THIS scares me: from Jonathon Turley's website

[snappyturtle]

http://jonathanturley.org/2013/03/31/could-the-banksters-grab-your-bank-deposits/


Could the Banksters Grab Your Bank Deposits?
Published 1, March 31, 2013 Congress , Constitutional Law , Courts , International , Justice , Uncategorized139 Comments


Respectfully submitted by Lawrence E. Rafferty- Guest Blogger

The recent news about Cyprus banks confiscating depositor’s funds sent chills throughout the financial world here and abroad. I couldn’t believe that the plan in Cyprus hinged on the idea that the bank could just steal customer’s funds to balance the bank’s books. I muttered to myself when I read the story that something as crazy as that couldn’t possible happen here in the United States. Unfortunately, I learned that the plan to pull a Cyprus type grab here was already in the works.

“A joint paper by the US Federal Deposit Insurance Corporation and the Bank of England dated December 10, 2012, shows that these plans have been long in the making; that they originated with the G20 Financial Stability Board in Basel, Switzerland (discussed earlier here); and that the result will be to deliver clear title to the banks of depositor funds. ” NationofChange

snip.....

To be clear, this joint FDIC-BOE plan would need enabling legislation to be passed before it could become the law of the land. However, the bankruptcy laws have put unsecured creditors, which depositors would be labeled under the plan, lower in seniority to the claims of derivative counterparties which would mean that the very parties who are causing the bank to fail, could collect before the innocent depositors.

snip....

This type of bank bail out is an end run on depositors and on the American public. I can only guess why the corporate owned mass media has not been carrying this story. I do not think that I would every put any money in any of the big multi-state banks in light of this potential nightmare of a bailout. I would love to see the Senate hold a hearing to question FDIC officials on this joint plan. While the wealthy use the banks, a good portion of their wealth is in other investment vehicles and therefore the brunt of the bailout could be borne by you and me. Of course the banks will claim that we would receive stock in lieu of the confiscated funds, but can you pay your mortgage bill with stock from a failing bank?

-----------------------

I trust Jonathon Turley therefore I trust his guest blogger. What do you think? With everything that has gone on in the last decade I worry that this scenario of banks seizing deposits could happen.

Edited for clarity of my own words not the author's.

2nd edit: For better understanding read:
http://www.nationofchange.org/it-can-happen-here-confiscation-scheme-planned-us-and-uk-depositors-1364735979

This link is on the Turley website in the above article....it answers much.

[demwing]

1. Can you eat stocks?

I bet they aren't as juicy and delicious as bankers.

[Kennah]

54. Doesn't matter how big of a fire I build ...

... I suspect it's never going to compare to the 4th circle of Hell.

You obviously see my quandary. How on Earth am I supposed to adequately cook the meat?

[OnyxCollie]

2. Bank Of America Dumps $75 Trillion In Derivatives On U.S. Taxpayers With Federal Approval

Bank Of America Dumps $75 Trillion In Derivatives On U.S. Taxpayers With Federal Approval
http://seekingalpha.com/article/301260-bank-of-america-dumps-75-trillion-in-derivatives-on-u-s-taxpayers-with-federal-approval

Bloomberg reports that Bank of America (BAC) has shifted about $22 trillion worth of derivative obligations from Merrill Lynch and the BAC holding company to the FDIC insured retail deposit division. Along with this information came the revelation that the FDIC insured unit was already stuffed with $53 trillion worth of these potentially toxic obligations, making a total of $75 trillion.

Derivatives are highly volatile financial instruments that are occasionally used to hedge risk, but mostly used for speculation. They are bets upon the value of stocks, bonds, mortgages, other loans, currencies, commodities, volatility of financial indexes, and even weather changes. Many big banks, including Bank of America, issue derivatives because, if they are not triggered, they are highly profitable to the issuer, and result in big bonus payments to the executives who administer them. If they are triggered, of course, the obligations fall upon the corporate entity, not the executives involved. Ultimately, by allowing existing gambling bets to remain in insured retail banks, and endorsing the shift of additional bets into the insured retail division, the obligation falls upon the U.S. taxpayers and dollar-denominated savers.

Even if we net out the notional value of the derivatives involved, down to the net potential obligation, the amount is so large that the United States could not hope to pay it off without a major dollar devaluation, if a major contingency actually occurred and a large part of the derivatives were triggered. But, if such an event ever occurs, Bank of America's derivatives counter-parties will, as usual, be made whole, while the American people suffer. This all has the blessing of the Federal Reserve, which approved the transfer of derivatives from Merrill Lynch to the insured retail unit of BAC before it was done.

BofA Said to Split Regulators Over Moving Merrill Derivatives to Bank Unit
http://www.bloomberg.com/news/2011-10-18/bofa-said-to-split-regulators-over-moving-merrill-derivatives-to-bank-unit.html

Bank of America’s holding company -- the parent of both the retail bank and the Merrill Lynch securities unit -- held almost $75 trillion of derivatives at the end of June, according to data compiled by the OCC. About $53 trillion, or 71 percent, were within Bank of America NA, according to the data, which represent the notional values of the trades.

That compares with JPMorgan’s deposit-taking entity, JPMorgan Chase Bank NA, which contained 99 percent of the New York-based firm’s $79 trillion of notional derivatives, the OCC data show.

...

One of DU's defenders of the status quo told me there was nothing to worry about, so take that for what it's worth, i.e. jack shit.

[snappyturtle]

3. I so appreciate you posting these links. I had read about this and it, too, is

scary to me. I just don't trust the big banks and thought I should let my DU family know
what I ran across.

[OnyxCollie]

5. It seems likely to happen.

Looking at how cities have gone bankrupt and "remedies" like the Emergency Financial Manager, I would expect a crashing of the entire US economy, draining of citizens' savings, and an appointment of an Emergency Financial Manager such as a corporation to run the country, with the TPP as the new Constitution.

[Occulus]

6. Meanwhile, Wikipedia says that "In nominal terms, the total 2011 GWP was around US$69.11 trillion."

That's Gross World Product, as measured in US dollars.

So, the obligation BoA and its parent laid at our feet is.... greater than the combined total economic output of the entire planet?

Am I reading that correctly?

If so, we are so so so fucked.....

[OnyxCollie]

7. Like an aneurysm about to burst. nt

[Occulus]

9. I'm starting to think that letting it all fall apart is the only possible path to a lasting remedy.

I don't like to think that, but I don't see any other way out...

[geek tragedy]

11. Misleading figure for a couple of reasons:

1) Derivatives are in notional amounts, not gross amounts. What does that mean--that means that if you hedge the interest rate risk on $1 billion of assets, the notional amount is $1 billion, even if the amount of risk is much smaller;

2) derivatives by definition off-set each other--for each person who bets one way, someone else is betting the opposite way. So, you can have $1 billion of derivatives on each side of a bet, with the net risk being zero not $2 billion. Hard to say how many off-setting positions BofA holds.

[Lucky Luciano]

35. Glad someone has a clue.

cheers.

[MindPilot]

16. Financial transactions are not part of GDP

I saw a wonderful documentary on Japanese TV (one of those things you would never watch except it is the best thing on in a hotel room) where a German economist laid out how the financial world operates almost separate and part from the "real" economy.

There was a chart that showed how global GDP--which is people making and doing things that other people pay for--is about $70 trillion. It also showed that the financial transactions are several times more that, about $175 trillion if I remember right.

The presenter was making a case for a FTT (financial transaction tax) based on the idea that hundreds of trillions of dollars change hands every year tax-free while adding exactly nothing to the GDP.

[Lucky Luciano]

34. The notional amount of their derivs was about $75T.

That is not the obligation.

A $1B one year OIS interest rate swap starts with a value of zero. If Fed Funds rates move by 1% immediately (enormous unlikely move), then the swap will be worth roughly $10 million. A far cry from $1B. Don't look at notional levels to mean obligations. The actual obligations may be around $600B to $1T though give or take a few hundred yards (billion).

[Volaris]

40. your math isn't wrong.

Now, have fun trying to sleep tonight.

[Occulus]

41. uh

Thanks awfully.

[Volaris]

43. sorry. But on a brighter note, think of it this way:

if BOA ever decides that the rest of us should actually make good on that deal, BOA is going to go under, because it's simply TOO BIG a debt for we the citizenry of THE PLANET to pay back. Yes, it shafts us in the meantime, but if push ever REALLY comes to shove, that deal has effectively sealed that banks Death Warrant.

And THAT should put a smile on your face as you nod off later.=)

[Occulus]

45. Hmmm. Then how about this tactic.

Force them to "make" us make good on it. With, of course, the intent of doing absolutely no such thing on our part.

How, I leave to more knowledgeable minds than mine.

It is, however, clear to me we should use its own obligations to force BoA's complete failure, and we should do so in the most spectacular fashion possible.

[Volaris]

46. See, THAT'S why I come here,

because now I have a smile on MY face. Thanks, Occulus.

[Occulus]

47. You're welcome.

What could trigger such a thing? What could entice them into committing that sort of deadly blunder on their part?

I think we all know these notes are so much worthless paper to begin with. How do we make them try to act as though they are legitimate, and then devalue it all to zero (with, of course, very justifiable malice aforethought on our part) and cut the snake's head clean off?

I'm thinking perhaps the RICO statutes (or what's left of them) might apply to get them to the table in an attempt to claim legitimacy, but we would need inside help from the Fed or Treasury to pull that off.

There has to be a set of legal mechanisms, however obscure and underused, that can make all this happen. Our financial laws are so Byzantine and mazelike that such a set of legal actions must exist somewhere.

[mercymechap]

4. You always think this couldn't possibly happen

to me in the United States, until you find that it is really happening to you. That is scary, don't know how much my measly amount would help a big bank, but it would sure devastate me.

[snappyturtle]

13. It's not so much that any one of us would be a mother lode for a bank but

that, once again those causing the problems would be unscathed....
or not hurt like we would be. In the mean time they're making $$$
as usual.

[forestpath]

8. If/when it happens I'm sure PBO will propose a policy to "protect" the VERY VERY VERY poor.....

[OnyxCollie]

10. A work program

to compete with Haiti, Bangladesh, El Salvador, etc.

[WinkyDink]

50. A FEMA camp program, more likely.

[OnyxCollie]

53. ACLU: Debtors’ prisons are alive and well in (Ohio)

http://www.democraticunderground.com/1071725

We expected it to be pretty intense, but what we found were pretty shocking numbers,” said ACLU of Ohio communications director Mike Brickner.

For example, “over 20% of all bookings in the Huron County Jail were related to failure to pay fines,” according to the report. Furthermore, “there is no evidence that any of these people were given hearings to determine whether or not they were financially able to pay their fines, as required by the law.”

The report includes several interviews with people who claim to have been victims of Ohio’s makeshift debtors’ prison system, such as unemployed Ohio local Megan Sharp. After being fined roughly $300 for driving with a suspended license, Sharp was incarcerated for ten days when she fell behind on her payments.

“The Norwalk Municipal Court added the cost of issuing the warrant and the expense of transporting her to jail to her debt,” according to the report. “The $300 she owed had now grown to over $500 with additional costs and fees.”
...
http://tv.msnbc.com/2013/04/04/aclu-debtors-prisons-are-alive-and-well-in-midwest/

[Benton D Struckcheon]

12. I'm reading the actual FDIC BOE plan and am a substantial portion of the way through it,

and I don't see anything relating to the taking of deposits. I just now read a paragraph on page 14 (out of 18 pages) that says the actions should prevent a run by depositors once they know their deposits are safe. I so far have no idea what the blogger read into this plan to set off such wild alarm bells. Have you read it? Do you know what the blogger might possibly be referring to?

[Benton D Struckcheon]

14. ...and just finished it.

Nothing there. Unless this person has some other evidence to present, this is bogus.

[snappyturtle]

15. Well, in the bank's view, the depositors are safe as they get stock in lieu of $$.

Maybe that is what set the author off.

I can't imagine Turley would allow this to run if it didn't float.

[Benton D Struckcheon]

17. No, that's not what it says.

The document very clearly states that debt holders - banks issue debt in the form of bonds and commercial paper - would get their debt converted to equity to recapitalize the failed bank. There is nothing in there re depositors except for a paragraph that also very clearly states that depositors would be protected.
The FDIC IS NOT THE FED. It's way better: they actually know what they're doing. They quietly wind up smaller banks all the time. They are making sure via this that they can do the global banks as well. They are required by law to protect insured deposits, and in the event their insurance fund can't cover those deposits the Congress will give them that money. It happened in the late 80s with the now defunct FSLIC so there is precedent here.

[snappyturtle]

27. Actually the FDIC-BOE article says from the beginning

that depositers are unsecured creditors. With that in mind:
(underlining mine)

The goal is to produce resolution strategies that could be implemented for the failure of one or more of the largest financial institutions with extensive activities in our respective jurisdictions. These resolution strategies should maintain systemically important operations and contain threats to financial stability. They should also assign losses to shareholders and unsecured creditors in the group, thereby avoiding the need for a bailout by taxpayers. These strategies should be sufficiently robust to manage the challenges of cross-border implementation and to the operational challenges of execution.

[Benton D Struckcheon]

30. I'm not addressing the article, I'm addressing the primary source, the actual plan.

It says no such thing. Here's the link: http://www.fdic.gov/about/srac/2012/gsifi.pdf

[snappyturtle]

37. I was using the same source as you. Unfortunately, I used the term 'article'. nt

[muriel_volestrangler]

57. Where does it "say from the beginning that depositers are unsecured creditors"?

Brown thinks it implies that; but I can't see that it does actually say it, anywhere.

[snappyturtle]

58. It doesn't. What I meant to say was that from the beginning to the end of

the document, 'unsecured creditors' is used in lieu of 'depositors'.
Ellen Brown 'thinks' this for good reason. I will give you a couple
of links to further expand this topic.

The only time I saw the actual term depositor used in the resolution
document was in direction to the banks to establish good communication
with their depositors that their deposits are 'protected'. It doesn't say
insured only protected. Throughout the doc, many times over, reference
is made that taxpayer dollars or public funds wouldn't bail out a future
crisis. This is the FDIC speaking and they don't speak of their insurance.
Odd, imho.

Anyway, I hope these links will give you more info into the topic.

http://webofdebt.wordpress.com/2013/03/21/a-safe-and-a-shotgun-or-public-sector-banks-the-battle-of-cyprus/ This is by Ellen Brown

http://www.collapsingintoconsciousness.com/depositors-are-now-unsecured-creditors/

[muriel_volestrangler]

24. Here's the paragraph that Benton refers to just above

47 Similarly, because the group remains solvent, retail or corporate depositors should not have an incentive to “run” from the firm under resolution insofar as their banking arrangements, transacted at the operating company level, remain unaffected. In order to achieve this, the authorities recognize the need for effective communication to depositors, making it clear that their deposits will be protected.

http://www.fdic.gov/about/srac/2012/gsifi.pdf

I think Ellen Brown has assumed that where the document talks about 'unsecured debt', it means deposits. But there's no reason to think that is does, and, with that paragraph, and the whole point of the document being how to keep a bank running, rather than having it collapse and taking everything with it, it's clear that the document it talking about how to keep deposits safe, while converting bonds and similar debt instruments into new shares in the bank (while the old shares lose all their rights, and therefore value, since shareholders lose first).

[Benton D Struckcheon]

32. It's a post Cyprus interpretation of the document that doesn't stand up to even cursory scrutiny,

which should be obvious to anyone reading it.

[snappyturtle]

36. Well, it's not 'obvious' to me. Maybe you should also read

http://www.nationofchange.org/it-can-happen-here-confiscation-scheme-planned-us-and-uk-depositors-1364735979

This link appeared in the article on Turley's site. Did you read it?

There is much in the FDIC-BOE doc that is unclear. What does
'resolution' constitute? What is included to make a G-SIFI 'stable'?
Read the above and I think you can see
why I am queezy about this document. I'd like to know
why the Bank of England and the U.S. FDIC would marry up to
draw up this document in the first place.

[OnyxCollie]

18. According to the CRA amendments to the Gramm-Leach Act,

it says

Protects FDIC resources by restricting claims for the return of assets transferred from a holding company to an insolvent subsidiary bank.
http://www.banking.senate.gov/conf/grmleach.htm

Now, the law says that it won't happen, but laws are for little people.

FDIC Agrees to Keep Silent on Settlements with Banks
http://www.democracynow.org/2013/3/20/headlines#3209

A new investigation says U.S. regulators have been quietly settling civil claims with banks whose failures triggered massive federal payouts and helped spur the financial meltdown. The Los Angeles Times reports the Federal Deposit Insurance Corporation has settled with the banks for a fraction of what their losses actually cost while agreeing not to publicize the deals to protect the banks’ public image. The FDIC has lost $92.5 billion in the failures of 471 U.S. banks since 2007. But the agency has collected just $787 million in settlements — a tiny fraction of its losses. While the settlements accuse the banks of fraud, negligence, reckless loans to homeowners, falsified documents and other abuses, they have been concealed from the public under nondisclosure deals some say border on illegal.

[Benton D Struckcheon]

19. Read that again

471 banks. The Fed and the Treasury couldn't handle Lehman and Bear Stearns without blowing up the entire world economy. These guys do hundreds of banks at a time, and the worst you can come up with is that they settled claims that don't even come to 100 billion on ALL of these banks without disclosing the details?
This is small time stuff. Very small time stuff. The FDIC has been around since 1933. They almost single-handedly managed to stop the entire US financial system from going bye-bye at that time, cleaning up after the mess the Fed and the Treasury caused at that time. This time around they're preparing so that the next time they have to clean up after another of the Fed's messes they have the tools to do it.
The point of the FDIC - this is FDR logic - is that it's an insurance provider for customer deposits, and as such it will examine the banks it insures to make sure they can insure them without a problem. They've been doing it for eighty years without the fanfare the Fed attracts, but with all the competency they so conspicuously lack.
To the actual point: that document - the FDIC/BOE plan - doesn't say what you think it says or what that blogger thinks it says. It was put together precisely to prevent depositor funds from being poached.

[OnyxCollie]

22. 90 billion > 75 trillion

Last edited Wed Apr 10, 2013, 01:34 AM - Edit history (1)

Bloomberg reports that Bank of America (BAC) has shifted about $22 trillion worth of derivative obligations from Merrill Lynch and the BAC holding company to the FDIC insured retail deposit division. Along with this information came the revelation that the FDIC insured unit was already stuffed with $53 trillion worth of these potentially toxic obligations, making a total of $75 trillion.

You can ignore this, but it doesn't make you any more credible.

[Benton D Struckcheon]

23. That's notional value

The actual value would be considerably less, firstly. Secondly, what strawman are you attempting to introduce? That I'm against Glass-Steagall coming back? I'm not. That I approve of this transfer? I don't. That the FDIC doesn't have a very large problem with these derivatives? It does, obviously. The FDIC was set up for a Glass-Steagall world, not one where banks are allowed to pull this kind of crap.
They're still way better than the Fed, and regardless of that LA Times article, they do their work honestly, competently, and quietly. That they've been made to deal with stuff they shouldn't have to is something else again. But if those derivatives blow up, they will do whatever they have to do to keep the depositors whole. They have an unblemished history of doing so that is the envy of the world. The eurozone wishes they had an FDIC.

[OnyxCollie]

28. Richard Wolff is concerned

and I'll take his word over yours.

Capitalism in Crisis: Richard Wolff Urges End to Austerity, New Jobs Program, Democratizing Work
http://www.democracynow.org/2013/3/25/capitalism_in_crisis_richard_wolff_urges

RICHARD WOLFF: Yes. On the question of "too big to fail," there really isn’t much to say. In 2008, our banks failed—all of them—the way the Cyprus banks failed and for very similar reasons. They took in a lot of depositors’ money, and they made risky bets they shouldn’t have made, and they failed, and so they didn’t have the money to honor their obligations, and they turned to the government for a bailout. And when the government hesitated, because it’s public money to bail out a privately failed bank, they were told, in another kind of blackmail, "We’re too big to fail. If you don’t bail us out, we will collapse and take the entire economy with us." And that was a persuasive argument. Particularly after they allowed Lehman Brothers to fail and that nearly did take the economy with it, that was a convincing argument.

~snip~

Number two, we seem to need, as a nation, to believe that we have the power to control, limit or regulate, whether it’s the Glass-Steagall Act that came out of our disaster of the 1930s or the Dodd-Frank Act, which came out of the disaster that started in 2008. We seem to want to believe we can leave in place private banks, no matter how big they are, and hedge them about with regulations. The proof of the Whale trades in London, the proof of everything we know, is that these banks have the money, the staff, the resources to work their way around the regulations at least as fast as we impose them on them. That’s what these hearings fundamentally show. They can make trades that are too risky. They can lose wild amounts of money. They can turn to the government and demand to be helped and bailed out each time. And they get it. We are telling them, in a classic example, "Look, do whatever you want. You don’t have any risk of fundamental failure and punishment." Regulation doesn’t work, because we believe in place an entity, a large corporation, with the money and the incentives to get around it.

~snip~

AMY GOODMAN: What lessons have been learned since 2008? And today, could the U.S. see the same situation as Cyprus?

RICHARD WOLFF: Absolutely. We have banks that are literally telling us, because we know from our controls that they are trying, even, to regenerate it. They’re trying to get people to borrow more money again. We’re not changing the wage structure of America, which means that Americans are required to go into debt to supplement their wages. You know, the irony is, we are trying, in the language of some of these folks, to kickstart our economy, to get it going again. But the problem is, our economy was a train heading into a stone wall in the first years of this century, and if we get our economy going again, without fundamental changes, what we’re doing is putting that same train back on the track heading towards the same wall. Cyprus shows us what’s happening.

Obama administration pushes banks to make home loans to people with weaker credit
http://www.washingtonpost.com/business/economy/obama-administration-pushes-banks-to-make-home-loans-to-people-with-weaker-credit/2013/04/02/a8b4370c-9aef-11e2-a941-a19bce7af755_singlePage.html

The Obama administration is engaged in a broad push to make more home loans available to people with weaker credit, an effort that officials say will help power the economic recovery but that skeptics say could open the door to the risky lending that caused the housing crash in the first place.

President Obama’s economic advisers and outside experts say the nation’s much-celebrated housing rebound is leaving too many people behind, including young people looking to buy their first homes and individuals with credit records weakened by the recession.

In response, administration officials say they are working to get banks to lend to a wider range of borrowers by taking advantage of taxpayer-backed programs — including those offered by the Federal Housing Administration — that insure home loans against default.

Housing officials are urging the Justice Department to provide assurances to banks, which have become increasingly cautious, that they will not face legal or financial recriminations if they make loans to riskier borrowers who meet government standards but later default.

[snappyturtle]

29. Thanks for posting these links too...love me some Richard Wolff. I find

him very credible as did the University of Mass for 35 years!

In re-reading the doc by the FDIC-BOE.....which I find as an odd
alliance in the first place, the mention many times over of protection
for the institutions and the word 'stability'...for G-SIFI (Globally active
Important (?) Financial Institutions).

I came to the conclusion that in the event of failure the banks would have
to do what they could but remain stable and the stockholders and unsecured
creditors (not the taxpayers...maybe they know that route wouldn't fly...again)
would be left holding the bag. Then for good measure threw in the removal
of the big wigs of the bank(s) in failure. I also think the 'important financial
institutions' are banks too big to fail hence the author's admonition not
to deposit with them.

If Wolff thinks Cypress can happen here and Turley has allowed this
article on his site....the article is definitely worth paying attention to. imho
Our naysayer here seems to believe the FDIC can't/won't fail...I think we've
pushed it pretty hard these last few years and I can't say I have a lot
of faith in it.

[Benton D Struckcheon]

31. That's just an appeal to authority

The primary source document to which I posted the link above says the opposite of what you're stating. You can post links from any opinion maker you want, it doesn't change the actual fact of what is actually in the doc.
It also doesn't change the history of the FDIC. And it doesn't change the actual fact that in Cyprus the insured depositors were not touched. If in a crisis of that magnitude, with a country that had ceded control of its currency, the insured depositors weren't touched, why would you think that in the US, which has its own currency and where no bank is anywhere near the size in relation to the economy that those banks were, that anything like this would happen?

So, to sum up, there's nothing in the primary source document, and no history of the FDIC even considering doing this. You've got nothing.

[OnyxCollie]

33. Richard Wolff is an economics professor.

Description of Appeal to Authority

An Appeal to Authority is a fallacy with the following form:

Person A is (claimed to be) an authority on subject S.
Person A makes claim C about subject S.
Therefore, C is true.
This fallacy is committed when the person in question is not a legitimate authority on the subject. More formally, if person A is not qualified to make reliable claims in subject S, then the argument will be fallacious.

You've got nothing.

[Lucky Luciano]

38. You still have not acknowledged the difference between derivative notional and derivative value.

This is about two orders of magnitude in difference. If you can't understand that, it has an affect on credibility. I doubt Richard Wolff would say BoA has $75T "worth" of derivatives on their balance sheet - he knows what notional means.

[OnyxCollie]

39. Well, what's the difference then?

What's the true value of $75 trillion worth of derivatives?

Is it half? Is it a quarter? Is it one-twentieth, $3 trillion? That's still 30 times the amount of 471 failed banks combined.

[Lucky Luciano]

42. I would estimate that dividing by 25 is about right.

Of course that is gross market value, so there is also some netting that can be done. Not sure what stress scenario analyses do to these values though. It is better to speak in terms of values instead of notionals.


http://www.bis.org/statistics/derstats.htm
The top line PDF file from this link has the data.



http://en.m.wikipedia.org/wiki/Interest_rate_swap#section_6

Interest rate swaps are the lion's share if the derivs market. This is a pretty simple description.

[OnyxCollie]

44. Even dividing by 25 is still a shitload of money. nt

[Lucky Luciano]

52. Remember that is gross. If I have two trades on the book with you...

...and I am up $5mm on one and down $5mm on the other, this nets out. Not sure what the net market values are, but this may divide by 100 instead of 25. Not sure though. Either way, you are talking about much different numbers - one of which is barely manageable in a worst case scenario and one which is utterly unmanageable.

[dixiegrrrrl]

25. Is the plan you are reading titled

"A joint paper by the Federal Deposit Insurance Corporation and the Bank of England
10 December 2012" ?

[fadedrose]

20. My bank is so nice...

They sent me a letter this week and said that if I close out my teeny CD and it has less than 24 months to go, they'll charge me ONLY a 1% penalty fee.

They're paying something like .05 for 12 months.

I hope Liz Warren builds a bonfire and throws the bankers in, a figurative one, of course...

[Kennah]

55. Literal one would be just plain silly as Satan's minions aren't likely to catch fire.

[Cleita]

21. It certainly would screw the majority of Social Security recipients, who

get their money by direct deposit to avoid an extra charge for not doing so.

[WinkyDink]

51. Gee, one might almost think that was part of the plan.

[JDPriestly]

26. Theoretically, the FDIC insures deposits.

It could happen, but the FDIC would have to run out of money first.

The banks and the FED are already making depositors pay for the bail-outs by offering extremely, extremely low interest rates to savers and depositors, charging heavy fees for all kinds of "services" that used to be more reasonable with your checking account and high interest rates on credit card debt not immediately paid off.

The banks make their money on the differentials between what they receive in interest paid to them from credit cards and those fees for everything they are allowed to charge for. They pass almost none of their profits on to depositors or savers.

That's why a credit union is a better deal.

[snappyturtle]

59. I've done more reading on this doc by the FDIC and BOE.

First notice that many times over in the document that the taxpayers, or public funds,
yada yada, yada, are mentioned not to be the source of funds to right the financial
situation of the banks. So, where do the banks get the money to stay alive? um.

Second, there is no exemption for insured deposits or depositors mentioned. The only
time I read 'deposits' was in a directive to the banks contained in the doc to set up
good communication to assure deposits were "protected". Equity? Didn't say by
insurance.

Third, there is global precedence with Cyprus and a big wig Italian banking CEO and New
Zealand. The CEO publically stated it's ok for banks to seize deposits and NZ, see below,
is making plans not unlike the FDIC-BOE document...just more specific than the latter.
They're making it the new meme. Meanwhile, banks are still engaging risky business
with their shady derivatives, etc. Look at JP Morgan Chase's Jamie Dimon.

The only threat I saw for banks is that they could be split up and top heads will be
canned....so?....by that time the fortunes will have ballooned. For all the talk of splitting
up banks or nationalizing them...it's just rhetoric. I think the President could have gotten
some support for nationalizing the banks during the early months of the crises here but....

Your choice of the word "theoretically" in reference to the FDIC insurance is well
chosen. imho That's what scares me.

You may find the following articles interesting


http://www.collapsingintoconsciousness.com/depositors-are-now-unsecured-creditors/

http://americablog.com/2013/04/fdic-uk-nz-deposit-confiscation.html

[DeSwiss]

48. K&R

[WinkyDink]

49. THAT would finally = revolution. Bankers would be murdered.

[Kennah]

56. Madame Guillotine, please pick up your voicemail.