Four Biggest Banks in America have Huge Leverage

By Greg hunter’s USAWatchdog.com 

I keep hammering away at the fact the Fed doled out $16 trillion in the wake of the credit crisis of 2008.  This is an enormous sum that is greater than the all goods and services produced in the U.S. in a single year.  Domestic banks and companies got the money, right along with foreign banks and companies.  In effect, the Federal Reserve bailed out the world financial system.  Now, we are right back to square one facing another financial meltdown with European banks and sovereign debt.  If the Fed spent $16 trillion, why in the heck is this problem not fixed and why isn’t the world economy taking off like a rocket?”  The simple answer is it wasn’t enough money.  

The Bank of International Settlements pegs the total world over-the-counter (OTC) derivative exposure at around $600 trillion, but many experts say the real figure is more than twice that amount.  No matter which figure you use, it is a gargantuan sum.  OTC derivatives are an unregulated dark pool of money with no public market.  These are basically debt bets between two entities on things such as credit risk, currencies, interest rates and commodities.  According to the latest report from the Comptroller of the Currency, just four U.S. banks have an eye popping $235 trillion of OTC derivative leverage. (Click here for the complete Comptroller of the Currency report.)  As a nation, U.S. banks have a total OTC derivative exposure of $250 trillion. So, the fact that just four U.S. banks have this much leverage and risk is astounding!  The banks are listed below in order of size and approximate OTC exposure:

 1.)     JP MORGAN CHASE BANK NA OH

           $78.1 trillion OTC derivatives 

 2.)    CITIBANK NATIONAL ASSN

           $56.1 trillion OTC derivatives

 3.)    BANK OF AMERICA NA NC

           $53.15 trillion OTC derivatives

 4.)    GOLDMAN SACHS BANK USA NY

           $47.7 trillion OTC derivatives

Considering that the total assets of these four banks are a little more than $5 trillion, I see a frightening amount of risk with a total derivative exposure of $235 trillion!  This is nearly 50 to 1 leverage.  On top of that, assets such as real estate or mortgage-backed securities can be held on the books at whatever value the banks think they can sell them for in the future.  I call this government sanctioned accounting fraud, or mark to fantasy accounting.  Who knows what the true value of the banks “assets” really are. 

I am sure the banks would say that the net exposure is really not near that great because the banks have hedged their bets.  The banks will probably say, by and large, these debt bets will cancel out or back up one another.  It is known in the banking world as “bilateral netting.”  A recent article in Zerohedge.com explained the enormous risk by saying, “The best example of how the flaw behind bilateral netting almost destroyed the system is AIG: the insurance company was hours away from making trillions of derivative contracts worthless if it were to implode, leaving all those who had bought protection from the firm worthless, a contingency only Goldman hedged by buying protection on AIG. And while the argument can further be extended that in bankruptcy a perfectly netted bankrupt entity would make someone else whole on claims they have written, this is not true, as the bankrupt estate will pursue 100 cent recovery on its claims even under Chapter 11, while claims the estate had written end up as General Unsecured Claims which as Lehman has demonstrated will collect 20 cents on the dollar if they are lucky.”(Click here to read the complete Zerohedge.com story.) 

The global economy is still in trouble.  Everyone is focusing on Europe because the sovereign debt crisis there is likely to cause the European Union to break apart and kill the Euro.  The Head of UniCredit global securities, Attila Szalay-Berzeviczy said recently, “The euro is beyond rescue . . . . “The only remaining question is how many days the hopeless rearguard action of European governments and the European Central Bank can keep up Greece’s spirits . . . . A Greek default will trigger an immediate “magnitude 10” earthquake across Europe.” (Click here for more on that story.)  If the EU goes under, do not expect all the highly leveraged U.S. banks to walk away unscathed.  They will need another bailout to stay afloat.  

You must remember the U.S. still is at the epicenter of the ongoing credit crisis.  At the moment, America looks like it is in better shape than Europe, but that will not last.  According to the latest report from John Williams of Shadowstats.com, “The root source of current global systemic instabilities largely has been the financially-dominant United States, and it is against the U.S. dollar that the global markets ultimately should turn, massively.  The Fed and the U.S. Treasury likely will do whatever has to be done to prevent a euro-area crisis from triggering a systemic collapse in the United States.  Accordingly, it is not from a euro-related crisis, but rather from within the U.S. financial system and financial-authority actions that an eventual U.S. systemic failure likely will be triggered, seen initially in a rapidly accelerating pace of domestic inflation—ultimately hyperinflation.” 

Sure, the dollar may gain in value for a while in absence of the Euro as a competing currency, but, ultimately, the dollar too will crash, right along with a few very big banks.

Comments
  1. Alessandro Machi

    It sounds like the world’s economy is too big to sail. It also sounds like the world’s economy is too big for a sale.

    Nothing will really change and things could get worse until “Restructuring a debt DOES NOT cause a default”.

    Right now the opposite is true. The restructuring of any debt is considered a default by the banking industry. That one simple rule is destroying the world’s economy and stealing wealth from main street and handing it over to wall street.

    • Claire Solt PhD

      whoever hasn’t figured out that the banks are nationalized and doing just what the fed gov tells them to do is just spreading deceptive propaganda. The gov is playing a shell game. The fed gives money to the banks and they buy treasury bonds to finance the deficit. By the way, they also nationalized the housing market and are directly responsible for all the forclosures. They are charging back the toxic assets to the banks. The financial press is useless, as far as I can tell.INTIMIDATE4D i SUPPOSE.

      • Greg

        Thank you Claire for weighing in here!
        Greg

  2. Brad

    To paraphrase Gov. Scott Walker, “It’s just math”. Even lib. Gov. Andrew Cuomo said, through his budget spokesman: “We are all in the same boat when it comes to public employees, It’s just math. You can’t run from that.” Even that fellow what’s-his-face obama said, “It’s not about class warfare {really?}, It’s just math” when referring to the budget battle.
    Gov. Walker may have desired to pay teachers twice the present salary and benefits, but even if he had, the money was not there. Sorry, we’re tapped out–not there–don’t have it–can’t do it–wish we could. Now, back to your article, it is the same story, really. The math tells the story and shows us the general direction of our future. This does not end well. Most of us will end up holding the bag to one degree or another. But, I believe worse than the personal and sovereign financial bust is the opportunity for our collectivist opponents, or other varietiy of tyrant, to seize control. In Chile when Allende, an avowed Communist, held the reins of power, my Chilean friends stated that “the disorder was in EVERYTHING.” It is easy to disrupt a system but hard to establish civil order. After the North Vietnamese won the war the statement was made by them that making war was easy, but to establish peace is very hard.
    Greg, we rely upon you to keep serving up the straight story. It is full-strength and unadulterated. It is tough to swallow sometimes but with the facts before us we can make wise decisions. Thanks for your good work.

    • Greg

      Thank you Brad, Ken and Art for the comments!
      Greg

  3. Ken

    We are like a frail lifeguards at the beach trying to rescue a bunch of portly, well ok then, morbidly obese, swimmers who are drowning.

    We have no chance of saving them (they weigh about 600 trillion dollars and we weigh about 14 trillion soaking wet) and as we reach them they grasp wildly at us, wrap their arms around our neck and drag us with them to the bottom.

    As a great philosopher, The Outlaw Josey Wales would say, “A man’s got to know his limitations.”

    I’d say we’ve reached ours long ago.

    By the way, if you haven’t already Greg, I recommend you check out an interview with David Stockman over at Lew Rockwell.

    Here’s one of my favorite quotes from that interview:

    “The Fed is so locked into this erroneous Keynesian world view that it’s indulging in a ritual incantation just doing the same thing over and over and over, when almost anyone who thinks about it can see why twenty or thirty basis points – if they can get that from Operation Twist – [would] solve anything that the last four or five hundred basis points of interest rate reduction haven’t solved, and what are the negative consequences of going in and manipulating and distorting the fundamental capital market of the world for thirty basis points? It’s not even a close question. It’s an evidence that they’re locked into almost insane policy making.”

    I think characterizing the Keynsian response to the credit crisis as “ritual incantation” is spot on. It had me laughing out loud because that’s how I thought of it too.

    They are indulging in Cargo Cult economics.

    Cheers

    -Ken

  4. Art Barnes

    Greg, with all that in play, include the global slowdown, especially most of Asia who are wholly dependent export economies and you come up with even less money earned worldwide. I don’t know much, but it takes money to pay down debt, with slow economies here and abroad, tax revenues play a significant role in staying off a calamity. In effect, slow global econonies and low tax revenues makes the time table of U.S. systemic failure sooner rather than later. Frankly though I read your article to mean this: THE FED WILL CRASH OUR SYSTEM TO SAVE THEMSELVES AND THEIR BUDDY BANKS!

    • Oldguy

      You’re right Art….
      I made a prediction in one of my older posts that the euro collapse will come in mid November, and all hell will come right after…even in our economy. Many of our young people have started to wake up from the dreamland their professors taught them. Reality hits hard. To believe riots won’t happen here is foolish. They’re presently called demonstrations; later come the riots. Corruption in our government has made this bursting of the bubble possible (thanks to Barney Frank, Chris Dodd, Schumer, et al).
      The banking crooks make up phony paper that they put a price on and sell to greedy and stupid investors. Some of these are derivatives, hedge funds, CDS’s, CDO’s, etc. If they could make titles to acreage on the moon they would sell them too. Only when we return to the intent of the stock market, which is ownership of businesses by purchase of shares in them without use of credit, will the market be stable. Sales of stock options, preferred stock, mortgages, etc. would also be disallowed. I guess I’m just too old.

  5. Matslinger

    Look no further than the world’s biggest global criminal “The BIS”.
    In 08, the reported derivative volume was 1.8 Quadrillion,
    the BIS acted quickley to (revise that number) down to a much more
    managable $600 trillion. The BIS continues to play a shell game with
    ALL central bank currencies on a daily basis.
    When gold began it’s noticable climb back in 2003, there were a multitude of tools available to reel it back in; interst rate adjustments, Gold dumping – (which was actually just a transfer of bullion from one Rothschild central bank to another,) commodity
    manipulations ( to draw investmnent capital away from one sector and
    into another), and of course , currency devaluation, which since 2010
    can be seen as an “ALL RED vs ALL GREEN” volley ball game, being
    used to milk the last remianing life out the paper currency system.
    Edward Bernaise and friends retroactivley cursed our country and world
    into a vicious cycle of manufacturing and destruction, based upon a
    an inevitably self destructive consumer sociey ( CONSUME defined
    in the dictionary as “to destroy”).
    I belive that these crafty freemasons planned this as early as 1873
    when they crippled the US and world economies by demonitizing silver,
    and repeated the formula
    100 “freemason” years later in 1973 with
    the Arab oil embargo, and the now dieing “petro dollar”.

    The present question at hand is: how much longer can we expect to keep
    running in and out of this burning building (the stock market),
    before it’s collapses on top of us
    and ALL paper assets return to their true intrinsic value – ZERO -?
    And when we arrive there, how many of the 3% slice od prepared Americans can we expect to locate and barter with?
    The new American refuge will become a nasty force to deal with,
    there is no fall back possition to sustain “civilization” when the
    dollar GOD dies.

  6. nm

    Greg:

    So, let me get this straight. In order to really fix the problem, they’d have to print $600 trillion dollars?

    I’ve asked this question before: At what point will Bernanke have to stop printing and when that happens…what will REALLY happen?

    • Greg

      NM,
      Not exactly, Some of these OTC contracts will perform just fine in a meltdown but some will not. This means contracts will not be “bilateral netted” or hedged for default risk. How many are sour? Who really knows because this is a dark pool with not regulation or public market. If just 10% defaults in the next meltdown then that will be $60 trillion in losses.
      Greg

  7. Ron P

    Greg. We can all complain about banks getting too big to fail, but is there not much we can do about it now. Congress let the fox into the hen house when laws were changed 20 years or so ago that allowed banks to cross state lines and become regional. For instance, North carolina National Bank was allowed to merge with a Texas bank and they became Nations Bank. Then later, it merged with the California based BoA to become the BOA we now known that is based in Charlotte, NC. Once this happened, they controlled a large majority of assets and became too big to fail. Now too many members of congress are bought and paid for by big financial institutions, so their jobs are on the line if they fail to support financial institutions.

    Maybe there is a way to bring the size of the organizations back down to a managable size, but it will take alot of smart minds to accomplish. Until then, one of these banks failing could cause a world depression.

    • Greg

      Ron P,
      You are correct. “One one of these banks failing could cause a world depression.” That is the scary thing and there are many failure possibilities.
      Greg

  8. mile

    does this mean there is enough to pay out the crooked bets on the crooked derivitives..? so BAC with sticky fingers could be worth ?…..100,000 a share..?…..suckers

  9. Diane Carol Mark

    Greg,
    Your link for Click here for the complete Comptroller of the Currency report isn’t a link–only text.
    :) Diane

    • Greg

      Diane Carol Mark,
      I fixed it. Sorry, but it works now.
      Greg

  10. Frank Brady

    The public at large is blissfully unware of the magnitude of the catastrophe that is bearing down upon us like a runaway freight train. The so-called financial press and the media organs that have been completely corrupted are guilty of criminal malfeasance. Elected officials and Central Bank diretors are guilty of massive fraud and criminal theft.

    Yours is among the very few American sites that is shooting straight with the people. Thank you very much for your courageous efforts.

    Frank

    • Greg

      Thank you Frank for your kind words and support.
      Greg

  11. Greg

    There is only 1 answer to this mess. GBA and RICO all banksters, their prostitue politicians and lawyers and the current DOJ.

    • Greg

      Greg,
      Amen brother!
      Greg Hunter

  12. Jeff L.

    I don’t see John Williams hyperinflation scenario until after a serious debt deflationary collapse first from which THEY then are very desperate.

    The debt outstanding and the derivatives could collapse the system faster than they can print money. The unknown question is the time period between the debt deflation and the hyperinflation that follows.

    Hyperinflation is the end game. It would be the last ditch policy. All defationists that I know are also hyperinflationists but its the order of things where everyone may have differing opions………just a thought!

    • Greg

      Jeff L.,
      Who knows the exact path this crash will take but at the very least inflation is a lock. Thank you for weighing in.
      Greg

  13. brian

    This is all true, but the real question now is how will those with authority react to this coming collapse……..

    Using histroy as a guide I guess we can expect that the result of this current crises will be more federal take overs, massive centralization of wealth, a full tilt assualt on the concept of private wealth and more scrutiny and control of our lives.

    Its all about continuity of Governemnt……..In Government We Trust

    Hail to the Chief baby!!!!!!!!!!!!!

  14. AndyB

    The derivative exposure could be as much as 2.4 quadrillion; but we will never know since it is an extremely non-transparent segment of the market, perhaps purposely so. If the real truth came out about the ESF, BIS et al, the debt enslaved populaces would make the French Revolution look like a celebration in a monastery.

    The Anglosphere elites may have met the end game of Keynesian top down, and incrementally fascist control. Their only solution, unfortunately, will be another World War, or a series of more false flag operations.

    • Greg

      Thank you Andy, Brad, and Bob for weighing in.
      Greg

  15. Brad Phipps

    This is starting to look like it could unravel quickly. Martin Armstrong thinks that the US dollar could see huge safe haven inflows when the chickens finally come home to roost in europe- but I would think that a lot of that money would seek safety in gold as well- causing both gold and the dollar to rise together- a phenomenon we witnessed quite a bit this summer. But after the fear subsides and all of the black holes of debt have been filled with funny money- be prepared for Mises’ ultimate crack-up boom as all cash stored in dollars rushes to purchase anything of substance. Ludwig von Mises was a true prophet- every gold bug owes him a huge debt of gratitude.

  16. Bob

    Good time to invest in whiskey an tobacco stocks. There’s going to be a party on the streets. There still be a stock market after the bottom. Some stocks should be worth more then cash. Get out of the healthcare and go for the party stocks. I’m not a broker are a trader but when the shtf people like to party. The bootlegger always gets ask to the party and leaves with the gold. peace

  17. bob

    for those who believe in The Fed, The USA Banking system, and santa clause, can use a thumbnail guess at ongoing freefall of usa and world economy, via hyperinflation::

    here, the 3 to one odds are easy to see whereby all bank and govt data is false,,,,, so::

    MORGAN CHASE BANK @ $78 trillion OTC derivatives

    CITIBANK @ $56.1 trillion OTC derivatives

    BANK OF AMERICA @ $53.15 trillion OTC derivatives

    versus

    GOLDMAN SACHS (worldwide)@ $47.7 trillion OTC derivatives

    so the suckers need only watch the offsets, when total of
    the 3 banks goes down goldman goes up, when goldman goes up
    enough the usa banks start into bankruptcy, thereby goldman and
    their sponsers become the de facto worldwide banking system,
    all prior creditors, depositors, go bellyup, ho ho ho

    • Greg

      Thant’s really scary bob.
      Greg

      • bob

        Greg,

        obama increased the usa-debt, for his term(s) and ongoing,
        so that debt can not be paid off, thus usa-economy continually
        is in quasi-bankruptcy as is the world economy, more or less a freefall of a hyperinflation-depression, which might hit bottom around yr 2030, if not then then soon afterwards, until then
        - count your fingers and toes when dealing with government(s) or business and or anyone other than your inner self, i.e. they will promise the end of the freefall but they know they can not stop it
        - it must fizzle out of its own accord

        of all the econs of the world nations, usa is the strongest altho it too is weak and defunct, but any money you throw in any other than usa you throw away will soon be a loss, as soon as obama is out of office usa econ will sputter than come up for air then be the best econ available, thus usa $ will get stronger, stay strongest, all others will convert to usa$ as their reserve currency and as their domestic monopoly play money

        this is not doom and gloom but a realization there is no santa clause, usa is ordained, and governments are ancient history none can survive until after y2030 – take a look, take a position, ride it out, it can not be bad forever, is just temporaty until around year 2030:: until then, as Armstrong says, all governments will have to shed the stupid and other incompetents so their trimmed down size can be effective, getting ready for the end of this mess as caused by governments

        Greg, thanks for this opportunity to say the above, does not matter if anyone agrees with me, i have said it and we have to wait until y2030 to see what happens between now and then…

  18. bob

    i might as well call your attention to the fact that one must evolve uniquely rather than as a copycat such as eurounion tried to copy usa resulting in failure

    thus if euromembers or any other group of wannabes try to evolve they must do so via being theirself and evolving according to their own dynamic

    since eurounion is dead the members ought abandon that farce and create a new groupie via their inner ability etc, but no need to do that since the cartel “Russia-China-USA” will absorb all into their realistic world economy and commerce, a piece of cake

  19. MasterLuke

    Just shows you the kind of twisting and turning of the truth can be achieved when you have control/power. When the people are controlled through TVs we have a problem. The only question worth asking now is are we going to have a fast collapse or are we going to have a long drawn out rapage. I really think it may be the latter.

    • Greg

      MasterLuke,
      Good question!
      Greg

  20. htm

    The derivatives market is a bit more complex than the article and the comments suggest. The most important that has been omitted is the fact that, in order to address counterparty credit risk, each counterparty has to post collateral to a trustee when he is “out of the money”. Day 1, the two counterparties are even; on day 2 it is likely that the market has mover and one of the counterparties will hold a position that shows a profit while the other counterparty will show a loss in the same amount. From day 2 to the maturity of the contract the losses and gains will move back and forth, and at maturity the contract will no longer have value to either party. The danger is that one of the counterparties becomes bankrupt while the contract is still in effect. In that case, it will be necessary to replace that counterparty and if the bankrupt counterparty has a loss on the contract (“is out of the money”) someone will have to be paid an amount of money equal to that loss in order to induce a new counterparty to step into the shoes of the bankrupt counterparty. For this reason the contract will provide that the contract be valued daily and that the out of the money post collateral with a trustee to ensure that there is always enough money to replace him if he goes bankrupt.
    What happened with AIG was that, having a AAA rating, they felt that they should not have to post collateral so long as they remained AAA and agreed that they would post collateral when, and if, they were no longer AAA. Unfortunately, when that happened they did not have the resources to post all of the collateral that was required. That’s when the government stepped in and loaned AIG enough money to post the collateral and to avoid the huge losses that would flow through the market as the contracts were replaced or terminated. This money was not given to Goldman Sachs (or anyone else) but rather to a trustee. So long as collateral was posted no losses would have occurred and as the contracts expired the collateral would be returned to AIG and the government.
    This discussion assumes that AIG had no unhedged risks (naked exposure to underlying transaction) and, in fact, AIG had very little of that risk for the reason that all AIG sought (like all derivative traders) was to make a spread on the position that it had taken in the derivatives market.
    The real risk in this business is not in the contract itself (unless one has taken a naked position) but rather in the possibility that a counterparty fails – something that is addressed with daily collateral postings.

    • MrMoron

      @htm
      I may be wrong, but your explanation of the mechanics of this marketplace bears no relation to anything I’ve read in the last five years. FWIW, I spent 11 years in the retail side of the brokerage business: was an options and futures and insurance licensee. Your description almost matches, prior to MF Global, how the futures and options exchanges operate but where you would be calling the exchanges the “trustee”.

      My impression is this (prior to 2007)
      -Margins, terms, periods, pricing method, collateral calls are contractually negotiated (sometimes just by e-mail).
      -There is rarely a third party trustee involved–or surety bonds posted to same.
      -Purchase margins on trades are ridiculously small compared to any listed leveraged derivative, and margin calls dependent on the counterparty’s back-office; not necessarily a daily affair or mtm.
      -The vast majority of these trades can not be systematically hedged or “insured” against the real risks–a euro collapse or a run on all banks (by wholesale selling of sovereign debt–like mortgage debt). You have a 2000 pound tail wagging a 20 pound dog.
      -Counterparty failure is assured when everybody has a losing position they can’t collect against due to undermargining system wide.The winners simply have smaller losses. Also, the positions/contracts are not necessarily fungible–standardized.
      -Last, all that is required in our SOP leveraged world is the perception, mere perception, that a bank going to the overnight market to fund its daily operations is insolvent. Illiquidity instantly becomes insolvency if you can’t fund your counterparty clearing commitments. If other banks won’t fund you for two days, the fed has to–then we the taxpayer.
      -Got $2 Quadrillion dollars? Ante up, your share is $40 million if you’re one of the 50 million taxpayers.

      It’s all going to go away with a very big bang, and no one will know how many people are really responsible for the mother of all Ponzi schemes. This is what the camps are for, and why there is no audit of Fort Knox and I suspect it has been part of someone’s plan for a very long time.

      • Greg

        MrMoron,
        You need to change you name to Mr. Spot-on!!! You are waaaaaay under selling your grasp on what in the hell is going on.
        Greg

  21. PeteCA

    While posters have been chatting with Greg … Bank of America (BAC) is steadily dying. Check its stock price today. Does this look like a company that is going to survive? As Greg points out – BAC is one of the largest banks in the USA and it is heavily involved in derivatives trading.

    Your worst nightmare is just around the corner. Who exactly would buy BAC and take it over, if the bank does go under – and Why?? But if someone doesn’t rescue BAC, it’s guaranteed that defaults on collateral in the derivatives markets will take place. BAC is tied to everyone. And if the Fed takes extraordinary action to “save the day” and cover all collateral (and losses) tied to BAC – who authorized this? Where is Congress?????? Who said that public money could be used to shore up bad derivatives trades by banks?

    Greece is on the ropes.
    Ireland is on the ropes.
    Portugal, Spain & Italy not far behind.
    BAC looking shaky.
    Banks in Europe teetering on the edge.

    Not exactly a pretty future.

    PeteCA

    • Greg

      Peter CA,
      Fantastic, blunt analysis! I love it!!
      Greg

  22. M SMITH

    Greg, there are so many stories out today about the health of our economy & TBTF and what was/is the cause of the economic stress on the western financial systems, plus the political ties to economic choices made by past and current law makers. The 1st link is http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2011/10/2_Martin_Armstrong.html. This interview is a truthfull as it gets and readers should not pass on it! I have sent this to family members & friends because the MSM would never report the truth about what our gov is doing. In 2008 while Martin was in prison members of congress sought Martins help on the economy, you can’t make this up, Martin is in jail because of a judge who was/is owned by the banks/gov. I bet only 1 out of 100,000 american even knows of what Martin has had to fight to get out of jail for something he never did. This is why Americans need to know how our courts really works!

    I just saw the mark up from spot silver prices on ASE’s spot=$30.76–sell $36.00 for 60 or more ASE’s and the premiums keep getting bigger on all form of physical silver.

    Next Martin 2 new releases at http://ww.armstrongeconomics.com/martin_armstrong_writings/. Both are dated 2011/10/01 & 2001/10/02. One is about the wall Street Protest & the other is a long piece of historic data he uses to explain how money moves & how do define money and how congress set aside what was right so they could hold on to the power they love as they let the U.S. go from a place where freedom shinned to a place where your rights of free speech and the protection from a over reaching gov that deems you as a threat because you disagree with the policies & regulations on certain groups while other groups have set up legislation that protects them from being charged for crimes they have committed and continue to as they please with out the worry of being jailed.

    I would like to add this. The gang of 12 who is calling to cut the benefits of those on Social Security, this is a non stop raid of the peoples money who have been paying into the system their whole life. You put in say $100K & you only receive 75% of what you paid in, this is plain theif by the gov. If they are going to make cuts it should be from congress’s own retirement program & all the unions who are Obama’s base. All those on SS should be mad as hell & calling their members of congress to stop this madness right now. There are so many places where there is waste on top of wasteful spending & that’s where any cuts should come from. I bought up Chain Inflation and why it’s so important that Americans call/write/fax congress to show your dis-pleaser of how they want to use Chain Inflation to cut any COLA’s for those depending on SS to keep up with the wide spread inflation that leaves millions with less each month to pay to keep food & meds that keep rising in price faster each month. If $3.00 gas is cheap, I would hate to see $6 or 10 a gallon. Greg, there is so much to add, I don’t know what to post next as more data keeps comming in from all over the world about politics, monetary systems falling apart & social unrest around every coner of the globe. The protest of Wall Street has expanded and is growing daily. One has to wonder if any really undertand what they are protesting, while the protestors sleep in tents, Soros & the others that are adding gas to the fire all set very comfy in their million dollar houses in NYC. Then we have some that really know there is so much corruption in the courts, congress & at the Fed they know there is a change being held back until it all blows up & then congress will roll at a bill that will pass & take effect right then, making all the paper dollars worthless as a new form of currency will be unvailed to the public. Things are moving a lot faster now and it will be like watching a movie for the 3rd time, you already know how it ends, but you wish you could change the ending, but it’s way to late.

    JSMINESET.com had a very good report on Jim’s site this week end, please look it up, it is a very detailed report & right to the point, it’s a must read for all. It talks about how Utal & other States are looking to gold & silver to be used against a failed Federal Reserve System and to to protect States Rights.

    • Greg

      Thank you M Smith for thew comment and content. I love Martin Armstrong!!!
      Greg

  23. bigtom

    htm-yes, i believe you are correct in your discussion. but one must further persue the word ‘derivative’. these are multipule contracts linearly based upon a one time original single use of collateral. it is the later trail of ‘imaginary’ paper collateralized notes based upon the original paper issuance of real collateral in the first instance that becomes the problem. the further down the paper issuance road one gets linearly from the original collateral source note the further distance one gets from recovery reality. however the original contract may be based upon some sort of ‘real’ collateral and become recoverable, the many lineraly spun off derivative contracts sold off in the financial ‘make believe’ world based upon the original paper with collateral makes for the real problem. i am not familiar with the daily nuances of counterparty ‘daily collateral postings’ as you state, but i am of belief those are of just ‘paper’ also, which again makes for the real problem, or so i understand…..perhaps one more knowledgable on this subject can make a better case.

    • Greg

      BigTom,
      I think you made your case pretty well. When It blow up this time ,many will be screwed. Thank you for the analysis.
      Greg

  24. Bob

    My question is how can anyone at the top let this leverage get so large and out of control? Is it really greed and incompetence combined?

  25. Jan

    Greg,
    Banks the world over are over leaveraged and their only solution is for governments the world over to keep printing more and more money to plub the holes. I cannot even imagine what will happen when they realize they are out of ink.

    I hope fellow patron’s of your blog find the articles in the UK Column enlightening. We are not alone in thinking the banksters are scum and our politicians are idiot lap dogs.

    • Greg

      Jan,
      I believe this is a universal thought. Thank you for defining this.
      Greg

  26. major

    Because we have fools for leaders, for at least several administrations, who through their arrogance thought they could defer or control consequences indefinitely…the whole World is ready to crash into poverty. These fools also believe they can offshore their stolen loot and will have a safe haven when the consequences of their foolish decisions bring the World to its knees. What they underestimate is the rage of those whose trust in their leaders or superiors has been so grossly defiled…there WILL be NO place they hide on this planet to evade the ultimate justice that will be demanded. It will be the middle ages once again. Nothing will be too brutal to exact commensurate punishment.

  27. iknowbetter

    Bank levergage does not compare to the leverage of the Federal Reseve.

    Be afraid.

    …ikb

    • Greg

      IKB,
      I am and I hope people take action to protect themselves.
      Greg

  28. Lester

    I’m no economist, but Jim Rogers is! He is not worried about his own money because he manages it prudently.
    What’s wrong with his advice to “let them all fail”?
    In a proper bankruptcy court everything would be resolved, debt would be wiped out, real assets would get re-priced, solvent investors would buy at real prices and the world would keep turning as it did in the past. Problem solved. If we let contract law work as it should.
    Now let’s find a “proper” bankruptcy judge! But where?

    • Greg

      Lester,
      I agree, It would have been much cheaper to only cover $6 trillion in deposits. Share holders and bond holders be damned.
      Greg

      • Lester

        There was a lady accountant who said: “money doesn’t disappear, only the pockets change”. If anyone claims money wiped out, it was only ephemeral increase in the numbers, imaginary profit. That’s not book value.
        Furthermore, much of the so-called “bank deposit” is multiplied accounting entry. By reducing the velocity of money we stay closer to real economic activity, reflecting production, not just churning accounts.
        Respectfully, “my two cents”.

        • Greg

          Lester,
          The comment is worth waaaaay more than 2 cents!!
          Greg

  29. Heidi

    Greg,
    I’m one of the 99%. IF you happen to see any bankers w/french cuffs…tell them I said to: Jump!
    Great article well organized!

    • Greg

      Thank you Heidi!
      Greg

  30. Russell Cohn

    Unbelievable as it might sound HR 2990, The NEED Act, takes the power to create money away from the privately managed cartel called Federal Reserve Bank and restores it to the purpose of rebuilding our nation’s infrastructure. All the funds necessary would be created for pensions, roads and bridges, social security, public health care and more without debt! The so-called national debt would be retired as it comes due also without new debt. Please inform yourself about this critical legislation and spread the information. It was re-introduced into Congress 2 weeks ago.

  31. bob D

    when i sent mine there was no other “bob”, after i sent then another
    bob showed up, or at least i first saw him, so from now on
    i use name ‘bob D’
    mine above are
    1) “for those who believe in the Fed…”
    2)”obama increased the usa-debt, for his term(s) and ongoing,…”
    3)”i might as well call your attention to the fact that one must evolve uniquely rather than as a copycat such as eurounion tried to copy usa resulting in failure”

    new: Greg,

    above you said scary for goldman, but they already are doing what
    i described, only moreso….

    however, they are no longer able to keep their scams going,

    suckers are born all the time but even they can
    be suckered only once then no more,

    i would guess goldman has used
    up all their suckers thus have put themselves out of the game::

    however, the big issue is will the USAttorney General have the balls
    to prosecute them for their outright frauds against the suckers which in the aggregate means their frauds end up at bottom line as frauds
    against USGovt…

    altho they can bribe a lot of the usgovt folks they can not bribe them all forever thus their days are numbered, poor fools

    yes, they have already shoved their headquarters off shore in ways
    USA-irs can not easily see their new games, however irs is working
    hard at catching those who wont pay their tax, thus soon ought
    grab goldman thugs, confiscate all their property via a quasi-RICO, and then we can all live happily ever after

    what goldman, and obama, have done is make USA weak so that soon
    foreign troops will come in and add to the illegal mexs crimes
    and this will have to spill more and more blood in the streets.
    —- o well usa was
    a nice country while it lasted…

    • Greg

      Bob D,
      It’s not over yet but the next few years will be life changing!
      Greg

  32. Mitchell Bupp

    Greg, Could explain exactly how the deratives are paid off? I have always thought that the deratives (aka bonds) were paid off through he proceeds of the mortgage payments. I don’t know this for a fact but just what I have always believed. Anyway … if the value of the securtized investment (house) this doesn’t matter to the bond holders as long as the payments are kept current. However, if a home goes into foreclosure the leagl actions kick in and the banks forecloses in the trusts name. then the “market value” of the home is critical for the bond holders.

    I know that is maybe simplistic …. but how close am I?

    Mitch Bupp

    • Greg

      Mitchel,
      You are describing a special kind of derivative called a Mortgage-Backed Security (MBS). These are really portfolios of mortgages with homeowner making payments. There is usually a given a special tax status called a real estate mortgage investment conduit. This allows those payments folks are making to pass right through the servicing the loan (usually a bank) and be paid without tax to the MBS owner. The MBS owner has to pay taxes after that. Other over-the-counter derivatives such as Credit Default Swaps are really insurance contracts on investments you make. You get paid in a lump sum if your investment goes sour. These are 2 of the many kinds of OTC derivatives. I hope that helps.
      Greg

  33. bresun

    I’m really confused about what this means to the average Joe. If there is that much exposure by the big banks, does this mean we shouldn’t have money in these banks b/c our money is at risk? Here is probably a really stupid question, but IF my money is at risk at Chase, and I pay my mortage to Chase, does that mean my money would technically be safe to the point I owe more than that on my mortgage with them? Also, do you know HSBC’s position? Thanks!!!

    • Greg

      bresun,
      In the end it is the currency that will lose much if not all of its buying power. This should be your biggest fear. I would check into a small local bank or credit union with a good rating from bankrate.com ot thestreet.com. The big thing here is loss of buying power or better put inflation.
      Greg

  34. michael williams g

    Too me I think wellsfargo is the strongest bank and biggest bank today and for a while it a be too , because its getting ahold of some of the strongest want to be rich people in the world , its making people with stuff to finance their stuff , big stuff , its pulling in big stuff to buy and sell , and its will be lending wells as well . It will meet all ya lending needs with insurance too back it up . Wellsfargo bank pays it self . All the rest of the banks are just laid back no work ,maybe jpmorgan ,or a p giannini or c mitchell ,mite put up a fight , but , this will be a financial wave , and its coming from wellsfargo , this bank well make people want to bank and get bank watch , I was reading and , saw, that that bank investment division was starting a new car company gloabl company – call – I t I jupiter , and that cars and suv ,jets , and motor boat ,and also- planet sola panels rite inside the earth not out in space but rite here , and their a lot of more goodies this bank and its divisions a bring too , I’m thinking maybe 400 new stocks from that bank .

    • Greg

      Michael,
      I think Wells is the strongest of the big banks. Thank you for your comments.
      Greg

  35. richard grimes james h grimes

    I think forcloser is stupid anyway , those homes just end up sitting their anyway ,with no hpoe to huge companies like citi bank and bank of america and us bank riggs national bank pnc bank too , they money go in and out depending on who’s in control of it , if u got the wrong people in control that’s when its all ends up a load of crap , and destorys the mighty dollar for anybody anywhere .laws are the same too me , if u got the wrong laws in place that a mess up the money as wells .did u no most of the theves of the world train them selfs too the laws , before they break them .what do that mean ? Like if a home owner lose his home tooid fraud , the us attorney or da office don’t handle those kind of cases , u have to have a private attorney ,what if u can’t afford one ? U see what I’m saying ? Too me all crimes of money and land need to hit the law attorney office . Free of pay from tax payer money .tax payer money isent been use well for people that one day may well need the help back from paying into all of that .

  36. Nancy Thompson

    I am not very savvy in the field of banking or economics and I struggle with trying to understand all of this. But it seems to me the Federal government is bailing out big banks and companies who made bad investments in an attempt to make huge profits off the little people. The Federal government allowed banks to make these bad mortgage loans, they allowed investors to bundle all the bad, or high risk loans together and sell them. They knew these were high risk loans, but were hoping to gain big interest and high fee’s from the little guy, the home owner. Where was the checks & balances on these loans? Isn’t this called, exploitation? When did it become good policy to exploit the average american Joe who was looking for the american dream? It sounds to me that banks and investors are still working the system, the U.S. governement, in an attempt to make some big money off these derivatives. They want to collect their money, not pay their taxes, and when it goes south have the tax payers bail them out. Where does it end? when do we say ENOUGH? And I guess that’s what all these Occupy movement protestors are trying to do.

    • Greg

      Nancy Thompson,
      I think you have a pretty good grasp of the current situation. Thank you for your comment.
      Greg

  37. We need a president that a take over the places of war , not keep trying to fight those folks , they care nothing about freedom , what those countries , I super freedom . Any country that is been run with out freedom , the usa need to go in and take it over , and make it free ,jill pryor is a dirty women . Sussex properties, hine one inc , john thompson,and the brown brothers , chase bank .

  38. I mean any country that is not free , like the usa . The usa is a free country , and all the other countries need to be free like this one . We need a president like thomas jefferson that a take , over a place and make it free , its costing the usa to much , tax money to keep fighting a war , that is point less ,to a group of people who wants to die . And usely they can be spotted out . If they that bad , make a speech and call them out , so the usa can get them and arrest them . The stuff crazy . Its time for the hold world to be free free free . I’m tired of seen women with black rag on their faces , because a religon says u have to wear a rag , they can’t force nobody to wear a rag on their face . That not freedom . That all force . And its illegal to force . This need to be inforce global as a global law . Its need to be inforced global, that , anybody forceing , any event be arrested . Civil and human rights need to be posted global to all . . The sun and the moon is free . Why can’t man be free .

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