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Thanks for the background.  It is difficult for those of us without experience in that industry to evaluate the consequences of proposed actions.  Same for Congress.  Thanks also for the link to the Jessie's Cafe article on default swaps.  $54 trillion in bets!  Any sense how badly which firms will be hurt.  It is trying to finance the unwinding of default swaps that I find most inappropriate for the US Government to underwrite.  I cannot see how the taxpayer gets any value for such expenditures.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Oct 3rd, 2008 at 03:39:24 PM EST
[ Parent ]
Allow me to set your hair afire.


OCC Q1 Report on Bank Derivatives Activities (pdf). Click to enlarge. The pdf is rather instructive. Take a peek. Maturity of these contracts range 2 mo - 5 years.

Notice Wells Fargo-Wachovia combined exposure is tiny be comparison (< 1%) to the top 3 "core banks." That's good and bad headline news. On one hand, derivatives trading was 4% of Wachovia gross Q1 and trending higher Q2. On the other, combined, the merger may be insufficiently capitalized to settle. Could be their positions net zero, everyone goes home relieved though.

Migeru posted an article here about notional value.

Diversity is the key to economic and political evolution.

by Cat on Fri Oct 3rd, 2008 at 05:28:42 PM EST
[ Parent ]
sems to be a party to every single derivative deal on the planet... Did anyone say 'too big to fail'??

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Fri Oct 3rd, 2008 at 05:44:51 PM EST
[ Parent ]
how about you get a 700 billion cash injection from the government, and it turns out the financiers have already been playing pass the parcel wit the debt, and somebody is getting cast loose with the debt while the other banks run off with the cash.

Any idiot can face a crisis - it's day to day living that wears you out.
by ceebs (ceebs (at) eurotrib (dot) com) on Fri Oct 3rd, 2008 at 05:48:06 PM EST
[ Parent ]
Didn't they invent CDSs?

A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith
by Migeru (migeru at eurotrib dot com) on Fri Oct 3rd, 2008 at 05:59:05 PM EST
[ Parent ]
here for pdf file.

A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith
by Migeru (migeru at eurotrib dot com) on Fri Oct 3rd, 2008 at 06:04:03 PM EST
[ Parent ]
While bank supervisors normally have concerns about market or product concentrations, there are three important mitigating factors with respect to derivatives activities.  First, there are a number of other providers of derivatives products, such as investment banks and foreign banks, whose activity is not reflected in the data in this report.  Second, because the highly specialized business of structuring, trading, and managing derivatives transactions requires sophisticated tools and expertise, derivatives activity is appropriately concentrated in those institutions that have made the resource commitment to be able to operate this business in a safe and sound manner.  Third, the OCC has examiners on-site at the largest banks to continuously evaluate the credit, market, operation, reputation and compliance risks of derivatives activities.
[Drew's WHEEEEE™ Technology]

A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith
by Migeru (migeru at eurotrib dot com) on Fri Oct 3rd, 2008 at 06:06:59 PM EST
[ Parent ]

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