“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.”
I’m no real estate expert, but I’d say that is a lot.
“Dead Beats” FUALT!
Um... The GOVERNMENT is accepting this crappy deal
and ONLY the government is big enough to do something this stupid.
If the government is stupid enough to do it, I don’t blame the banks for taking advantage of it. They have to live in the real world of existing rules.
Is there that much money in the entire world?..........
There is ZERO chance the net obligation is anything like that. Surprised Alpha isn’t clear on that.
Oh I’m sure we’ll be able to suck that up in no time/sarc
Every $5T in todays dollars represents the amount of money spent by FedGov™ on WWII in the 1940’s.
I find it difficult to believe there is 75 trillion worth of vacant real estate out there. I wonder what percentage of these holdings are currently occupied for free and whether ACORN (or whatever they’re calling themselves now) is involved in it.
????
Let’s see...
We have a national total including future unfunded liabilities of about $130 trillion dollars. Throw in $75 trillion in derivatives and we are over $200 trillion.
Nice!!!!
The FED was the cornerstone of Progressive plans for Gov't. The FED must be neutered.
The FDIC opposed the move, but there is nothing the FDIC can do, except file a petition for a writ of mandamus in court, against the Federal Reserve, seeking a declaration that the approval was illegal. But, the FDIC would lose, because Congress has given the Federal Reserve Board ultimate power to do whatever it wishes.
So, the bottom line is this: When something bad happens, and the derivative obligations are triggered, the FDIC will be on the hook, thanks to the Federal Reserve. The counter-parties of Bank of America, both inside America and elsewhere around the world, will be safely bailed out by the full faith and credit of the USA. Meanwhile, the taxpayers and dollar denominated savers will be fleeced again. This latest example of misconduct illustrates the error of allowing a bank-controlled entity, like the Federal Reserve, complete power over the nation's monetary system. The so-called "reforms" enacted by Congress, in the wake of the 2008 crash, have vested more, and not less, power in the Federal Reserve, and supplied us with more, rather than less instability and problems.
This is not an isolated instance. JP Morgan Chase (JPM) is being allowed to house its unstable derivative obligations within its FDIC insured retail banking unit. Other big banks do the same. So long as the Federal Reserve exists and/or other financial regulatory agencies continue to be run by a revolving door staff that moves in and out of industry and government, crony capitalism will be alive and well in America. No amount of Dodd-Frank or Volcker rule legislation will ever protect savers, taxpayers or the American people. Profits will continue to be privatized and losses socialized.
What’s a few Trillion more that we can’t pay back?
With Bernyankme’s approval....
Would this be considered more LOOTING of the American people? $75 Trillion!!!!
This has to be satire. I firmly believe the problem is too big for the worlds governemnts/economies to do anything to stop this train wreck, but those numbers are an order of magnitude worse than I thought things were.
When you surprise the “doom and gloomers” with bad news, you KNOW we are in a world of hurt.
Sounds like a game of hide the salami. The toxic derivatives are still toxic and it is just a question of shifting the corpse around so that eventually it lands on the door of the Fed and ultimately the taxpayer who will ultimately pay for the losses.
The above article is a little more balanced approach. Some things should be noted.
From an old article regarding collateralized-debt obligations or CDO’s
http://broadcatching.wordpress.com/2009/04/06/matt-taiibi-the-big-takeover-rolling-stone-magazine/
(Snip)
The best way to understand the financial crisis is to understand the meltdown at AIG. AIG is what happens when short, bald managers of otherwise boring financial bureaucracies start seeing Brad Pitt in the mirror. This is a company that built a giant fortune across more than a century by betting on safety-conscious policyholders — people who wear seat belts and build houses on high ground — and then blew it all in a year or two by turning their entire balance sheet over to a guy who acted like making huge bets with other people’s money would make his d*ck bigger.
That guy — the Patient Zero of the global economic meltdown — was one Joseph Cassano, the head of a tiny, 400-person unit within the company called AIG Financial Products, or AIGFP. Cassano, a pudgy, balding Brooklyn College grad with beady eyes and way too much forehead, cut his teeth in the Eighties working for Mike Milken, the granddaddy of modern Wall Street debt alchemists. Milken, who pioneered the creative use of junk bonds, relied on messianic genius and a whole array of insider schemes to evade detection while wreaking financial disaster. Cassano, by contrast, was just a greedy little t*rd with a knack for selective accounting who ran his scam right out in the open, thanks to Washington’s deregulation of the Wall Street casino. “It’s all about the regulatory environment,” says a government source involved with the AIG bailout. “These guys look for holes in the system, for ways they can do trades without government interference. Whatever is unregulated, all the action is going to pile into that.”
The mess Cassano created had its roots in an investment boom fueled in part by a relatively new type of financial instrument called a collateralized-debt obligation. A CDO is like a box full of diced-up assets. They can be anything: mortgages, corporate loans, aircraft loans, credit-card loans, even other CDOs. So as X mortgage holder pays his bill, and Y corporate debtor pays his bill, and Z credit-card debtor pays his bill, money flows into the box.
The key idea behind a CDO is that there will always be at least some money in the box, regardless of how dicey the individual assets inside it are. No matter how you look at a single unemployed ex-con trying to pay the note on a six-bedroom house, he looks like a bad investment. But dump his loan in a box with a smorgasbord of auto loans, credit-card debt, corporate bonds and other crap, and you can be reasonably sure that somebody is going to pay up. Say $100 is supposed to come into the box every month. Even in an apocalypse, when $90 in payments might default, you’ll still get $10. What the inventors of the CDO did is divide up the box into groups of investors and put that $10 into its own level, or “tranche.” They then convinced ratings agencies like Moody’s and S&P to give that top tranche the highest AAA rating — meaning it has close to zero credit risk.
Suddenly, thanks to this financial seal of approval, banks had a way to turn their sh*ttiest mortgages and other financial waste into investment-grade paper and sell them to institutional investors like pensions and insurance companies, which were forced by regulators to keep their portfolios as safe as possible. Because CDOs offered higher rates of return than truly safe products like Treasury bills, it was a win-win: Banks made a fortune selling CDOs, and big investors made much more holding them.
The problem was, none of this was based on reality. “The banks knew they were selling crap,” says a London-based trader from one of the bailed-out companies. To get AAA ratings, the CDOs relied not on their actual underlying assets but on crazy mathematical formulas that the banks cooked up to make the investments look safer than they really were. “They had some back room somewhere where a bunch of Indian guys who’d been doing nothing but math for God knows how many years would come up with some kind of model saying that this or that combination of debtors would only default once every 10,000 years,” says one young trader who sold CDOs for a major investment bank. “It was nuts.”