 - 12:53 | 2010399 GeneMarchbanks
GeneMarchbanks's picture

The attempt to make the internet unbearable through ads chasing you endlessly is becoming an issue. This series of tubes is going down soon.

Sun, 12/25/2011 - 13:31 | 2010456 oogs66
oogs66's picture

The I phone saved google - so many fat finger clicks

Sun, 12/25/2011 - 17:07 | 2010668 ClassicalLib17
ClassicalLib17's picture

Whatever an ad blocker is I'm fairly certain I don't have it.  Thank you ZH for the opportunity to learn that which I have never been exposed to.  It's been a long struggle, but I am determined to gain a vague understanding of the financial system.  God bless 

Sun, 12/25/2011 - 23:15 | 2011022 StychoKiller
StychoKiller's picture

The following solution to annoying advertisements does just as well as AdBlocker, without screwing up site content:

It does this by forcing ad sites IP addresses to be replaced with, which is the localhost address of anyone's PC.

I advocate that yer viewers donate some FRNs to the site -- I do so myself.


Mon, 12/26/2011 - 00:51 | 2011201 Al Gorerhythm
Al Gorerhythm's picture

Tyler; can I pay you with a credit note?

Mon, 12/26/2011 - 00:54 | 2011206 Al Gorerhythm
Al Gorerhythm's picture

That was meant as sarc, but I'm going to ask every shop owner I deal with if they'll accept credit when I pay for items in cash, just as an experiment. If they don't accept credit, how will I pay them?

Sun, 12/25/2011 - 16:13 | 2010619 I am Jobe
I am Jobe's picture

Suggest you get yourself a R710 Dell Server along with Compellent Storage to ensure you are informed. Now back to news ZH's

Sun, 12/25/2011 - 12:48 | 2010386 EhKnowKneeMass
EhKnowKneeMass's picture

WTF. Posted this, then it disappeared. Somebody deleting posts?


Sun, 12/25/2011 - 13:03 | 2010420 youLilQuantFuker
youLilQuantFuker's picture

Christmas present bah humbug.

Sun, 12/25/2011 - 13:06 | 2010424 AgShaman
AgShaman's picture

Ooooh....reading that's hard on the eyes.

Wake me up when Warren mean, Bank of Amerika needs another bailout

Sun, 12/25/2011 - 13:08 | 2010429 ucsbcanuck
ucsbcanuck's picture

Thanks TD for all the info and enlightenment. 

As an example of how truly f*cked up this whole thing is - the Administration refuses to prosecute criminal wrongdoing for the fear that if the public knew what was going on, they would stop investing:

Wow - and here I was thinking that legal enforcement CREATED confidence. Never in my lifetime would I ever have thought that someone would decline to enforce laws because it could DESTROY confidence.

I was somewhat skeptical of Obama because after all he is a politician and has to play the game somehow. But this is worse, far worse. Now I've lost all respect for him. 

Merry Christmas and a Happy New Year to all.

Sun, 12/25/2011 - 23:17 | 2011026 StychoKiller
StychoKiller's picture

The Obamatron administration, puting the CON in confidence since 1/23/2009...

Sun, 12/25/2011 - 13:14 | 2010435 bpom
bpom's picture

Give a man a fish, and he will have food for a day, but teach a man to fish, and he will sit in a boat and drink beer all day.

Sun, 12/25/2011 - 13:18 | 2010440 youLilQuantFuker
youLilQuantFuker's picture

Amen brother. At least until the ice runs out. Warm beer is the curse of the high seas.

Sun, 12/25/2011 - 13:24 | 2010445 farmerjohn2112
farmerjohn2112's picture

Ah... just get another stringer and dangle the sixer in the lake - cold enough.

Sun, 12/25/2011 - 13:30 | 2010455 francis_sawyer
francis_sawyer's picture

lol - BASS ALE!

Sun, 12/25/2011 - 23:29 | 2011048 OldPhart
OldPhart's picture

As a Desert Kid working around the ranch I learned to drink beer at damned near any temperature.  Prefer room temp as cool enough, though.

Sun, 12/25/2011 - 18:46 | 2010746's picture

I skip the fishing entirely and just head down to the Allegheny with a six pack.

Sun, 12/25/2011 - 13:33 | 2010457 AnAnonymous
AnAnonymous's picture

keep kicking the can down the road until it all comes crashing down.

Better version:

keep kicking the can down the road until there is no more road left.

Press the focus on the road and lead to ignore all the possible ways of kicking the can as they are only diversion material.

Sun, 12/25/2011 - 14:47 | 2010522 ThisIsBob
ThisIsBob's picture

Keep kicking the can down the road so the can kickers can grab what they can before it all blows up.

Sun, 12/25/2011 - 13:39 | 2010461 dizzyfingers
dizzyfingers's picture

I haven't read this yet, but before I do I want to say that though I would enjoy the feeling of vindication seeing "the system"* collapse so that the world could get back to "normal"**, in the past few weeks*** I've come to believe that can-kicking may be the best we can hope for.

Thank you in advance for this article, no matter what it says. Your intro makes it seem an apprpriate and timely Christmas present and no matter how furious and sick makes me, I'll enjoy knowing whatever information it offers.

Thanks zerohedge; love all of you to pieces who toil and comment here. Really. If it weren't for the information I find here and the emotional release it gives me to scream and spit at my computer screen, I'd probably have done something crazy by now and be in jail. I appreciate all articles and all comments; they are a lifeline to a semblance of sanity.

*the bankster/wall street heist system

**is there a normal? was there ever a normal? will there ever again be a normal? (Please don't remind me that chaos is normal -- I know that but I think that means universal chaos, like the universe itself, not the bankster/wall street heist kind. The latter is what I'm asking about ever being "normal" again. Like with Glass-Steagall back in place.)

***watching the EU-carnival racket games, and then MF Global, then the Fed audit info, and then Bernank finally bankrupting the US for BOE; and then rehypothecation and its implications, and then the ongoing swindle we call "elections"... I'm getting ulcers.


Sun, 12/25/2011 - 14:10 | 2010485 collon88
collon88's picture

My sentiments too.  To add emphasis I sent Tyler $20.  I hope everyone who reads this does also.

Sun, 12/25/2011 - 20:52 | 2010842 Miss Expectations
Miss Expectations's picture

Makes me dizzy...but this kind of stuff should also be on our radar:

An autistic child was put into a drawstring bag at school.

"God, they do not have my son in that bag …”

That’s what Sandra Baker, of Harrodsburg, Ky., said she thought when she walked down a hall toward a big green bag, with a teacher’s aide sitting beside it, at her son’s school, on Dec. 14.

“Mama, is that you?” a voice coming from the bag said.

  Here's what the school said:

“The employees of the Mercer County Public Schools are qualified professionals who treat students with respect and dignity while providing a safe and nurturing learning environment,” Davis  said in the statement.

Then there's Nurses Fired for Taping Patient's Mouth Shut

Artalejo's daughter, Brittany Bilson, told the television station that her mother's teeth were chattering and she was moaning and shaking. Bilson said the nurses told her mother to shut up, taped her mouth closed and joked they would be fired if they were caught.

  Here's what the hospital said:

"But as a hospital we are fully committed to providing quality and compassionate care. The allegations that were brought forth were completely against that commitment."



Sun, 12/25/2011 - 22:55 | 2010984 Rynak
Rynak's picture

Morals and PR are a lame substitute, for that universal something that morals and PR are supposed to convey.

....just like "responsibility" is a lame substitute for "self-honesty".

Sun, 12/25/2011 - 23:21 | 2011033 StychoKiller
StychoKiller's picture

Seems like PR and "Mission Statements" are a lame substitute for responsibility and moral behavior.  Seems like some employees should be summarily fired, and then arrested for simple assault.

Sun, 12/25/2011 - 13:57 | 2010476 Atlantis Consigliore
Atlantis Consigliore's picture

Bring back the Goodfellas;  at least then there was honor, and lawyers were buried in the desert.  Brokers?  you kept you word or were broken in half and fed your eyeballs from vices....rare.

Sun, 12/25/2011 - 22:07 | 2010910 disabledvet
disabledvet's picture

"making a killing in the market: shoot your broker." that's the coffee mug from a guy who was on the sell side for 20 years. I don't think the broker side is going anywhere with cloud computing, nat gas and solar power still readying themselves to completely change the way we live our lives. The buy side (the banks) have been bailed out for these technologies to be brought to bear by the private marketplace. Whatever the result on the War on Terror (which is the bulk of Federal Spending and the reason for the massive size of the USA's debt and deficit) the ability to make money beyond the dreams of avarice is alive and well. Love the sentiment presented here of course.

Sun, 12/25/2011 - 14:00 | 2010477 Scalaris
Scalaris's picture


Reducing Systemic Risk


"Although we at the Federal Reserve remain focused on addressing the current risks to economic and financial stability, we have also begun thinking about the lessons for the future. I have discussed today two strategies for reducing systemic risk: strengthening the financial infrastructure, broadly construed, and increasing the systemwide focus of financial regulation and supervision. Work on the financial infrastructure is already well under way, and I expect further progress as the public and private sectors cooperate to address common concerns. The adoption of a regulatory and supervisory approach with a heavier macroprudential focus has a strong rationale, but we should be careful about over-promising, as we are still rather far from having the capacity to implement such an approach in a thoroughgoing way. The Federal Reserve will continue to work with the Congress, other regulators, and the private sector to explore this and other strategies to increase financial stability." 


Ben S. Bernanke

Federal Reserve Bank of Kansas City's Annual Economic Symposium, Jackson Hole, Wyoming

August 22, 2008

Sun, 12/25/2011 - 14:14 | 2010488 cheeseheader
cheeseheader's picture

Greetings and Salutations from the new kid on the block....

Spoken like a true over-Ivory-Towered academic.  I'd like to introduce him to the unseen side of my woodshed and get him some dirt under his fingernails, holes in his breeches, and calouses on his hands--before I kick the ever-lovin' cr*p out of him and send him back home to hide under mommy's skirt.

Ben S. Bernanke...America's newest day laborer.

Sun, 12/25/2011 - 14:12 | 2010486 ISEEIT
ISEEIT's picture

Why we love you. Maybe it is truth that is the ultimate commodity? Humans are so utterly starved of truth. We waste our precious little bit of time in a sea of lies and know that bullshit is rape. We deserve a better place to begin from.

We are HUNGRY. It's a good and proper hunger though. People in general are good. People in charge are bad. All we really ask is that we be left alone to experience our journey free of your perverted itinery. We don't want to rule the world, YOU DO.

We don't propose to control you, You propose to control us.

We say politely, NO.

We will not always be polite, it is our preference to be polite, it is our nature to be polite.

I do pray that you respect our desire to remain polite.

Love you ZH.

Sun, 12/25/2011 - 15:07 | 2010539 Piranhanoia
Piranhanoia's picture

The scientific method makes a mockery of any of the accepted practices in above paper. It sounds like fraud in the inducement is known to every party before the fact, and all conspire with this knowledge. I am really shaken there are so many people that do this for a living when it really just accelerates our all dying.   I hope one day we abandon all this crap and people that demonstrate sociopathic tendencies are prevented from doing that which they desire.  What a small price to pay, considering.

Sun, 12/25/2011 - 15:18 | 2010552 Gromit
Gromit's picture

Maybe long term investors should ask for their stock certificates.

Ensuring that all your accounts are cash rather than margin is a start but after MF Global even that isn't enough.

Brokers have reason to fear this, as it threatens the major source of their incomes, and will reduce trading to boot. They can't let you buy 5000 shares for $7.95 or whatever without being able to generate substantial income from their possession of the assets in street name.

My old muni bearer bond certificates were beautiful and I miss them. 

I've asked for years to be able to hold my California GO bonds directly with the State of California (as at ) so I hold them with a custodian in a segregated trust accoun for 30bps per year. There must be some reason why refuse, probably there is some benefit to brokers to possess these securities in book form.


Sun, 12/25/2011 - 23:25 | 2011042 StychoKiller
StychoKiller's picture

Could it be that Paper & Ink (and the Printers that love them) are expensive?

Sun, 12/25/2011 - 15:27 | 2010561 Raymond_K_Hessel
Raymond_K_Hessel's picture

Thank you TD for all you do! If there's a better blog, I haven't found it. Keep up the good work!

Sun, 12/25/2011 - 15:34 | 2010571 keepusfree
keepusfree's picture

This explains it pretty simply and what the young and others are doing about it.

Sun, 12/25/2011 - 15:49 | 2010584 ebworthen
ebworthen's picture

Broken Train!

Broken Train - Beck

The snipers are passed out
In the bushes again
I'm glad I got my suit dry-cleaned
Before the riots started

Cuz there's only rehashed faces
On the bread line tonight
Soon you'll be a figment
Of some infamous life

Billionaires smile like weapons
Passing out platinum pensions
They're out of control
No one knows how low they'll go
(Hold on)
Take a ride on a broken train

Sun, 12/25/2011 - 15:46 | 2010586 Fix It Again Timmy
Fix It Again Timmy's picture

Using the infamous quote from the movie, "Risky Business"  - "Yes, No, Maybe."

Sun, 12/25/2011 - 18:42 | 2010742 PulauHantu29
PulauHantu29's picture

Why not tax the house sellers who took a big profit during Greenspan's EZ Money Boom? Taxing "new" house buyers seems to throw even more cold water on the already plunging house market.

Sun, 12/25/2011 - 16:05 | 2010611 ShoeShineBoy
ShoeShineBoy's picture

good memories.. those of you who wants to find out why people were heavily short LEH's and bunch others, but especially LEH, they will find the answer in the form of a "matchbook" withdrawal/drop graph in this very paper, was an excellent resource then, and it still is.

Sun, 12/25/2011 - 16:08 | 2010616 bobbydelgreco
bobbydelgreco's picture

maybe i am wrong maybe gold won't nose dive maybe ben wins in the end maybe keynes wrong about the liquidity trap but one thing i know rome wasn't burnt in a day

Sun, 12/25/2011 - 17:06 | 2010648 Tuffmug
Tuffmug's picture

Interesting article but the concerns no longer apply. Fast forward to today's reality. The regulators and the regulated are now co-conspiritors in a fraud to hide or bail out any insolvency or illiquidity. The Banker and Broker now has no risk that is not impicitly backstopped by a central banker stealing from the collective wealth of the nation by money printing. MF Global was a brain fart by the regulator who pushed a small button on MF without realizing it was connected to a nuclear device. I'm sure they have been ordered never to push that button again and to watch more internet porn.

Sun, 12/25/2011 - 18:00 | 2010703 RockyRacoon
RockyRacoon's picture

Paragraph 15 of the accounting rule FAS 140stipulates that the amount referred to on the balance sheet statement need only be“collateral pledged to counterparties which can be repledged to other counterparties”.

What else do we need to know?  This about wraps it up.

Sun, 12/25/2011 - 18:05 | 2010710 Iwanttoknow
Iwanttoknow's picture

Did someone delete the first time i posted this? 


Sun, 12/25/2011 - 18:34 | 2010733 hmmmstrange
hmmmstrange's picture

That is 100% BS. derived from this crap

Sun, 12/25/2011 - 23:46 | 2011080 Iwanttoknow
Iwanttoknow's picture

Thanks.I could'nt understand how euro could have differertial values.

Sun, 12/25/2011 - 18:35 | 2010734 FoieGras
FoieGras's picture

Nothing is 'broken' or 'dysfunctional'. Not more than it was during many other periods over the last 200 years anyways. Things are always in disarray. Marekts are always going up and down. Hundreds of banks and brokers have gone bankrupt over the last 200 years.

What we're whitnessing - in terms of historic significance - is just another random year in financial history.

Sun, 12/25/2011 - 18:37 | 2010736 ebear
ebear's picture

"As such, we adhere to the paradigm describing the distinction between giving a man a fish and teaching a man to fish"

Build a man a fire and he'll be warm for the night.

Set a man on fire and he'll be warm for the rest of his life!

Sun, 12/25/2011 - 18:43 | 2010737 PulauHantu29
PulauHantu29's picture

Read ZH; it beats a $250k MBA!


Please, please keep posting these educational articles.

Mon, 12/26/2011 - 01:08 | 2010755 steve from virginia
steve from virginia's picture


Let's leave out of this discussion the custody banks ... where $40 trillion resides (mostly in the form of assets other than currency) looking for trouble and finding some. What is explained by Citi is that costs of managing that sum were greater than the sum, itself. Discussion of this is for another day.

Let's look at the big picture where the entire economy is broke yet the obsession du jour is malfunction of the dealers (in that they cannot provide enough liquidity to support transactions on their own accounts and so must make use of funds entrusted to them by clients). Fair enough, but this is not unlike a person with a house engulfed with fire obsessing about a leaking water heater in the basement.

Broker/dealer illiquidity CONTRIBUTED (along with broker/dealer malfeasanse) to a failure that was inevitable due to the excess cost structure of the economy as a whole. If the broker/dealers had not failed some other link in the chain of finance OR IN SO-CALLED PRODUCTIVE ECONOMY would have broken as indeed it did. What failed at the bottom was -- and is -- the non-productive energy waste infrastructure. This failure is ongoing, taking place first in the US and is now underway in other countries (Ireland, Spain, now Canada, Australia, Dubai and China).

Our shit can't pay for itself. Not just on Wall Street.

Sun, 12/25/2011 - 19:36 | 2010789 Hannibal
Hannibal's picture


Sun, 12/25/2011 - 19:55 | 2010802 WonderDawg
WonderDawg's picture

Capitalism was murdered by Corruption.

Sun, 12/25/2011 - 23:49 | 2011085 Rick64
Rick64's picture

The root problem is man's inherent greed, and that attribute is why all systems are vulnerable and end in failure.

Mon, 12/26/2011 - 00:24 | 2011141 TheFourthStooge-ing
TheFourthStooge-ing's picture

"Cannibalism will eat itself!" --- Some Old Nobody


Sun, 12/25/2011 - 19:46 | 2010792 slowimplosion
slowimplosion's picture

I realize that "central planning" is the new boogieman around here, but I really object to the attempt to describe the shadow banking system - the exact, complete and total opposite of "central planning" - as having anything to do with "central planning".

And Merry Christmas.

Sun, 12/25/2011 - 21:04 | 2010847 Tuffmug
Tuffmug's picture

Disagree. Central planning now backstops shadow banking. They saved it in 2008 and continue to support it now. It's Repo Heaven time and the Government is the sugar Daddy.

Sun, 12/25/2011 - 20:59 | 2010849 Tyler Durden
Tyler Durden's picture

How about objecting to what is actually being said: that central planning is doing everything it can (not enough) to prevent the inevitable unwind of shadow banking via an endless series of QEs where the unregulated credit money is onboarded on the government's balance sheet, for the simple reason that shadow banking only works in an environment that is confident in its own self-sustainability, and not being on central bank life support.

Sun, 12/25/2011 - 21:48 | 2010862 Tuffmug
Tuffmug's picture

Shadow banking has plenty of confidence. Their ultimate backstop is now the entire cumulative wealth of the nation via the FED. What better counterparty could you want?? Every QE is another stealth theft of cumulative wealth funneled to the bankers. The resolution of the 2008 crisis was an effective merger of government and the bankers. Central banks are doing way more than life support for the banks. We are early in the game. There is a lot more accumulated wealth for the FED to steal.

Sun, 12/25/2011 - 22:21 | 2010929 disabledvet
disabledvet's picture

"in Europe." other than that...I whole heartedly agree.

Sun, 12/25/2011 - 20:08 | 2010812 Yen Cross
Yen Cross's picture

 Speaking of " Piece Meal" ? How about we discuss the ( M/E ) , Middle Eastern ) rinse wash every night into ( EUROS)?

  It's so pathetic I want to PUKE! 100 $ crude?  What a FUC.King joke!

   The ass raping never ends!!!

Sun, 12/25/2011 - 20:19 | 2010819 gorillaonyourback
gorillaonyourback's picture

so the big security lenders like STATE STREET etc   dont think making a percentage both ways selling govt bonds at an interest rate charge and buy collateral at an interest charge is worth it.......  I think a new paradigm maybe well on its way.   I read recently that the g-uber-mint  may force pension funds hedge funds etc to keep 10 percent of their asses in gov't bonds.

after reading that i would assume their has been an increase in lending out govt bonds and buying relatilvely more safe corporate bonds.   new paradigm?

Sun, 12/25/2011 - 20:37 | 2010827 TheSilverJournal
TheSilverJournal's picture

They should be forced to buy bonds because that's the safest thing to be in. / sarc

Mon, 12/26/2011 - 02:39 | 2011352 DanDaley
DanDaley's picture

That would be called economic oppression, an old and nasty ruse of unscrupulous governmental hacks to funnel money directly to the government via a gun to the head.

Sun, 12/25/2011 - 20:35 | 2010825 TheSilverJournal
TheSilverJournal's picture

I listen to the events of 2008 and I learned that a core position of physical silver is a must.

Sun, 12/25/2011 - 21:13 | 2010855 Yen Cross
Yen Cross's picture

 I surmise,  "  LONG AMMO" , Tyler?

Sun, 12/25/2011 - 21:58 | 2010906 Dirtt
Dirtt's picture

Very appreciative.

Getting the bait on the hook took a little re-reading but as far as understanding the severity of leverage and off-balance sheet shenanigans? Clear as Fiuggi water.


Sun, 12/25/2011 - 22:34 | 2010951 hermes trismegistos
hermes trismegistos's picture

ZH offers inputs,unconnected dots of the world.By observing and going deeper into the direction in which those dots points we can have a better and more comprehensive understanding of how the financial / economical  machine works and what we may expect from it.We learn not to be taken by surprise by the unfolding of events and rather be almost prepared fotr them.Or better even, to use the machine  for our own advantage.

Sun, 12/25/2011 - 23:31 | 2011052 gwar5
gwar5's picture

Awesome. If there's no pretend there's no extend.


Speaking the truth about how the central bankers are handling our economy is now a crime. The truth can no longer be spoken in polite company because we're all supposed to pretend that all is well, otherwise, it will set off the herd. Those that seek the truth to prepare are a national security threat.







Mon, 12/26/2011 - 00:30 | 2011154 Wu Qi Ming
Wu Qi Ming's picture

Thanks for the PDF, unable to access scribd in China. Most definitely 2 is 1 for this type of information.

Mon, 12/26/2011 - 00:32 | 2011160 Wu Qi Ming
Wu Qi Ming's picture

Hmmm, something most interesting. After posting my initial comment, the embedded Scribd file in the article appeared. Very interesting indeed......

Mon, 12/26/2011 - 02:05 | 2011319 nowhereman
nowhereman's picture

I am here because being here is where it's at.

No more, no less.

I am so fortunate to have found you.

Mon, 12/26/2011 - 12:12 | 2011775 RiverRoad
RiverRoad's picture

Keep on keepin' on Tyler.  It would be so easy for you to write "the book" as we know you could so easily do.  But please don't.  The education I, for one, am getting here is invaluable.  We all know how the book ends already....

Mon, 12/26/2011 - 12:16 | 2011782 Broker NotBroke
Broker NotBroke's picture

Nah, they look fine to me /sarc

Mon, 12/26/2011 - 12:17 | 2011783 Broker NotBroke
Broker NotBroke's picture

double post

Mon, 12/26/2011 - 22:57 | 2012598 covert
covert's picture

the stock trading system has been broken from the beginning.


Tue, 12/27/2011 - 01:45 | 2012747 dvolatility
dvolatility's picture


Thu, 12/29/2011 - 14:38 | 2019836 st3phen
st3phen's picture

thanks, tyler, for posting this. very interesting (and scary).


my question to everyone: does anyone have a copy of the cited paper "Where Should Hedge Funds Keep Their Cash?" (September 2008)? I've googled around a bit and didn't have any luck finding a copy; the author cites it a couple of times, and I'd like to read it.





Sat, 04/14/2012 - 19:58 | 2345853 postafoa02
postafoa02's picture

look peeps, explanation of everything is coming soon.. just hang tight..

i'm not just in the correct mode of drunk0rness yet

i do command you for you awesome patience.. just hang in there peeps

Sat, 04/14/2012 - 20:00 | 2345858 postafoa02
postafoa02's picture

and yes i know i used the words peeps and hang twice.. it's up to you to decode why.

Sat, 04/14/2012 - 20:15 | 2345879 postafoa02
postafoa02's picture

not only that, i might have been promised some pot later, which will delay and obfuscate my final answer by days or even weeks, but that's your problem


Sat, 04/14/2012 - 20:33 | 2345899 postafoa02
postafoa02's picture

i just thought of something:


In the end, washing your teeth is more important than scratching your balls, but you can still do both at the same time


no this is not the final explanation, just thought of that before going to sleep

Do NOT follow this link or you will be banned from the site!