October 19, 2011

US to Backstop $75 TRILLION in Derivatives Risk?

By admin

Just as #occupywallstreet picks up steam, it looks like the US Federal Reserve will backstop (ie. insure against risk or exposure) the massive $75 TRILLION of notional derivatives carried by the Bank of America.

What this means is that when Europe finally implodes and banks fail, U.S. taxpayers will hold the bag for trillions in CDS insurance contracts sold by Bank of America and JP Morgan.  Even worse, the total exposure is unknown because Wall Street successfully lobbied during Dodd-Frank passage so that no central exchange would exist keeping track of net derivative exposure.

No wonder Americans are upset.

This is the Ponzi-Bingo-Lottery-Casino attitude being presented by American financial institutions and the obvious reality is that the Fed will continue to do everything it can to prevent a massive hemorrage from happening, but every time they try to block things up, everyone just gets impacted.

It’s time to let it go.  Stop treating the banks like they’re little children and make them accept their responsibility.