Inside the Secret Society of Wall Street’s Top In-House Lawyers


… lawyers are another bunch of rogues second only to their buddy banksters. Secret meetings in the same fashion as their master Bilderbergers reflect the shady business of the cabal


 

Bloomberg

It’s a Wall Street club that’s virtually unknown on Wall Street. It has no name or official membership list, and it meets only once a year, in locations such as Switzerland’s Lake Lucerne, Connecticut’s Litchfield County, and, this year, Versailles.

The attendees are top in-house lawyers for some of the world’s most powerful banks — people who sit at the table for decisions that can shape multibillion-dollar litigation tabs for the likes of Barclays Plc, Citigroup Inc., Goldman Sachs Group Inc., Deutsche Bank AG and JPMorgan Chase & Co.

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Trianon Palace Vesailles

For this year’s meeting, in late May, the lawyers descended on Trianon Palace Versailles, a luxury hotel less than two kilometers from the palace of Louis XIV and adjacent to the royal park.

The gatherings, which were described by several people familiar with them who asked not to be identified, tend to feature discussions of nuts-and-bolts issues such as managing relationships with the board and whether compliance personnel should receive stock incentives.

Sticking Together

This year, according to two of the people, some attendees arrived at the marble and gilded hotel primed to focus on a common scourge: class-action lawyers who seek billions of dollars from top banks for alleged market manipulations and related bad behavior. Eric Grossman, chief legal officer at Morgan Stanley, implored his confederates to hang together and resist the temptation to settle quickly.

Months before, Citigroup Inc.’s general counsel, Rohan Weerasinghe, had made a decision that essentially forced several of the world’s biggest banks to pay a total of $1.9 billion to settle a class action over credit-default swaps. Investors, including the Los Angeles County Employees Retirement Association, claimed the banks had worked together to limit competition in the market, allowing them to earn extra profits.

When multiple banks are sued in a class action, it’s common for them to share information and coordinate their defenses. But after years of practice, class-action lawyers have figured out a way to fracture these alliances. They reach a settlement with one bank, then ratchet up pressure on the others. Each bank knows that the last to settle will probably pay the heftiest price. That’s because of a legal theory called joint and several liability, in which a company found in court to be even partially to blame can end up on the hook for all the damages.

In the swaps case, Citigroup broke first, agreeing in the summer of 2015 to pay $60 million. Others followed, with JPMorgan Chase & Co. settling last for $595 million. Looming over the banks was the possibility of an antitrust investigation of the swaps market by the European Union, which could have uncovered evidence that would then be available to the class-action plaintiffs. In the end, the EU closed its case, so the banks might have been better off waiting.

Avoiding Criticism

Citigroup’s decision to settle highlighted the need for a conversation on the matter, according to the people familiar with the May meeting. Weerasinghe was there, but in keeping with the group’s collegial atmosphere, there was no direct criticism of him for deciding to cut a deal, the people familiar with the event say.

“They realize they are stronger when they stick together than when they splinter,” says Dan Brockett of Quinn Emanuel Urquhart & Sullivan, a lead plaintiffs’ attorney in the swaps case. “But each general counsel has a fiduciary duty. Each bank will act in its own interest.”

The annual gathering, whose existence hasn’t previously been reported, is the brainchild of lawyer Robert Mundheim. A general counsel for the U.S. Department of the Treasury in the 1970s, Mundheim went on to become a dean at the University of Pennsylvania Law School, then general counsel for the former Salomon Smith Barney in the 1990s. He’s now with the firm Shearman & Sterling and has been hired by independent directors of Wells Fargo to investigate the bank’s retail sales practices and other matters.

The Decider

Mundheim decides which top bank attorneys should be tapped for membership, according to the people with knowledge of the meetings, one of whom said they have been held for roughly two decades. The group includes banks that have in recent years grappled with investigations by the U.S. Department of Justice, the Federal Reserve and other regulators, as well as class actions. Besides the swaps case, major banks have paid settlements related to alleged manipulation of foreign exchange rates and the ISDAfix benchmark, which is used in the sale of interest rate derivatives.

After inquiries by Bloomberg News, some members of the group complained to one another about a breach of confidentiality, according to the people. Mundheim declined to comment, as did Grossman and Weerasinghe.

The Trianon, nestled near the gardens of Versailles, features a Gordon Ramsay restaurant as well as a spa and indoor pool.

Also representing the U.S. banks at the Versailles gathering were current or departing general counsels including Stephen Cutler of JPMorgan, Gary Lynch of Bank of America and Gregory Palm of Goldman Sachs, according to the people familiar with this year’s meeting.

Across the Pond

Joining them were counterparts representing banks on the other side of the Atlantic, including Markus Diethelm of UBS Group AG, Richard Walker of Deutsche Bank, Robert Hoyt of Barclays, Romeo Cerutti of Credit Suisse Group AG, David Fein of Standard Chartered Plc, Stuart Levey of HSBC Holdings Plc and Georges Dirani of BNP Paribas SA, according to the people.

Through bank spokesmen, the general counsels and banks declined to comment.

Among the proposals put forward during this year’s meeting was a suggestion that all banks in a suit wait at least 60 days after the filing of a routine motion to dismiss the case before going their own way. Another was that any general counsel who wanted to enter into settlement talks consider giving his counterparts 48 hours’ notice so they wouldn’t be left scrambling.

The overnight gathering ended with a traditional group stroll outside. Then the lawyers went their separate ways, saying goodbye until next year’s meeting.

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NYSE and its stocks will sink to the bottom of the ocean if they were in a shipping container


Many people think that the stock markets are the “indicators” and signs of whether the economy is healthy or otherwise. The mainstream media controlled by Wall Street and governments are always painting a rosy picture of the economy and placing the wool on people’s eyes.

As many (not that many actually) know the too-big-to-fail banks have failed, but because they are still seemingly conducting business as usual, most would think , “Oh its just a small hiccup” and are very confident that their governments are there ever-ready to protect their monies and assets. Anyway, that’s what an elected government is for right? Wrong!

The boneheads in the financial sector depend on the central bank$ to “regulate” the casinos and Ponzi schemes of the world’s banks and bursars. In every tight situation they would wait for the central ban$ter$’ solutions, eagerly with their fingers crossed hoping the sun shines again the next day for another bigger scoop, or a newer scheme to rob the masses. The picture is downright pathetically horrendous.


Once again, the rosy view on U.S. economy wilts

Federal Reserve bigwigs meet this week to debate when to raise a key short-term U.S. interest rate. The outcome, however, is not expected to be a cliff-hanger. Wall Street investors only see a 15% chance that the Fed will hike rates.

The final nail in the proverbial coffin may have come with a decline in retail sales and manufactured goods in August, reflecting persistent caution on the part of consumers and businesses. – Market Watch


Latest today…a real classic garbage from who else – The Financial Times

Stocks gain and the dollar drifts ahead of central bank meetings

Oil prices rise on talk of Opec deal to stabilise global production


For me, I look at the sea where I could see the ships. If the horizon is empty of freighters it simply means no cargo is moving. One cannot make up the data of the Export-import (Exim) business. No buying means no selling, no manufacturing means no trading, and its that simple to gauge the (real and true) economy.  The Baltic Dry Index figures dropped to its all-time low.

In trading Thursday, the benchmark Baltic Dry Index continued its fall with another record low at 298, its first value ever below three hundred points. Capesize and supramax day rates were down, while panamax vessels traded slightly higher. The worsening market is forcing an increased volume of vessel and enterprise sales, and, for well-positioned buyes, creating an opportunity to purchase at distressed-asset prices. – The Maritime Executive

The word economy has taken a turn from its original meaning and intention by Keynesian economists and what is apparent is its now only meant to measure the profits, wealth and assets of the 1 percent and has nothing to do with the 99 percent.

The reports of the shipping industry is terrifying news for the global economy. The horizon is empty and the shipping lanes are scarce if not empty of cargo ships.

The shipping industry is taking a beating.

As the Wall Street Journal reports, about 1,000 ships capable of hauling 52 million metric tons of cargo will be cut up and sold for scrap metal this year. Owners have only ordered 293 vessels this year through July — a stark decrease from 2010 to 2015 when owners were buying 1,450 ships annually.

The reason? A stagnant global economy that stems back to little growth in Europe and a slowdown in China. Chinese imports from the European Union fell 14% last year, the WSJ reports. In the first quarter of this year, Chinese imports from the EU fell 7% from a year prior. Exports to Europe have fallen as well. Continue reading

That sinking feeling for Hanjin as falling freight rates fuel a global shipping crisis

They just keep slitting each other’s throats with lower rates,” the  shipbroker says. His sense of desperation is common in the industry, but he still asks not to be named. Tomorrow he will be fixing deals for the same shipowners who have flooded the market with new vessels in recent years, driving shipping rates lower as the glut of unused vessels grows. – The Telegraph

China’s ports hit hard by global trade slowdown

In the first half of the year, Hong Kong handled 10 per cent fewer containers than during the same period in 2015 and is on course for its fifth consecutive year of declines. – FT

Look up the Internet for more reports of the dying sea-freight business, and you’d find its definitely not a sign of a healthy global economy, but the world’s economist will tell you differently and that’s because the economic profession is in a sad state

It is not an exaggeration to say the current reputation of economists is probably just below that of a used car salesman. The recent failures of economic policies to boost growth or employment have tarnished this image even more. This, however, is in sharp contrast to the past when economists were seen as the intellectual roadblock to popular misconceptions, bad ideas, or more importantly, government policies sold to the public on false assumptions. – Frank Hollenbeck

Hanjin to return chartered vessels

South Korean container line says it is losing $2m a day

Hanjin Shipping is to return all of its chartered vessels to their owners to cut costs, after the South Korean container line said it was losing $2m a day amid the logistics chaos prompted by its bankruptcy last month. – FT

If Wall Street and the world’s con-stock marketers, and their stocks are in shipping containers they would all sink to the bottom of the oceans…literally.

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The Veneer of Justice in a Kingdom of Crime


The veneer of justice is similarly happening in Malaysia, the kingdom of crime with the A-G’s handling of the 1MDB fraud and the RM2.6b found in PM Najib’s personal account.

The international bank$ter$, lead by Goldman Sachs (underwriter for 1MDB scams) control all the departments of justice of the world.


 

BestEvidence

If a country is to fall into totalitarian, the dictator must get control of the Department of Justice, the Police, and the Interior

bestevidence

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Summary.

The criminal global banking cartel has effected a coup d’etat in the U.S. This is why the same criminal financial elite that saw 1000 of its members go to prison 20 years ago (after the S&L crisis) is now above the law.

To date, the question of why the U.S. Department of Justice has failed to prosecute even one too-big-to-fail bank for the pervasive criminal frauds that drove the multi-trillion-dollar economic meltdown of 2008 has been answered pretty much with shrugs.

By far the most insightful answer was provided by Martin Smith’s breathtaking Untouchables episode, which PBS Frontline aired in January 2013. See http://www.pbs.org/wgbh/frontline/fil…

But even Smith’s answer—that the DOJ never truly investigated Wall Street crime due largely to the so-called collateral consequences doctrine—really explains how rather than why prosecutions have been scuttled.

In an effort to pick up where the Untouchables left off in early 2013, BestEvidence presents “The Veneer of Justice in a Kingdom of Crime.” In addition to analyzing events that have occurred since the Untouchables aired (including events caused by the Untouchables), and in an attempt to answer some of the deeply troubling issues raised by Martin Smith, “Veneer” examines certain implications the DOJ’s pronouncements, since late 2012, that the rule of law is effectively dead (having been supplanted by the management of oversized global banks).

What follows is a brief American legal history of the executive branch’s overthrow by criminal global banks, which is divided into four roughly chronological segments.

I. Background (March 2010 to December 2012)

Goldman Sachs’ legal defenses to fraud—and the DOJ’s adoption of those defenses—are summarized and exposed as false. The DOJ soon admits it refrains from prosecutions not based on any law, but on unspecified collateral effects that prosecutions allegedly would have.

II. Lessons From the Untouchables (January 2013)

Since it won’t prosecute Wall Street, the DOJ doesn’t even bother conducting investigations. The overriding factor is collateral consequences. Two potential sources for collateral consequences opinions emerge: government regulators and the very financial institutions that have been accused of crimes.

III. The DOJ’s Endless Lies to Conceal Its Master (February 2013 – April 2014)

The DOJ’s claim that government regulators provided opinions on collateral consequences is exposed as a lie. There never were any such regulators. Instead, the DOJ’s sources of collateral consequences opinions are—as the DOJ itself once admitted, before falsely backtracking—the very banks accused of crimes. The collateral consequences doctrine itself is next exposed as a sham, used by global banks to declare immunity from their own crimes—the act of a king.

IV. Presenting the True Sovereign Power in the Executive Branch

The one bank that’s on record as having gained access to a DOJ conference room—where, as the DOJ previously admitted, global banks asserted immunity from their own crimes—is revealed. The true chain of command in the DOJ is presented.

 

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This Week: Shut Down Wall Street, No More Suicides!


Larouche Pac

This Week: Shut Down Wall Street, No More Suicides!

With so-called “junk debt” markets plunging and experts warning of a “riot in the Wall Street casino” this week if the Federal Reserve raises rates, EIR Founding Editor Lyndon LaRouche made a very strong proposal yesterday; indeed, a demand on the elected representatives and citizens of the United States.

LaRouche said: “Close in on this and shut this Wall Street casino down, this week. Remember what is the effect on the people of this kind of crash. We cannot have more suicides, or any more of what happened in Italy last week.”

Italy is in an uproar since an Italian citizen committed suicide after an insolvent bank expropriated all his savings in an outrageous “bail-in” procedure, which also expropriated many others across four failing banks. This infamous “Cyprus-style” procedure has been repeatedly used in Europe as banks collapse, and more expropriations are coming. “People have been being murdered by their banking systems,” as LaRouche put it.

In the United States the sudden “junk debt collapse” is only a harbinger of a Wall Street collapse worse than 2008, with worse impacts on human livelihoods on a global scale.

LaRouche added:

“We cannot allow it to continue, you have worthless accounts, of so-called debt “assets” which are in collapse, and they’re being used to kill people’s income, their employment, potentially their food supply, and even to kill them. If you don’t shut down these Wall Street ‘funds,’ now, you will see what has just happened in Italy, on a grand scale.”I mean it is an ‘edge of death’ situation, if we don’t shut down those pretended assets. Close down the Wall Street system, bankrupt it as Franklin Roosevelt did during his Presidency.

“Then, countries have to create national credit for productivity and employment, again as Roosevelt did.”

It is Barack Obama who has blocked restoration of the Glass-Steagall Act, which is the key to bankrupting Wall Street and allowing productive credit to take effect on the economy.

The same Obama has brought in the “Paris climate agreement,” so-called, which — if it were to be carried out — would reduce the economy’s ability to support human life, by 80-90% in the next 35 years.

“This is a bold human genocide if allowed to occur,” LaRouche said. We can’t allow it to occur.

“That means closing out Wall Street — and that includes Donald Trump — and getting Obama out. Good people in both political parties can agree, to move the responsible authorities in Congress to get these objectives done.”

SUPPORTING MATERIAL

‘Riot in the Casino’ This Week?

That the was the forecast of former Reagan Administration budget official David Stockman, referring to the Federal Reserve’s apparent intention to raise interest rates — for the first time in 10 years — in the teeth of an accelerating junk-debt and commodity price collapse.

Junk debt (junk bonds and leveraged loans) in the U.S. economy, as a reminder, totals at least $2 trillion in “assets” mainly held by banks, although many mutual, pension, and hedge funds are also involved. The junk-debt market decline has become very sharp in December, with interest rates on middling (CCC-rated) junk bonds hitting 17.25% Dec. 10 and shooting upwards. This debt is essentially impossible to refinance. In recent weeks the ratings agencies and banks have charted a “spike” in defaults and bankruptcies of junk debtors — concentrated in oil and gas exploration and related services — and warned the “spike” will become a “wave” in January-February.

Now, two junk creditors have gone under. Two debt-invested funds have liquidated in the past few days. The first was actually a mutual fund: the $1.8 billion, “well-respected” Third Avenue Capital on Dec. 10. Its founder Martin Whitman is designated a “legendary vulture investor.” Just as that was being explained away (“it was investing in unrated debt”), the second went under on Dec. 11. It was Stone Lion Capital, a $2 billion hedge fund which was one of those investing in Puerto Rico distressed debt.

Some see a “Bear Stearns moment” — i.e., the bankruptcy of the two CLO-invested hedge funds in June 2007, which exposed the “non-containment” of the mortgage securities/derivatives meltdown. Vulture investor Carl Icahn gave a “keg of dynamite” interview on CNBC, saying “I believe the meltdown in High Yield is just beginning.”

The Wall Street Journal wrote Dec. 11, “The move is also a sign of how much the market for [all —ed.] corporate debt is deteriorating. “‘Investors have been dazzled that yields on bonds have climbed so high, even while default rates remained low,’ said … a longtime junk-bond analyst. ‘Currently, though, the ability to sell a large position is especially poor. When that tension gets especially high, you can see something snap.'”

The century-old British colonial looter Anglo American, which was making “energy-junk” loans on a large scale, is suddenly at the brink of junk itself, with Moody’s downgrading it Saturday to one step above junk for all its divisions and placing a negative advisory on all of them. Credit default spreads on both Anglo American and Glencore rate them at more than a 50% chance of default, requiring $1,000 cash up front to insure $10,000 of their debt.

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American Online Retailer Holds 3 Months Of Food, $10 Million In Gold For Employees In Preparation For The Next Collapse


Zero Hedge

overstock

Overstock CEO Patrick Byrne’s crusade against naked short sellers in particular, and Wall Street and the Federal Reserve in general, has long been known and thoroughly documented (most recently with his push to use blockchain technology to revolutionize the multi-trillion repo market).

But little did we know that Overstock’s Chairman Jonathan Johnson is as vocal an opponent of the fiat system, and Wall Street’s tendency to create bubble after bubble, if not more than Byrne himself.  That, and that his company actually puts its money where its gold-backed money is and in preparation for the next upcoming crash, has taken unprecedented steps to prepare for what comes next.

One week ago Johnson, who is also candidate for Utah governor, spoke at the United Precious Metals Association, or UPMA, which we first profiled a month ago, and which takes advantage of Utah’s special status allowing the it to use gold as legal tender, offering gold and silver-backed accounts. As a reminder, the UPMA takes Federal Reserve Notes (or paper dollars) which it then translates into golden dollars (or silver). The golden dollars are based off the $50 one ounce gold coins produced by the Treasury of The United States. They are legal tender under the law and are protected as such.

What did Johnson tell the UPMA? Here are some choice quotes:

We are not big fans of Wall Street and we don’t trust them. We foresaw the financial crisis, we fought against the financial crisis that happened in 2008; we don’t trust the banks still and we foresee that with QE3, and QE4 and QE n that at some point there is going to be another significant financial crisis.

So what do we do as a business so that we would be prepared when that happens. One thing that we do that is fairly unique: we have about $10 million in gold, mostly the small button-sized coins, that we keep outside of the banking system. We expect that when there is a financial crisis there will be a banking holiday. I don’t know if it will be 2 days, or 2 weeks, or 2 months. We have $10 million in gold and silver in denominations small enough that we can use for payroll. We want to be able to keep our employees paid, safe and our site up and running during a financial crisis.

We also happen to have three months of food supply for every employee that we can live on.

The contents of the rest of his speech are largely familiar to advocates of sound money: fiat paper has no value, solid gold – as both a currency and an asset – has tremendous value but is difficult to transport (and since a systemic collapse would certainly involve gold confiscation, portability would be an issue); gold-backed money may be the best option, and so on.

We are confident the echo-chamber of worthless econohacks and macrotourists, the same ones who were absolutely certain the great financial crisis will never happen, will be quick to mock “prepper” Johnson and Wall Street pariah Overstock. And they have every right to do so. We only hope that after the next crash, with central banks all in and when calls for another global bailout hit a fever pitch, that all those pundits who made fun of the Johnsons of the world, will keep their damn mouth shut.

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LaRouche Mobilizes to Shut Down Wall Street, As Bankers Shriek: “The System Is Cracking”


LaRouche Pac

Statue of Liberty

As you read this report, a strong delegation of LaRouche PAC organizers from New York City—seasoned veterans of Lyndon LaRouche’s “Manhattan Project”—has arrived in Washington, D.C. to head up a day of organizing and lobbying on Capitol Hill on Oct. 7, to urge key responsible Congressmen and Senators to act at once to shut down Wall Street, and implement Glass-Steagall. As LPAC’s 7-point statement, “For Urgent Attention of Congressmen, Senators and Other Members of the U.S. Government” specifies: “There is now an acute emergency which threatens to kill millions of Americans, primarily, and also citizens of other countries,” which requires action now, this week.

Panic among Wall Street and City of London bankers is evident just barely below the surface. The lead article in the Oct. 3-9 edition of the Economist, the banner publication for City of London financial interests, warns that “the system is cracking,” and calls for a massive effort to backstop the bubble with new waves of quantitative easing—exactly as Lyndon LaRouche has warned is their intention. Similarly, Forbes magazine frets that “there are over $600 trillion in OTC [over-the-counter] derivatives outstanding” on the books of the mega-banks (although the real number is probably twice that amount), which could blow the entire system apart, once a run begins. “For the likes of JP Morgan, Bank of America, Citigroup, Goldman Sachs and Morgan Stanley, these issues remain a topic of life or death.”

The British Empire is also panicked because their errand-boy Barack Obama is sinking, and sinking fast, both inside the United States and internationally. The impact of the United Nations General Assembly, and Russian President Putin’s bold actions in Syria, are rumbling around the planet, and people are waking up to the fact that a new international order is possible. They have watched as Putin took Obama to the cleaners in Syria, and not only survived to tell the story, but is going strong, while Obama is flailing about in frustration. The idea that “maybe we don’t have to suffer Obama any more; maybe we don’t need to submit to Wall Street and watch our nations die,” is a growing force across the planet.

This is a historic moment pregnant with potential, Helga Zepp-LaRouche has emphasized. It is a moment when we can not only sink Wall Street and reinstate Glass-Steagall, but also shift radically towards the policies of the World Land-Bridge and global reconstruction. The fact that leading scholars, think- tankers, and others in China have publicly endorsed the LaRouches’ Land-Bridge policy, that the second largest economy in the world has essentially adopted that policy, is of dramatic import globally. Now that the Chinese-language edition of EIR’s book “The New Silk Road Becomes the World Land-Bridge” has been published with such powerful endorsements, we will bring that message back home to the United States, with a large-run publication of the Special Report, priced for broad circulation across the country.

Lyndon LaRouche stated what is at stake, in his Oct. 5 weekly webcast with the LPAC Policy Committee:

“We can no longer tolerate the risk which is involved in the renewal of Wall Street’s conditions. And therefore, for that reason, we have to shut down Wall Street, in order to protect the people of the United States… We must take preemptive action. What we’ve done, and what I’ve pushed for, is to have an immediate decision, by relevant members of the Congress, to assemble and deal with the situation as such. That was, foreclose against Wall Street without letting them get a bail-0ut effort. Because the giving another option for bail-out to Wall Street would almost certainly ensure a great catastrophe of the people of the United States.””So therefore, we have to protect the population. We have to cancel Wall Street. And we have to proceed to restructure the organization of our employment for the intent of actually getting productive processes going into effect, essentially, a more exigent sort of requirement which Franklin Roosevelt did. But what Franklin Roosevelt suffered, and had to face and deal with, is minor compared to what this condition is of the United States right now.”

“But we have the means available, right at this critical point; we have the means internationally to create a solution for this problem.”


SUPPORTING MATERIAL

Wall Street Bankers Openly Discuss the Coming Crash: “The System Is Cracking”


As the LaRouche movement goes into high gear to shut down Wall Street and return to Glass-Steagall before a crash strikes, Wall Street and City of London bankers are now openly discussing the coming crash… and quietly panicking over how to handle it.

The lead article in the Oct. 3-9 edition of the Economist, the banner publication for City of London financial interests, warns that “the system is cracking,” and calls for an all-out effort to backstop the bubble with new waves of so-called quantitative easing—exactly as Lyndon LaRouche has warned is their intention. The article frets, however, that this hyperinflationary bailout policy may not work as it did in 2008, because the U.S. Congress might go instead for more regulation of the banks—although the article studiously avoids mentioning the feared words, “Glass-Steagall.”

A major problem today, the Economist writes, “is the lack of a backstop for the offshore dollar system if it faces a crisis. In 2008-09 the Fed reluctantly came to the rescue, acting as a lender of last resort by offering $1 trillion of dollar liquidity to foreign banks and central banks. The sums involved in a future crisis would be far higher. The offshore dollar world is almost twice as large as it was in 2007. By the 2020s, it could be as big as America’s banking industry. Since 2008-09, Congress has grown wary of the Fed’s emergency lending. Come the next crisis, the Fed’s plans to issue vast swap lines might meet regulatory or congressional resistance.”

The Economist article concludes: “There are things America can do to shoulder more responsibility–for instance, by setting up bigger emergency swap lines with more central banks. More likely is a splintering of the system, as other countries choose to insulate themselves from Fed decisions by embracing capital controls. The dollar has no peers. But the system that it anchors is cracking.”

Similarly, Forbes magazine’s Antoine Gara wrote on Oct. 2 about the danger of a new blowout, which unusually admits that the underlying problem is the gigantic pile of derivatives sitting on top of numerous nominal debt bubbles. Gara, in reviewing the current Glencore crisis, tries to whistle past the graveyard, arguing that “Glencore’s unraveling won’t turn into the next Lehman Brothers crisis.” He says that is because Glencore does not have the derivatives exposure that Lehman had.

But, he admits, “were Goldman Sachs, Morgan Stanley, or any other large investment bank to be thrown into Glencore’s current predicament, there would be good cause to worry about a Lehman 2.0. There are over $600 trillion in OTC derivatives outstanding [in actuality, there are probably double that amount–ed.], a greater number than prior to the crisis, and many of those contracts continue to trade bilaterally among banks, linking firms together.”

Gara concludes: “For the likes of JP Morgan, Bank of America, Citigroup, Goldman Sachs and Morgan Stanley, these issues remain a topic of life or death. Last quarter, each firm disclosed trillions, if not tens of trillions outstanding in OTC derivatives contracts. No amount of rising retained capital would
protect those firms if there were a messy Lehman-like bankruptcy.”


 

Latest

The First Crack: Deutsche Bank Preannounces Massive Loss, May Cut Dividend

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The BRIC Miracle Is A Fable Made By Central Banks And Told By Goldman


CONTRA CORNER

By John Morgan at NewsmaxFinance

credit bubble

There was never a miracle of capitalism that ignited the previously emerging BRIC nations – just a giant global credit bubble that is now rapidly deflating, according to David Stockman, former White House budget chief under President Regan.

He believes the Wall Street manipulators who got rich on the scam involving Brazil, Russia, India and China will soon have their comeuppance.

“The BRIC countries were actually economic cripples riven with socialist and statist policy afflictions that had the good fortune to hitch a ride on the central bank-fueled credit binge of the last two decades,” Stockman writes on his Contra Corner blog.

In Stockman’s view, the whole BRIC saga amounts to “pettifoggery” by the likes of Goldman Sachs and its ilk, which he said have been operating a “devil’s workshop” for the Federal Reserve and other central banks.

“After all, in the age of central bank-driven bubble finance the purpose of Wall Street and its equivalents elsewhere is to scalp profits from the expanding bubble, not to discover honest securities prices, allocate capital or transform real economic savings into productive long-term investments.”

Stockman suggests there is little chance the federal government will balance the nation’s budget, that the Fed’s zero interest rate policy that has wrecked consumer savings will be altered, that real Wall Street reform a la “super Glass-Steagall” will be enacted or that too-big-to-fail banks will be broken up. In his view, such steps would harm the false “economy” he believes has been concocted in Washington, D.C. and on Wall Street.

“In truth, it does not take a great deal of investigation to see that the red capitalists of China, the thieving oligarchs of Russia, the corrupt labor socialists of Brazil and the Fabian apparatchiks of India did virtually nothing during the last two decades to change policy direction or inaugurate free market policies that could unlock true growth and wealth,” he notes.

“Instead, they simply figured out that in a world economy driven by money printing central bankers at the Fed, ECB, BOE and BOJ — the only smart thing to do was join the party. So they commanded their central banks to operate their printing presses in overdrive mode, and this was highly convenient.”

Stockman says China’s colossal export machine was made possible because China’s central bank money printing presses ran amok and that unfettered debt expansion in the U.S. engineered by the Fed furthered the global bubble.

As for Russia, which Stockman describes as “a giant oil and gas patch and open mining pit,” he said its “prosperity was derived almost entirely from the global commodity bubbles fueled by the first round effects of massive money printing…….”

http://www.newsmax.com/Finance/Stockman-BRIC-bubble-credit/2015/01/04/id/616310/

Photo credit: wealthcycles.com

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