Fed Backstopping CDSs - You gotta be kidding me

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Davos's picture
Davos
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Fed Backstopping CDSs - You gotta be kidding me

Enter Cede & Co II; The Fed Is Now Backstopping $25 Trillion In DTCC Cleared Credit Default Swaps

And you thought the $23 trillion in backstops for the financial system was bad, you ain't seen nothing yet. Earlier today, the Depository Trust & Clearing Corporation, best known for its Cede & Co. partnership nominee which is the holder of virtually every single physical stock certificate in the known universe, and accounts for over $2 quadrillion in stock transactions per year, announced that "the Federal Reserve Board had approved its application to establish a DTCC subsidiary that is a member of the Federal Reserve System to operate the Trade Information Warehouse (Warehouse) for over the-counter (OTC) credit derivatives." With this approval the DTCC is now the de facto legally accepted global repository for over-the-counter credit derivative transactions. Simply said, the Federal Reserve is now the guarantor behind all CDS transactions that clear via DTCC, which would be pretty much all of them (sorry CME, you lose). The total bottom line in terms of gross notional? 2.3 million contracts with a gross notional value of $25.5 trillion. When the next AIG implodes, and the CDS market is once again facing annihilation in the face, who will be on the hook? You dear taxpayer, that's who.

 

The new Fed-endorsed organization will settle CDS obligations in all currencies and process credit events. It will also include all OTC credit derivatives traded worldwide, and will be regulated by the Fed and the NY State Banking Department and will be overseen by other US and International regulators.

 I'd laugh if the joke wasn't on us.

DaytonMegan's picture
DaytonMegan
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Re: Fed Backstopping CDSs - You gotta be kidding me

Is this more or less a coup -- a de facto takeover since they have us over the proverbial barrel? Tell me this isn't as scary as it sounds.

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JAG
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Re: Fed Backstopping CDSs - You gotta be kidding me

Maybe the Fed should backstop Las Vegas as well. In fact, lets just declare that no one can lose money in America ever again! 

I read this article a few hours ago and couldn't believe it. I can't imagine what Dr. M will have to say about this. The article is a little hard to follow, but I think it boils down to this:

Davos, its desperate crap like this that makes me think you will be very right in your beliefs one day soon.

Davos's picture
Davos
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Re: Fed Backstopping CDSs - You gotta be kidding me
JAG wrote:

Maybe the Fed should backstop Las Vegas as well. In fact, lets just declare that no one can lose money in America ever again! 

I read this article a few hours ago and couldn't believe it. I can't imagine what Dr. M will have to say about this. The article is a little hard to follow, but I think it boils down to this:

Davos, its desperate crap like this that makes me think you will be very right in your beliefs one day soon.

+1 & like Marc Faber says: As long as Mr. Bernanke is the Fed chairman I'm not selling my gold.

SagerXX's picture
SagerXX
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Re: Fed Backstopping CDSs - You gotta be kidding me
Davos wrote:

Enter Cede & Co II; The Fed Is Now Backstopping $25 Trillion In DTCC Cleared Credit Default Swaps

Simply said, the Federal Reserve is now the guarantor behind all CDS transactions that clear via DTCC, which would be pretty much all of them (sorry CME, you lose). The total bottom line in terms of gross notional? 2.3 million contracts with a gross notional value of $25.5 trillion. When the next AIG implodes, and the CDS market is once again facing annihilation in the face, who will be on the hook? You dear taxpayer, that's who.

But...butbutbut...[struggling w/magnitude of this]...  This wouldn't be looting.  It'd be...seppuku...  Somebody tell me there's another way to interpret this...

Viva -- Sager

Carl Veritas's picture
Carl Veritas
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Re: Fed Backstopping CDSs - You gotta be kidding me

 

JAG,     you put that very delicately

goes211's picture
goes211
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Re: Fed Backstopping CDSs - You gotta be kidding me

I wonder if you might be reading more into this than is really there.  I don't see anything (other than speculation) that says the FED is operating as a central clearer/counterparty for these transactions.  I would assume it is really just collecting this data so that the contracts can be standardized, risk managed, and eventually properly listed on an exchange.

If I am wrong, and the FED has agreed to backstop OTC CDS contracts, armageddon is near.

DrKrbyLuv's picture
DrKrbyLuv
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Re: Fed Backstopping CDSs - You gotta be kidding me

DaytonMegan wrote:

Is this more or less a coup -- a de facto takeover since they have us over the proverbial barrel?

Actually the coup took place in 1913 this is just the open looting of the people as they move towards the end game.  Our economy is being destroyed so that we cannot make it as an independent nation state.  The "back-stop" they are planning for us will be tyrannical global governance by the Nazis at the BIS.

The wall street banks are hitting us from two directions.  First, they are moving all risk to us so that they may gamble without restraint.  Now, Citi is figuring out how to make our demise a big payday:

Citi plans crisis derivatives

Credit specialists at Citi are considering launching the first derivatives intended to pay out in the event of a financial crisis. The firm has drawn up plans for a tradable liquidity index, known as the CLX, on which products could be structured that allow buyers to hedge a spike in funding costs.

However, there is concern from academic circles that the counterparty risks involved in such a product could create moral hazard. Chris Rogers, chair of statistical science at Cambridge University, said the only participants able to sell CLX-based products would probably be those who are too big to fail.

"This is basically a kind of insurance product. The main issue is: how good is the party issuing it? If it's going to be paying out huge numbers in the event of a crisis, will it be able to meet it obligations? Insurers can buy reinsurance for their liabilities, but the buck has to stop somewhere – there's a limit to how much a private insurer can pay out. Only the government can cover unlimited losses," he says.

Let me remind you who Citibank is in case you forgot.  In 1997, the all powerful New York Federal Reserve reported that it's three largest member banks were Chase Manhattan Bank, Citibank and Morgan Guaranty Trust Company.  The House of Morgan (Morgan Guaranty Trust Company) and the Rockefeller family (Chase Manhattan Bank) merged to become the J.P. Morgan Chase Company. 

We know from history that J.P. Morgan and Rockefeller started as agents for the House of Rothschild.  People were amazed to find that upon J.P. Morgans death, he wasn't as rich as presumed - in fact, most (over 60%) of his legendary bank was actually owned by the Rothschild's.

This is important to note as the New York Fed runs our monetary system, the Whitehouse and Congress.  We are witnessing the biggest criminal conspiracy in history. 

Larry

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