Free Republic

For those who care what the man whose corporate existence is intimately tied to the government's bailout of the financial system, has to say, below we present Buffett's 2010 letter to shareholders. The only section that is relevant to us, and which continues to demonstrate why Berkshire is a walking moral hazard (contrary to his conedmnation of financial weapons of mass destruction), is the disclosure on derivatives.

US Politicians Duped By The Brotherhood In the United States, one individual maintained a pretense of "moderation" which would later embarrass the left and the right. According to the testimony of Dr. Michael Waller to the US Senate Committee on the Judiciary, Abdurahman Alamoudi was a member of the Muslim Brotherhood. A man born in Eritrea in 1951, he arrived in the US in 1979 and became a naturalized US citizen on May 23, 1996. From 1985 onwards he became involved in many Muslim groups. In 1990 he founded the Washington DC-based American Muslim Council (AMC), which Waller states "has...

We’ve been over the numerous BS excuses that US Dollar destroyer extraordinaire Ben Bernanke has made for QE enough times that today I’d rather simply focus on the REAL reason he continues to funnel TRILLIONS of Dollars into the Wall Street Banks. I’ve written this analysis before. But given the enormity of what it entails, it’s worth repeating. The following paragraphs are the REAL reason Bernanke does what he does no matter what any other media outlet, book, investment expert, or guru tell you. Bernanke is printing money and funneling it into the Wall Street banks for one reason and...

If you took an opinion poll and asked Americans what they considered the biggest threat to the world economy to be, how many of them do you think would give "derivatives" as an answer? But the truth is that derivatives were at the heart of the financial crisis of 2007 and 2008, and whenever the next financial crisis happens, derivatives will undoubtedly play a huge role once again.So exactly what are "derivatives"? Well, derivatives are basically financial instruments whose value depends upon or is derived from the price of something else. A derivative has no underlying value of its...

On the third Wednesday of every month, the nine members of an elite Wall Street society gather in Midtown Manhattan. The men share a common goal: to protect the interests of big banks in the vast market for derivatives, one of the most profitable — and controversial — fields in finance. They also share a common secret: The details of their meetings, even their identities, have been strictly confidential.

My Dear Friends, Gold is clearly on its way to $1,650 and beyond. I have told you for many years that there was no PRACTICAL solution to the problems created by OTC derivative manufacturers and distributors namely our beloved “banksters.” By practical I meant a solution that itself would not cause more dislocations than the problem to which it was applied already has. Now you see political realities both in taxation and quantitative easing. Friends, there is no practical way out of this problem – none. We are going to inflate and spend as the entire Western world financial/political managers...

(snip) According to the Office of the Comptroller of the Currency’s Quarterly Report on Bank Trading and Derivatives Activities for the Second Quarter 2010 (most recent), the notional value of derivatives held by U.S. commercial banks is around $223.4 TRILLION. Five banks account for 95% of this. Can you guess which five? (snip)

Just because you have been making your mortgage payments on time and have great credit does not mean that you are not in default. Tens of millions of mortgage holders are making their mortgage payments to banks that cannot prove they own the mortgages to their homes. This is now a fact. Think about this for a minute. The odds are that the monthly payment you are making to your bank is being cashed by a bank that cannot prove ownership of your mortgage. This means that you are making payments to a bank that does not have the authority...

Harold Bradley, chief investment officer for the Kauffman Foundation, discusses the increase in derivatives held by commercial banks with CNBC's Maria Bartiromo and Herb Greenberg. Maria Bartiromo: Why do you think we should care much about derivatives that the banks are holding? Harold Bradley: Well, you know, I'm just sitting out here in the Midwest looking at government statistics, and the Bank for International Settlements is showing a chart that, to me, just seems so counterintuitive. When you look back at the last time they peaked in late '08 and early '09, when Ned Davis was issuing his first warnings,...

It was sickening enough when British oil giant BP set new standards for corporate scumbaggery in the Deepwater Horizon oil spill, turning the Gulf of Mexico into its own personal toilet and imperiling entire species of wildlife in an attempt to save a few nickels. But with the Gulf geyser finally capped, there's still a way for BP to cause an even more unthinkable disaster: an AIG-style, derivative-fueled financial shitstorm. If the company decides to declare bankruptcy — a very real possibility with these bastards — it could trigger chaos in our casino system of finance, underscoring the insane levels...

Michael Snyder writes: Today there is a horrific derivatives bubble that threatens to destroy not only the U.S. economy but the entire world financial system as well, but unfortunately the vast majority of people do not understand it. When you say the word "derivatives" to most Americans, they have no idea what you are talking about. In fact, even most members of the U.S. Congress don't really seem to understand them. But you don't have to get into all the technicalities to understand the bigger picture. Basically, derivatives are financial instruments whose value depends upon or is derived from the...

"America cannot afford a Trillion Dollar disaster. That’s what this will cost, count in Trillions not Billions. The cost in lives, displaced people and destruction to the Eco System is on a scale Humanity has never encountered in its recorded history."

The financial reform that is about to be passed is a farce. Like so much in Washington, it is strictly for the tourists. The following article from Sox First provides commentary on the legislation: "You think the Obama administration's legislation to fix US financial regulation is going to change Wall Street? You're dreaming! Nothing has changed, investment banks are a protected species in the US. Hailed by some sections of the media as something that will put banks on a bigger leash, the reality it does nothing of the sort. It's just a massive con because of the way the...

President Obama was quick to claim victory at week’s end, after congressional negotiators hammered out a final bill regulating the financial sector, saying it provides “90% of what I proposed.” But just how the nearly 2,000-page bill will affect New York — which relies upon financial institutions for a major share of its tax base — remains unclear. After all, as Senate Banking Committee Chairman Chris Dodd admitted: “No one will know until this is actually in place how it works.” Which is why Rep. Jeb Hensarling (R-Texas) warns of “three unintended consequences on every page of this bill.” Not...

Washington in the Obama era seems bent on imposing "solutions" that not only fail to solve Americans' problems, but make us poorer in the bargain. In a direct attack on Wall Street, the president and his ally, Sen. Blanche Lincoln (D-Ark.), are bent on imposing the "Volcker rule," which would prohibit banks from making speculative investments with their own funds, and on requiring banks to divest their derivatives trading desks, or at least put them in a separate subsidiary owned by a parent holding company. Five major banks -- Bank of America, Citigroup, Goldman Sachs, JP Morgan and Morgan Stanley...

Blanche Lincoln may represent Arkansas in the US Senate -- but given the pain she's trying to inflict on New York's financial sector, she might as well hail from London or Hong Kong. With talks under way to reconcile House and Senate financial-reform bills, the powerful Agriculture Committee chairwoman is reportedly working overtime to resurrect a plan that would force banks to part ways with their lucrative derivatives-trading operations. Which, in turn, would separate New York from a healthy chunk of its tax base -- and a whole lot of jobs. Few would dispute, of course, that the market for...

Soros: The Crisis Is Far From Over, And Derivatives Are A "License To Kill" Vince Veneziani Jun. 10, 2010, 4:14 PM George Soros is sounding a lot like Warren Buffett these days. In a conference in Vienna, the famous investor said that Europe's worsening debt situation is just "Act II" of the crisis, according to Bloomberg. Bloomberg: “The collapse of the financial system as we know it is real, and the crisis is far from over,” Soros said today at a conference in Vienna. “Indeed, we have just entered Act II of the drama.” Soros, 79, said the current situation...

One of the biggest risks to the world's financial health is the $1.2 quadrillion derivatives market. It's complex, it's unregulated, and it ought to be of concern to world leaders that its notional value is 20 times the size of the world economy. But traders rule the roost -- and as much as risk managers and regulators might want to limit that risk, they lack the power or knowledge to do so. A quadrillion is a big number: 1,000 times a trillion. Yet according to one of the world's leading derivatives experts, Paul Wilmott, who holds a doctorate in applied...

From Greece to Britain and the USA – trillions in bailouts disappear into the black holes of the overspending government bureaucracies and irresponsible corporations. It is amazing that the stock markets are still functioning. May be it is because the Wall Street stopped reflecting the reality long time ago. Instead the market invented the new dimension of reality – the derivatives of all kind. Wall Street is trading crap – the derivative markets are like trading shares for vacations on asteroids, because Obama said he has a plan to go there, when the economy recovers and he gets revenues from...

"-- The notional value of derivatives held by U.S. commercial banks increased $8.5 trillion in the fourth quarter, or 4.2 percent, to $212.8 trillion." "-- Derivative contracts remain concentrated in interest rate products, which comprise 84 percent of total derivative notional values. The notional value of credit derivative contracts, at $14 trillion, represents 7 percent of total notionals. Credit derivatives notional totals increased by 8 percent during the quarter." Imagine: an increase of $8.5 trillion in notional value of derivatives in just three months."