THE DERIVATIVES MARKET IS BEGINNING TO CRACK

Here is just a small sampling of a non bank entity taking a huge loss on a derivatives position. On Friday Metlife reported profit down 21%.The loss amounted to 593 million on derivatives that went the wrong way. Reuters is reporting that the

 top 5 American banks have a 200 trillion dollar exposure offshore

that they parked in 2014.This very morning,the Canadian papers are reporting that the 6 biggest banks carry over 100 billion of gross credit exposure to the oil and gas sector and defaults may ensue. Now might be the time to get some money out of the bank…

How Wall Street got around derivatives rules imposed by the CFTC after the financial crisis

The lobbying blitz helped win a ruling from the CFTC that left U.S. banks’ overseas operations largely outside the jurisdiction of U.S. regulators. After that rule passed, U.S. banks simply shipped more trades overseas. By December of 2014, certain U.S. swaps markets had seen 95 percent of their trading volume disappear in less than two years.

While many swaps trades are now booked abroad, some people in the markets believe the risk remains firmly on U.S. shores. They say the big American banks are still on the hook for swaps they’re parking offshore with subsidiaries.


This worries some regulators, who fear that Washington, in turn, will be on the hook for another bailout if these “too big to fail” banks are hit by a fresh shock – such as a rash of defaults in a recession.

“These are the shadows that do you in during a crisis, when there is almost always that link back to the core money center banks at home,” said Simon Johnson, an adviser to the Federal Deposit Insurance Corporation, which regulates government insured banks, and a former chief economist at the IMF.

by INVESTMENT WATCH | AUGUST 24, 2015