1800 Banks At Risk Failure From 4Q08 Data

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Nichoman's picture
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Joined: Nov 1 2008
Posts: 422
1800 Banks At Risk Failure From 4Q08 Data

Dr. Martin Weiss (Money And Markets) on 7 April states debt crisis is spreading and much worse.

Consider going to his post below for his reasoning...


Inclined to agree.

What do others think?



FireJack's picture
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Joined: Feb 8 2009
Posts: 156
Re: 1800 Banks At Risk Failure From 4Q08 Data

Isn't this really bad:

“Equally alarming,” writes Dr. Weiss, “is the fourth quarter OCC data
demonstrating that record bank losses are spreading to interest-rate
derivatives. Until now, bank derivatives losses have been limited
almost exclusively to credit defaults swaps (CDS), which represent only
7.8 percent of the notional value U.S. derivatives held by all U.S.
banks. In the fourth quarter, although the CDS losses continued at a
near-record pace, we also witnessed record losses in the interest-rate
sector, which represents 82 percent of the derivatives market: The
nation’s banks lost $3.4 billion in interest-rate derivatives, or more
than seven times their worst previous quarterly loss in this category.


I fear that this derivative market is the big monster that it appears to be. Given that it is worth some 1 quadrillion dollars couldn't losses here balloon to the hundreds of trillions? Is it possible that 1 day the banks could find themselves loosing trillions by the hour culminating in a sudden major crash? All the other stuff alone could cause a major crash but this derivative market says to me one day, without warning, everything could dissapear.

investorzzo's picture
Status: Diamond Member (Offline)
Joined: Nov 7 2008
Posts: 1182
Re: 1800 Banks At Risk Failure From 4Q08 Data

I think it looks real bad! Problem is the manipulation coming from the govenment and wall street, keeps the Enron ponzi scheme rolling along. There are dark pools of money from the Cartel, the world keeping the manipulation going. Just look at the tax payer being fleeced out of 1 trillion in bad mortgages and now banks like Wells Fargo have record profits! You can see just how bad the manipulation really is.  

Systemic Risks from Dark Liquidity in Dark Pools

and others, have long warned about the risks of darkly liquid OTC
Derivatives.  Consider Deepcaster’s “Laundry List” warning of February
29, 2008:

- - “In considering ‘dark liquidity,’
‘dark pools,’ ‘dark algorithms’ and such, Deepcaster’s initial reaction
was “what about the ‘Theology’ of the free and open and fair
marketplace with a level playing field” with which we are inculcated?”
And “what about the risks?” Don’t all these ‘dark vehicles’ greatly
increase the risks in the market?

- - And do
they not also provide manifold opportunities for The Cartel* to
implement Market Interventions without scrutiny? Consider:
- - It
is pretty clear that the ‘dark pool algorithms’, which are at the heart
of systems designed to trade large orders in liquid markets, enable
automated trading operations otherwise known as “program trading.” But
haven’t automated trading platforms played a big part in major company
and market meltdowns?
- - Isn’t an essential part of any investors’ sensible risk evaluation
a function of evaluating counterparty risk? That is, counterparty is
the party who takes the other side of any particular investment
transaction in which any of us is involved.  But the capacity to make
good on any such transaction is typically solely a function of
counterparty strength or weakness. In OTC dark liquidity transactions
there is typically no clearinghouse guarantee.  Suppose the
counterparty fails? And suppose the counterparty on any particular
investor transaction is at great risk because of its ‘dark book’
transactions with other ‘dark’ parties. Who would know, and how could
the risk be evaluated?
- - Indeed, we certainly have enough recent examples of Counterparty
Failure to cause concern. Consider Lehman Brothers and the Amaranth
Hedge Fund in recent months and Long-Term Capital Management in recent
years are only three examples of this.
- - And what about “Fundamental Fairness” and “Level Playing Fields” in The Markets? Equal
timely access to price information is essential to fairness to the
investing public, but “dark pools” and “dark transactions” in principle
limit such information to the privileged few
- - And what about “conflicts of interest?” One blogger wrote: But if a
bank sets up an (dark pool) exchange, some of the biggest traders on
the exchange will also be the bank’s biggest customers in other areas.
This is a massive conflict of interest situation. Remember what
happened in the 1990s when investment banks noticed that their equity
research divisions could be used as a marketing tool? Imagine using
execution speeds and pricing for the same purpose.
- - And what about lack of oversight?  Who is watching the watchers, if indeed there are any watchers?
- - And what about the potential for fraud?



pinecarr's picture
Status: Diamond Member (Offline)
Joined: Apr 13 2008
Posts: 2258
Re: 1800 Banks At Risk Failure From 4Q08 Data

I think it is becoming increasingly clear to more and more people that there's more than a little discrepancy (i.e., a chasm) between our country's and financial market's stated ideals and conduct of behavior, and the reality of their goals, motivation, and conduct of behavior.  Too bad it is  the naively responsible taxpayers, and our children, who are paying for it!

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