Comments on: Another Bad Day at Wall Street http://themoderatevoice.com/14600/another-bad-day-at-wall-street/ An Internet hub for moderates, centrists, and independents, with domestic and international news, analysis, original reporting, and popular features from the left, center, and right Mon, 23 Nov 2009 14:13:53 -0500 http://wordpress.org/?v=2.8.4 hourly 1 By: ChuckPrez http://themoderatevoice.com/14600/another-bad-day-at-wall-street/comment-page-1/#comment-95401 ChuckPrez Fri, 17 Aug 2007 12:19:17 +0000 http://themoderatevoice.com/general/14600/another-bad-day-at-wall-street/#comment-95401 This is a smaller symptom of a much, much, MUCH larger problem. Check this out: <a href='http://www.financialsense.com/editorials/weiss/2007/0813.html" rel="nofollow">(Clicky the Linky!)</a> <blockquote>In its latest survey, the Bank of International Settlements (BIS) calculates that the total "notional" value of all derivatives outstanding in the world is a mind-boggling $415 trillion. That's over eight times the GDP of the entire world economy … twenty times the total value of all U.S. stocks … and fifty times all the Treasury debts of the United States Government. The fear: That any unexpected disruption in this $415-trillion market could throw the world's financial markets into turmoil … bankrupt hundreds of hedge funds … wipe out the profits of big-name financial institutions … sabotage the investments of pension funds … and scramble the portfolios of millions of average investors.</blockquote> <blockquote>In 1998, the last time the derivatives market nearly blew up, there were "only" $80 trillion in derivatives outstanding worldwide, according to the BIS. That was already huge. But as I explained a moment ago, now the total derivatives outstanding has jumped to $415 trillion, or over FIVE times more! And just from 2005 to 2006, it surged by a whopping 39.5%, about TEN times faster than the growth in the global economy.</blockquote> <blockquote>the U.S. Government's Office of the Comptroller of the Currency (OCC) reports that, in the United States … Just FIVE banks control 97.1% of the derivatives in the entire U.S. banking system. Worse, among these five banks, none — not ONE — has the capital to cover its net credit risk, the primary measure the OCC uses to evaluate the risks these banks are taking in their derivatives trading. Back in 1998, at the time of the last debacle, JPMorgan Chase, the world's largest player in the derivatives market, had $3.80 in credit risk for each dollar of capital. That was already over the top, in my view. And now, the OCC reports that JPMorgan Chase has a whopping $7.99 in credit risk per dollar of capital, or more than double its 1998 risk level! HSBC, which was barely a player in the derivatives market back in 1998, now has $5.65 in credit risk per dollar of capital! Citibank: $2.03 per dollar of capital in 1998; $4.60 today. Bank of America: 90 cents on the dollar in 1998; $2.88 today. Wachovia: Just 18 cents on the dollar in 1998; $1.56 today. This means that … Even though Wachovia has the least exposure to derivatives among the top five, it is still extremely vulnerable — with more at stake than its entire capital. America's largest bank — Bank of America — is also embroiled up to its eyeballs, risking over FOUR times its capital. And the single largest player in the derivatives market - JPMorgan Chase - is taking the most risk of all: EIGHT times its entire capital, according to the OCC's data. </blockquote> This is a smaller symptom of a much, much, MUCH larger problem.

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