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Thread: The Big Banks & Derivatives

  1. #1
    Senior Member Gerry Clinchy's Avatar
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    Default The Big Banks & Derivatives

    http://www.nytimes.com/2010/12/12/bu...adlines&emc=a2

    This is a very long article, but worth reading. It shows that we have not progressed a whole lot from the situation that led to banks "too big to fail".

    I'll just give you the opening paragraphs to give you an idea.

    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.

    Drawn from giants like JPMorgan Chase, Goldman Sachs and Morgan Stanley, the bankers form a powerful committee that helps oversee trading in derivatives, instruments which, like insurance, are used to hedge risk.

    In theory, this group exists to safeguard the integrity of the multitrillion-dollar market. In practice, it also defends the dominance of the big banks.

    The banks in this group, which is affiliated with a new derivatives clearinghouse, have fought to block other banks from entering the market, and they are also trying to thwart efforts to make full information on prices and fees freely available.

    Banks’ influence over this market, and over clearinghouses like the one this select group advises, has costly implications for businesses large and small, like Dan Singer’s home heating-oil company in Westchester County, north of New York City.

    This fall, many of Mr. Singer’s customers purchased fixed-rate plans to lock in winter heating oil at around $3 a gallon. While that price was above the prevailing $2.80 a gallon then, the contracts will protect homeowners if bitterly cold weather pushes the price higher.

    But Mr. Singer wonders if his company, Robison Oil, should be getting a better deal. He uses derivatives like swaps and options to create his fixed plans. But he has no idea how much lower his prices — and his customers’ prices — could be, he says, because banks don’t disclose fees associated with the derivatives.

    “At the end of the day, I don’t know if I got a fair price, or what they’re charging me,” Mr. Singer said.
    G.Clinchy@gmail.com
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  2. #2
    Senior Member Goose's Avatar
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    And incoming House Banking Committee Chairman Spencer Bachus recently said that "Washington's role is to serve the banks." What a douchebag. Washington's role should be to prosecute the banksters (and the keynesians) and throw their sorry asses in jail.

    Here's hoping that WikiLeak's promised data dump in early 2011 comes true.

    We live in Cuba now.

  3. #3
    Senior Member Buzz's Avatar
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    Quote Originally Posted by Goose View Post
    And incoming House Banking Committee Chairman Spencer Bachus recently said that "Washington's role is to serve the banks." What a douchebag. Washington's role should be to prosecute the banksters (and the keynesians) and throw their sorry asses in jail.

    Here's hoping that WikiLeak's promised data dump in early 2011 comes true.

    We live in Cuba now.
    Oh my. Hades is surely freezing over now. I was going to post up on that comment yesterday but was short on time after a week of nothing but dog training.


    I started reading this article yesterday that Gerry posted. I have to finish it today. From what I'm getting from it so far, no one knows what the hedgers are paying or what the commodities are selling for, so a few banks have a corner on this market and what they are skimming off the top is a big secret.

    Maybe a lot of regulations are ineffective or counterproductive, but the idea that congress and the regulators are there to serve the banks is absurd. I thought they were supposed to be working for me and you.
    "For everyone to whom much is given, of him shall much be required." -- Luke 12:48

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    Quote Originally Posted by Buzz View Post
    Oh my. Hades is surely freezing over now. I was going to post up on that comment yesterday but was short on time after a week of nothing but dog training.


    I started reading this article yesterday that Gerry posted. I have to finish it today. From what I'm getting from it so far, no one knows what the hedgers are paying or what the commodities are selling for, so a few banks have a corner on this market and what they are skimming off the top is a big secret.

    Maybe a lot of regulations are ineffective or counterproductive, but the idea that congress and the regulators are there to serve the banks is absurd. I thought they were supposed to be working for me and you.
    It's U & me!

    IMO, most bills regardless of party, are placed in the hopper with an eye on the potential for contributions to the author. The FinReg's (Dodd-Frank) were an example of that . Lots of hyperbole, little accomplished .

    Haven't read the article yet, don't have a week of laying in the sun doing a little doggy stuff as an excuse , but will. Gerry always puts good stuff in the hopper .
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  5. #5
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    This arctic blast has apparently gone as far south as hell, because for the first time I agree 100% with Goose {and Marvin too}

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    Quote Originally Posted by Goose View Post
    And incoming House Banking Committee Chairman Spencer Bachus recently said that "Washington's role is to serve the banks." What a douchebag. Washington's role should be to prosecute the banksters (and the keynesians) and throw their sorry asses in jail.

    Here's hoping that WikiLeak's promised data dump in early 2011 comes true.

    We live in Cuba now.
    You had my attention and support until the remark about "keynesians". What the heck does that have to do with Banks trading in derivitives?????

  7. #7
    Senior Member Goose's Avatar
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    Quote Originally Posted by depittydawg View Post
    You had my attention and support until the remark about "keynesians". What the heck does that have to do with Banks trading in derivitives?????
    I was going to make a comment about Jeffrey Dahmer and if he were alive today he'd probably be a keynesian but that might be a little over the top.

    We live in Cuba now.

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