Derivatives

Markopolos: Bernie Madoff’s Ponzi Scheme ‘Will look Like Small-Time’

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harry-markopolos

Harry Markopolos — the whistleblower on Bernie Madoff who proved to be much smarter than the SEC — says there are evildoers out there who will make the Ponzi scum “look like small-time.”

Markopolos gave a speech to 400 of the faithful at the Greek Orthodox Church in Southampton and predicted major scandals will soon be revealed about the unregulated, $600 trillion, credit-default swap market.

“To put it in simple terms, it is like buying fire insurance policies from five different insurance companies on your neighbor’s house and then burning down the house,” he said.

After his lecture, Hampton Sheet publisher Joan Jedell reports Markopolos was feted at a dinner at Nello Summertimes hosted by John Catsimatidis and his wife, Margo, who were joined by Al D’Amato and Greek shipping magnates Nicholas Zoullas and Spiros Milonas.

August 12, 2009

Source: The New York Post

The US government completely ignored Harry Markopolos:

– Markopolos: I gift wrapped and delivered the largest Ponzi scheme in history to the SEC

– Madoff whistleblower to slate ‘inept’ SEC regulators:
“It led me to conclude that the SEC securities lawyers, if only through their ineptitude and financial illiteracy, colluded to maintain large frauds such as the one to which Madoff later confessed.”

– Madoff whistleblower wants to be left alone

– Whistleblower document warned SEC in Nov. 2005 about Madoff’s Ponzi scheme

– A Madoff Whistle-Blower Tells His Story

Taxpayer money at work!

On the Edge with Max Keiser (07/17/09): ‘Obama is a bum’

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Read moreOn the Edge with Max Keiser (07/17/09): ‘Obama is a bum’

Derivatives and stimulus spending will cause next financial crisis: Templeton’s Mark Mobius

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Mark Mobius, executive chairman of Templeton Asset Management Ltd., poses for a portrait in Hong Kong, March 23, 2009. Photographer: Scott Eells/Bloomberg News

July 15 (Bloomberg) — A new financial crisis will develop from the failure to effectively regulate derivatives and the extra global liquidity from stimulus spending, Templeton Asset Management Ltd.’s Mark Mobius said.

“Political pressure from investment banks and all the people that make money in derivatives” will prevent adequate regulation, said Mobius, who oversees $25 billion as executive chairman of Templeton in Singapore. “Definitely we’re going to have another crisis coming down,” he said in a phone interview from Istanbul on July 13.

Derivatives contributed to almost $1.5 trillion in writedowns and losses at the world’s biggest banks, brokers and insurers since the start of 2007, according to data compiled by Bloomberg. Global share markets lost almost half their value last year, shedding $28.7 trillion as investors became risk averse amid a global recession.

Read moreDerivatives and stimulus spending will cause next financial crisis: Templeton’s Mark Mobius

On the Edge with Max Keiser and Catherine Austin Fitts, former Assistant Secretary of Housing (06/26/09)

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Read moreOn the Edge with Max Keiser and Catherine Austin Fitts, former Assistant Secretary of Housing (06/26/09)

The Obama Deception

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See also: Ron Paul: Obama Foreign Policy Identical To Bush


1:51:21 – 12.03.2009
Source: Google Video

The $700 trillion elephant

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Gargantuan derivatives market weighs on all other issues

SANTA MONICA, Calif. (MarketWatch) — There’s a $700 trillion elephant in the room and it’s time we found out how much it really weighs on the economy.

Derivative contracts total about three-quarters of a quadrillion dollars in “notional” amounts, according to the Bank for International Settlements. These contracts are tallied in notional values because no one really can say how much they are worth.

But valuing them correctly is exactly what we should be doing because these comprise the viral disease that has infected the financial markets and the economies of the world.

Nobel prize-winning economist Scholes Advises ‘Blow Up’ Over-the-Counter Contracts (Bloomberg): The “solution is really to blow up or burn the OTC market, the CDSs and swaps and structured products, and let us start over,” he said, referring to credit-default swaps and other complex securities that are traded off exchanges. “One way to do that, through the auspices of regulators or the banking commissioners, is to try to close all contracts at mid-market prices.”

Try as we might to salvage the residential real estate market, it’s at best worth $23 trillion in the U.S. We’re struggling to save the stock market, but that’s valued at less than $15 trillion. And we hope to keep the entire U.S. economy from collapsing, yet gross domestic product stands at $14.2 trillion.

Compare any of these to the derivatives market and you can easily see that we are just closing the windows as a tsunami crashes to shore. The total value of all the stock markets in the world amounts to less than $50 trillion, according to the World Federation of Exchanges.

Read moreThe $700 trillion elephant

Fed Refuses to Release Identity of Credit Default Swap Counterparties

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As you know, the Fed and Treasury are refusing to reveal to Congress, their overseers or the American people who is getting the bailout money.

But did you know that the Fed is now refusing to disclose who the counterparties are to AIG’s billions of dollars of credit default swaps?

Read moreFed Refuses to Release Identity of Credit Default Swap Counterparties

CORRUPTION-US: How Wall Street and Washington Betrayed America

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WASHINGTON, Mar 4 (IPS) – A new report says that Wall Street has only itself to blame for the misguided deregulation that led to the current deepening financial crisis.

Issued Wednesday by Essential Information and the Consumer Education Foundation, the report documents billions of dollars spent by the financial sector on what would eventually be their own downfall.

The 231-page report, “Sold Out: How Wall Street and Washington Betrayed America,” shows that the financial sector invested more than 5 billion dollars on purchasing political influence in Washington over the past decade, with as many as 3,000 lobbyists winning deregulation and other policy decisions that led directly to the current financial collapse.

“The report details, step-by-step, how Washington systematically sold out to Wall Street,” said Harvey Rosenfield, president of the California-based non-profit organisation Consumer Education Foundation.

“Depression-era programmes that would have prevented the financial meltdown that began last year were dismantled, and the warnings of those who foresaw disaster were drowned in an ocean of political money,” he said. “Americans were betrayed, and we are paying a high price – trillions of dollars – for that betrayal.”

Read moreCORRUPTION-US: How Wall Street and Washington Betrayed America

Banks face new wave of losses on CDS contracts, analysts warn

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Banks in Europe and the US face a new wave of losses linked to contracts issued to insure against companies going bust and defaulting on their loans, City analysts have warned.

After the billions lost over the US subprime market and leveraged loans, investment banks such as Morgan Stanley, Deutsche Bank, Barclays, UBS and RBS face losses on credit default swaps (CDS) – contracts that allow an investor to be repaid if a company loan or a bond defaults.

CDS contracts became a favourite tool of speculators, mostly hedge funds, which bought the contracts without having any link to the original lending. They bought the contract to trade or in the expectation the company would in fact default, meaning they could claim back the full value of a loan they never made.

The CDS market exploded to be worth as much as $50 TRILLION, many times the size of the underlying assets. Each loan could have thousands of protection contracts, even if there were only a few lenders. Hedge funds accounted for about 60% of CDS trading, according to ratings agency Fitch.

Read moreBanks face new wave of losses on CDS contracts, analysts warn

Warning: Megabanks Could Fail Despite Federal Aid

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The time has come to issue one of my sternest warnings to date: Bank of America and Citigroup could fail despite the most radical government rescues of all time.

Right now, after recent close calls with instant death, these two megabanks are on life support, receiving massive transfusions of government capital. But they’re still hemorrhaging, and no one in Washington has found a cure.

Already, they have received capital injections of $90 billion ($45 billion each).

Already, this bailout is larger than the total combined capital of PNC Bank, Suntrust Bank and State Street Bank – all among America’s ten largest.

Yet, ironically, that $90 billion is still a drop in the ocean compared to their massive exposure to risky assets.

The shocking facts revealed in the banks’ own balance sheets and in the OCC’s Quarterly Report demonstrate the enormity of problem:

Massive Risks at America’s Megabanks
(bill. of dollars)
B of A Citi B of A + Citi JPM
9/30/2008
Total assets		 1,831 2,050 3,881 2,251
All derivatives 38,186 39,979 78,165 91,339
Credit default swaps 3,291 2,467 5,758 9,250
Exposure to defaults by trading partners 177.6% 259.5% 400.2%

Fact #1. Too big to save. Bank of America Corp. and Citigroup, Inc. have combined assets of $3.9 trillion, or 43 times the size of the Treasury bailout funds they’ve received to date.

Fact #2. Bigger losses ahead. Even before any further declines in the economy, an unusually large portion of their assets are already in grave jeopardy – commercial real estate loans going sour, credit cards loans tanking, auto loans sinking, and residential mortgages turning to dust. Now, as the economy continues to tumble, avoiding much larger losses will be almost impossible.

Fact #3. Big derivatives players. Bank of America and Citigroup are the nation’s second and third largest high-rollers in the derivatives market, with a combined total of $78 trillion in these bets outstanding. That’s over ten times the derivatives that Lehman Brothers had on its books when it failed last year.

Fact #4. They’ve bet far too much on each other’s failure. Bank of America and Citigroup are also the second and third largest participants in the most dangerous derivatives of all – credit default swaps. These are the big bets that financial institutions make on the failure of other major companies.

Read moreWarning: Megabanks Could Fail Despite Federal Aid

Deutsche Bank Had Loss of $6.3 Billion in Fourth Quarter

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Deutsche Bank has also difficulties to finance the Postbank acquisition, that is why Deutsche Post will buy a stake – around 10% – in Deutsche Bank.

Interesting article in German:

Indirekte Teilverstaatlichung: Post soll Ackermann retten (Financial Times Deutschland)
(Indirect Partial Nationalization: Post to Save Ackermann)

More:

– Deutsche Bank, Deutsche Post Adjust Postbank Deal Terms (Dow Jones)
– Deutsche Post to Take 8% Deutsche Bank Stake in Postbank Deal (Bloomberg)
– D.Post’s D.Bank stake not lasting solution-official (Reuters)

Deutsche Bank Reports EU4.8 Billion Loss on Trading

First Annual Loss in More Than 50 Years


Pedestrians pass a Deutsche Bank AG branch with shopping bags in Berlin on Oct. 20, 2008. Photographer: Hannelore Foerster/Bloomberg News

Jan. 14 (Bloomberg) — Deutsche Bank AG, Germany’s biggest bank, reported a record loss of about 4.8 billion euros ($6.3 billion) in the fourth quarter after the worst financial crisis since the Great Depression pummeled debt and equity trading.

The bank fell as much as 13 percent in Frankfurt trading. The loss, which compares with a profit of about 1 billion euros a year earlier, also reflects provisions for debt backed by bond insurers and “substantial injections” of cash into money market funds, the Frankfurt-based bank said today.

Deutsche Bank has “scaled back or exited trading strategies most affected by market turbulence,” Chief Executive Officer Josef Ackermann said in a statement. The German bank lost about $1 billion from bad bets involving bonds hedged by credit-default swaps in the quarter, plus $500 million trading equities, two people with knowledge of the matter said this week. The company reported its first annual loss in more than 50 years.

“The enormous fourth-quarter and full-year loss is a shock to investors,” Michael Seufert, an analyst at NordLB in Hanover with a “sell” rating on Deutsche Bank, wrote in a note to clients today. “The process of reducing risks and scaling down the balance sheet is proving to be very painful.”

Read moreDeutsche Bank Had Loss of $6.3 Billion in Fourth Quarter

Gold and Silver

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Secretary Paulson Remarks on the Economy Before the U.S. Chamber of Commerce
“The structure of our economy is sound and our long-term economic fundamentals are healthy.” – Henry Paulson
January 22, 2008
Source: Treasury

Paulson: U.S. Banking System Fundamentally Sound
“Our banking system is a safe and a sound one,” Paulson insisted on CNN’s “Late Edition.”
Mon Jul 21, 2008
Source: CNBC

Bush: US Economy is Sound Despite Problems
“We can have confidence in the long term foundation of our economy. And I believe we will come through this challenge stronger than ever before,” he said.
15 July 2008
Source: VOA News

The next bubble to burst will be US Treasuries and when this bubble bursts the dollar will be destroyed.

There will be a financial collapse in the US.

This mess will – most probably – be even worse than the Great Depression.

I urge you again to prepare yourself.

There is not much time left to get yourself ready.

Part I: “The End for the Dollar and all Fiat Currencies (1/5)“

Part II: “The Next Bubble to Pop! (2/4)“

Part III: “On Gold and Market Manipulation (3/5)“

Part IV: “The Significance of Gold Backwardation Explained (4/5)“

Part V: More on Gold and Silver Backwardation and Manipulation (5/5)

Supplement to explain futures market basics and backwardation: “The Money Matrix – What the Heck Are Derivatives? (PART 10/15)“

Bank of China furious at Deutsche debt move

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Investors in bank debt are threatening to boycott lenders that follow Deutsche Bank in breaking an unwritten rule and failing to exercise a call option on subordinated debt.

In a co-ordinated action, angry bond investors are writing to bank treasurers and investor relations heads telling them that any failure to exercise a call option will be considered a breach of trust that could cause all the issuer’s debt to be shunned.

Related article: Others may follow Deutsche on bond calls-Moody’s

Deutsche stunned the debt market last week by choosing not to redeem €1bn (£932m) of subordinated lower tier 2 bonds because to do so was cheaper than refinancing. But though the move saved Germany’s biggest bank up to €150m, it caused fury among buyers of the debt who worked on the assumption that bonds would always be redeemed at their first call date.

The letter, seen by The Independent, said a bank’s decision not to call debt would be taken to mean “the institution is in such difficulty that it is an impossibility to call the instrument or the institution feels that it is in such a strong position that it can afford to alienate itself from the support of a wide portion of the fixed-income institutional investor community”.

Bank of China, a major buyer of bank debt, has gone further in its communication with issuers. The giant Chinese lender’s Hong Kong operation has told banks that “any non-call by a given institution will result in that institution’s debt (not just lower tier 2 but senior and tier 1 as well) being ineligible for future investment consideration”.

Bank of China added that Deutsche Bank had also been removed from consideration as a counterparty for any credit derivative transaction in future.

Read moreBank of China furious at Deutsche debt move

Hyperinflation and then The Second Great Depression

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A future out of control, bankrupt financial institutions trying to hold on, limitation on credit severely limits ability of the economy to start up again, debt totally embraces our lives, handouts a state secret, soon cash infusions wont work for banks anymore, banks hold too much toxic garbage to even know if they are solvent. We are now 17 months into a credit crisis that continues to expose the corruption and incompetence of government, banking, Wall Street and transnational corporations. The situation has not stabilized and it won’t anytime soon. All we see are sweetheart deals for elitist corporations for which American taxpayers will pay for years to come. The future of our nation is totally out of control. For the last eight years our economy has been running on something for nothing, lies and deceit. The result will be hyperinflation and then the Second Great Depression.

Read moreHyperinflation and then The Second Great Depression

Britain worse credit risk than McDonald’s

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Britain has become a worse credit risk than McDonald’s and a host of other large companies, figures produced for The Independent reveal.

The collapse in Britain’s credit rating has taken place over the past two and a half months, since the Government underwrote the banking system and decided to spend its way out of recession. Investing in UK government debt is now almost twice as risky as buying McDonald’s corporate bonds, according to the market in credit default swaps (CDS), which provides insurance for the buyers of such debt.

The government debt of large economies such as the UK would normally be considered far more secure than corporate bonds. However, on 29 September, the cost of buying insurance against default on UK five-year government debt became more expensive than the equivalent cover for the US burger chain and has since overtaken Kellogg’s and Coca-Cola, according to data from Bloomberg.

The cost of insuring British debt soared on that day, as the Government nationalised Bradford & Bingley, increasing fears that the state would have to bail out the banking system.

The cost of insuring for a year against default on £10m of five-year UK debt has jumped from less than £30,000 to £120,000, compared with the current price of £77,000 to protect against a similar McDonald’s default.

Read moreBritain worse credit risk than McDonald’s

‘PONZI SCHEME’ AT CITIGROUP

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SUIT SLAMS RUBIN

Robert Rubin

A new Citigroup scandal is engulfing Robert Rubin and his former disciple Chuck Prince for their roles in an alleged Ponzi-style scheme that’s now choking world banking.

Director Rubin and ousted CEO Prince – and their lieutenants over the past five years – are named in a federal lawsuit for an alleged complex cover-up of toxic securities that spread across the globe, wiping out trillions of dollars in their destructive paths.

Investor-plaintiffs in the suit accuse Citi management of overseeing the repackaging of unmarketable collateralized debt obligations (CDOs) that no one wanted – and then reselling them to Citi and hiding the poisonous exposure off the books in shell entities.

The lawsuit said that when the bottom fell out of the shaky assets in the past year, Citi’s stock collapsed, wiping out more than $122 billion of shareholder value.

However, Rubin and other top insiders were able to keep Citi shares afloat until they could cash out more than $150 million for themselves in “suspicious” stock sales “calculated to maximize the personal benefits from undisclosed inside information,” the lawsuit said.

Read more‘PONZI SCHEME’ AT CITIGROUP

Max Keiser on the Obama economic team; Global Banking System is still on the cusp of a massive implosion

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Max Keiser’s appearance on Aljazeera English on November 24, 2008 as Obama announces his economics team including Tim Geithner and Larry Summers.

Max discusses whether Obama can do anything to rescue the financial system that has already had $7 trillion showered on it. And whether or not the Chinese will continue to finance America’s increasing debt needs.

Finally, will there be a devaluation of the US dollar?

Source: YouTube

Colossal Financial Collapse: The Truth behind the Citigroup Bank “Nationalization”

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On Friday November 21, the world came within a hair’s breadth of the most colossal financial collapse in history according to bankers on the inside of events with whom we have contact. The trigger was the bank which only two years ago was America’s largest, Citigroup. The size of the US Government de facto nationalization of the $2 trillion banking institution is an indication of shocks yet to come in other major US and perhaps European banks thought to be ‘too big to fail.’

The clumsy way in which US Treasury Secretary Henry Paulson, himself not a banker but a Wall Street ‘investment banker’, whose experience has been in the quite different world of buying and selling stocks or bonds or underwriting and selling same, has handled the unfolding crisis has been worse than incompetent. It has made a grave situation into a globally alarming one.

‘Spitting into the wind’

A case in point is the secretive manner in which Paulson has used the $700 billion in taxpayer funds voted him by a labile Congress in September. Early on, Paulson put $125 billion in the nine largest banks, including $10 billion for his old firm, Goldman Sachs. However, if we compare the value of the equity share that $125 billion bought with the market price of those banks’ stock, US taxpayers have paid $125 billion for bank stock that a private investor could have bought for $62.5 billion, according to a detailed analysis from Ron W. Bloom, economist with the US United Steelworkers union, whose members as well as pension fund face devastating losses were GM to fail.

Read moreColossal Financial Collapse: The Truth behind the Citigroup Bank “Nationalization”

The global economy is being sucked into a black hole

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This Is Not A Normal Recession

Moving on to Plan B

“The Winter of 2008-2009 will prove to be the winter of global economic discontent that marks the rejection of the flawed ideology that unregulated global financial markets promote financial innovation, market efficiency, unhampered growth and endless prosperity while mitigating risk by spreading it system wide.” Economists Paul Davidson and Henry C.K. Liu “Open Letter to World Leaders attending the November 15 White House Summit on Financial Markets and the World Economy”

The global economy is being sucked into a black hole and most Americans have no idea why. The whole problem can be narrowed down to two words; “structured finance”.

Read moreThe global economy is being sucked into a black hole

IMF Needs Its Own Rescue Package Now

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Turkey is reported to be in negotiations with the International Monetary Fund for a $40 billion loan. Very shortly, the Baltic States and at least a dozen developing countries will be filing for IMF handouts. But how will the venerable lender of last resort fund itself?

According to a fact sheet posted on its website in October, the IMF had $200 million available for emergency loans to the third-world, and another $50 billion in “additional resources”. But the IMF’s liquidity is rapidly dwindling. Between the crisis facilities concluded with Ukraine, Hungary, Serbia, Iceland and Pakistan, and the expected spate of new loan requests, the IMF should be running out of money within the first quarter of next year. Quite simply, unless the rich nations (including American tax-payers) can add to the IMF’s funding capabilities, the global recession will cause unprecedented havoc, chaos, hunger and turmoil in the world’s poverty pockets.

Read moreIMF Needs Its Own Rescue Package Now

Statement From G-20 Summit: In English

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The Editor of Expresso in Portugal wanted my take on the recent G-20 communique. Here is my “translation” of the official statement:

1. Now that the growth of debt and derivatives bubbles has stalled, we are committed to using governmental-central bank mechanisms to cover the positions of any of the large private financial institutions whose profits are at risk due to their management of these bubbles and who can use this opportunity to squeeze and acquire smaller rivals at low cost.

2. Our commitment to use derivatives and market interventions to shift investment from the real economy and commodities into a paper economy is firm. We will continue to use centralized governmental mechanisms to subsidize and manage this process.

3. All of the organizations and players who reaped a fortune engineering the debt and derivatives bubbles will be allowed to keep their winnings.

4. We will use this period of consolidation to further centralize the global financial system by enforcing greater centralization of the standards, practices and control of enforcement and regulatory bureaucracies. This increased governmental centralization will be presented as the “fix” for our “problems.”

5. We will continue the move toward one world government and one world currency.

Read moreStatement From G-20 Summit: In English

Credit Swap Disclosure Obscures True Financial Risk

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Nov. 6 (Bloomberg) — The most comprehensive report on unregulated credit-default swaps didn’t disclose bets in the section of the more than $47 trillion market that helped destroy American International Group Inc., once the world’s biggest insurer.

A report by the Depository Trust and Clearing Corp. doesn’t include privately negotiated credit-default swaps that insurers such as AIG, MBIA Inc. and Ambac Financial Group Inc. sold to guarantee securities known as collateralized debt obligations. It includes only a “small fraction” of contracts linked to mortgage securities, according to Andrea Cicione at BNP Paribas SA in London.

New York-based DTCC’s data, released on its Web site Nov. 4, showed a total $33.6 trillion of transactions on governments, companies and asset-backed securities worldwide, based on gross numbers. While designed to ease concerns about the amount of risk banks and investors amassed on borrowers from companies to homeowners, the report may have missed as much as 40 percent of the trades outstanding in the market, Cicione said.

The data are “likely to underestimate the amount of net CDS exposure,” Cicione, who correctly forecast in January that the cost of protecting European companies from default would rise, said in an interview. “A broadening of the coverage to the entire market is what investors really need.”

Read moreCredit Swap Disclosure Obscures True Financial Risk

‘The banks are cheating us’

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Hong Kong investors protest Lehman Brothers losses

HONG KONG – Angry Hong Kong investors, some banging gongs and others waving banners, scuffled outside a bank on Friday as frustration mounted over losses tied to investments linked to failed U.S. bank Lehman Brothers.

Several hundred investors, many of them elderly retirees, marched to eight banks which had sold Lehman structured products, including ABN Amro, Standard Chartered, Bank of China, Citic Ka Wah and DBS bank, demanding compensation for their losses.

Some investors tried to barge into a DBS bank branch on Hong Kong island, jostling with security staff who linked arms to form a human barricade.


Lehman Brothers mini-bonds holders scuffle with officials during a protest against various banks which sold them the product in Hong Kong Friday.

“The banks are cheating us,” shouted some investors, while others banged gongs and waved protest banners accusing the banks of misleading investors on the risks involved.

Read more‘The banks are cheating us’