As if the last few years haven't shown why, Tweedle Dee, Tweedle Dum and Tweedle WTF?
In a HuffPo article from Shahien Nasiripour, about Wall Street's temporarily triumphant return to trading unregulated derivatives at an ever increasing pace the OCC's deputy comptroller stated
The credit risk posed by derivatives in the banking system now stands at $555 billion, a 37 percent increase from 2008. "By any standard these [credit] exposures remain very high," Kathryn E. Dick, the OCC's deputy comptroller for credit and market risk, said in a statement.
Ok, that sounds pretty sane and sound, but then the OCC spokesman says this:
"The system has always worked on derivatives," said Kevin M. Mukri, an OCC spokesman. "You have higher-quality counterparties -- higher quality than in any other line of business."
Furthermore, "the purpose of derivative trading to to mitigate risk -- not increase risk," he said. "Without derivatives it would be a very hectic marketplace."
Really Mr. Murki! Really!! Are you out of your ever debt loving mind? Who the hell are you? Who hired you? Who hasn't fired you? And what in the hell prescription are you taking to make you so delusional because that drug needs to be recalled?
- I think you meant to say the system got worked over by derivatives. The system got gang raped by derivatives and the abuses your offices allowed and blocked others from stopping.
- Higher quality counter-parties? Like AIG quality? AIG who took it up the wazoo at the expense of US. Or quality like MBIA and other monoline insurers (Goldman's alleged hedge) who told Goldman Sachs to take a long walk when they came trying to cash in on their fraudulent default swaps, which ultimately also left us holding the bag because of a corrupt Bush administration.
Either way, with quality like that, we're still screwed. And better than "any other line of business?" Name me one that screwed up as epically as Wall Street did last year? For the last 35 years?
- The purpose of derivatives and how they're actually used are two different things, and if you and your daddy's are too stupid or corrupt to acknowledge that, you belong in a paper hat or prison.
Goldman Sachs announced that it would become a bank holding company last September, less than a week after Lehman Brothers declared bankruptcy. Coming under the Federal Reserve's protective umbrella gave the firm "access to permanent liquidity and funding," Lloyd C. Blankfein, chairman and CEO of Goldman Sachs, said at the time.
Goldman Sachs basically cut out the middleman and appearance of propriety and just flat out said we're their ATM and they get to deposit blank checks.
Baker says that now that the firm is a bank holding company, the bank's exposure to losses from derivatives contracts (compared to available capital) poses particular problems. Now, "the public is on the hook for that. If they run into trouble they could go to the Fed and borrow at the discount window [and] they have access to the FDIC's special lending [program]," he explains. Goldman Sachs has issued about $25 billion in FDIC-backed debt as of June, according to regulatory filings.
Do you get that? The FDIC and (waiting to be audited)Fed have placed US on the hook for tens, if not hundreds of billions or trillions of dollars to Goldman Sachs and Citi and their ilk. They have only become more complicit with Wall Street since last year. Do you think the same people who have gladly handed over trillions are going to stand in the way of these banks when they create new products, like I don't know, let's say, preying on senior citizens knocking at death's door and buying out their life insurance policies for pennies on the dollar.
These creatures are the ones we're supposed to depend on to defend US from exploitation for Wall Street's gluttonous wallets. I think Mr. Murki's colossal state of denial says it all, but Dean Baker understates it best.
"You're having the protections for what's supposed to be relatively boring commercial banking applied to risky investment banking. It's a real serious problem," Baker says.