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View Diary: Lawmakers Probe $75T Derivatives Dump by Bank of America (238 comments)

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  •  The motives are complex (21+ / 0-)

    ...until you follow the Dollar.

    Goldman Sachs packaged the Greek Bonds, and sold them to the European banks.

    At the same time, Goldman Sachs wangled Merrill Lynch and JP Morgan into opening this low-profile derivative brokerage/exchange in the city called Markit of London. The first product they created were the insurance CDSs for the Greek bonds, which Goldman also sold to the Euro banks along with the Greek bonds.

    (Something I haven't mentioned is that about a month after Obama was inaugurated, the DOJ landed hard on Markit with a corruption investigation. That lasted all of about 24 hours. Then not another peep.)

    In any event, the issue is that the US side says the CDS won't pay unless Greece actually "defaults." The Euro Banks say that they believed their losses were covered (the 50 percent haircut).

    So the dilemma is -- why should Europe take a loss when they could just let the bonds default and be made entirely whole again? When they posed that question, both Chase and B of A took their toxic gambling divisions (Merrill Lynch and JP Morgan) and moved them under FDIC protection. It took a couple of hours. Of course the FDIC objected, but they have no power.

    What the FDIC does have is an unlimited amount of money -- based on the future taxes of the American people.

    My guess is that the Euro banks won't make a claim against the CDS insurance, but there will be some sort of back-door deal where the US will end up paying a percentage of the Bond loss. Via the Colonists.

    This is all being swept away faster than I can write about it.

    •  oh boy (7+ / 0-)

      the rabbit hole hasnt bottomed yet i guess.
      thank you verry much for so much inside into this hole
      btw is there any institution in the world that has enough power to
       "stop the looting and start prosecuteing"
      beside our governments, but i guess not

      •  the investigations have already started (0+ / 0-)

        and are being recorded by the people and will be prosecuted by the people at the peoples court.....

        Please do not tell me you are involved by being a member of DK4.... really get involved...... The goal is not to bring your adversaries to their knees but to their senses. -- Mahatma Gandhi

        by Mindmover on Tue Nov 01, 2011 at 09:22:24 AM PDT

        [ Parent ]

      •  It's too late to stop this particular looting. (2+ / 0-)
        Recommended by:
        blueness, gerald 1969

        And, as of this morning, great uncertainty has stormed back into the picture. My banker wrote this morning about whether or not the 50% loss to the Euro banks will trigger the CDSs::

        I saw this on the Bloomberg this morning. "As speculation mounts about credit default swaps on Greece's debt, the International Swaps and Derivatives Association's determinations committee has the ultimate say on whether CDS are triggered.

        ISDA said it is too early to tell whether a recent haircut on Greek bonds constitutes a "credit event." "As such, it does not appear to be likely that the euro zone proposal will trigger payments under existing CDS contracts," according to ISDA. "However, whether or not it does so will be decided by the Determinations Committee on the basis of specific facts, if a request is made to them."

        And then, the other shoe dropped, suggesting there will again be a full default -- which would, of course, trigger the CDSs:

        Greek Prime Minister, Papandreou, decided yesterday that he was going to put the Grand Plan to a Parliament Confidence Vote, and then a public referendum.  

        Now. I'm not saying that democracy is a bad thing here folks. What I'm saying is that the referendum has zero chance of passing, for the Greeks have protested each and every austerity measure.

        The Greeks don't want austerity measures, but they want to remain in the euro.  Apparently, Papandreou hasn't done a very good job of convincing the Greeks that they need these austerity measures or else they will default.

        The markets truly feel that this is a HUGE gamble, and that the public will vote no, and then the whole plan will fall apart.

    •  It's like an X-Files episode... (3+ / 0-)
      Recommended by:
      divineorder, Pluto, pgm 01

      ..."It's over, Mulder! They're cleaning it up as we speak! What are you doing?! You're badly injured, Mulder, get back in that bed!"

      "She's right, Mulder. They've already made it disappear."

      -5.38 -4.72 T. Atlas shrugged. Jesus wept.

      by trevzb on Tue Nov 01, 2011 at 08:42:57 AM PDT

      [ Parent ]

    •  see.... (0+ / 0-)

      Please do not tell me you are involved by being a member of DK4.... really get involved...... The goal is not to bring your adversaries to their knees but to their senses. -- Mahatma Gandhi

      by Mindmover on Tue Nov 01, 2011 at 09:18:59 AM PDT

      [ Parent ]

    •  Puto, will you write a diary, please, on (1+ / 0-)
      Recommended by:

      all this?

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