Big Banks Manipulated $21 Trillion Dollar Market for Credit Default Swaps (and Every Other Market)

Derivatives Are Manipulated Runaway derivatives – especially credit default swaps (CDS) – were one of the main causes of the 2008 financial crisis. Congress never fixed the problem, and actually made it worse.
The big banks have long manipulated derivatives … a $1,200 Trillion Dollar market.
Indeed, many trillions of dollars of derivatives are being manipulated in the exact same same way that interest rates are fixed (see below) … through gamed self-reporting.
Reuters noted last week:
A Manhattan federal judge said on Thursday that investors may pursue a lawsuit accusing 12 major banks of violating antitrust law by fixing prices and restraining competition in the roughly $21 trillion market for credit default swaps.
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‘The complaint provides a chronology of behavior that would probably not result from chance, coincidence, independent responses to common stimuli, or mere interdependence,’ [Judge] Cote said.
The defendants include Bank of America Corp, Barclays Plc, BNP Paribas SA, Citigroup Inc , Credit Suisse Group AG, Deutsche Bank AG , Goldman Sachs Group Inc, HSBC Holdings Plc , JPMorgan Chase & Co, Morgan Stanley, Royal Bank of Scotland Group Plc and UBS AG.
Other defendants are the International Swaps and Derivatives Association and Markit Ltd, which provides credit derivative pricing services.
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U. S. and European regulators have probed potential anticompetitive activity in CDS. In July 2013, the European Commission accused many of the defendants of colluding to block new CDS exchanges from entering the market.
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‘The financial crisis hardly explains the alleged secret meetings and coordinated actions,’ the judge wrote. ‘Nor does it explain why ISDA and Markit simultaneously reversed course.’

This post was published at Washingtons Blog on September 9, 2014.

Senate Hearing Today: Six Years After Wall Street Collapse, Banks Are Still Untamed

This month marks the six-year anniversary of the financial collapse of some of Wall Street’s most iconic names. As this New York Post cover of September 20, 2008 memorializes, rapper Sean Combs (P. Diddy) was stepping in dog excrement while the taxpayer was being dragged into something just as smelly – a government bank bailout that would grow to hundreds of billions in on-the-record cash infusions and $16 trillion in secret below-market-rate loans from the Fed.
Now it’s September 2014. Six years of crisis studies, hearings, reform legislation, rule-writing, stress tests, living wills, new bank scandals and no jail time for top dogs have darkened the public mood further about both Wall Street and the ability of Congress to meaningfully reform it.
The Senate Banking Committee is hauling all six regulators of Wall Street before it today to take the pulse on where reform has failed and where it’s working. (The fact that Wall Street still needs six regulators is your quick answer that these mega banks remain too big, too complex, and still too dangerous.)
Daniel K. Tarullo, a Governor at the Federal Reserve, will attempt to reassure the Senate panel that they have things under control with testimony that the Fed will be imposing capital surcharges on the most Global Systemically Important Banks or GSIBs.

This post was published at Wall Street On Parade By Pam Martens and Russ Marte.

Goldman Warns “Something Has To Give” On Tax Inversions

Treasury Secretary Lew’s comments on tax reform yesterday indicate that in the absence of legislative activity to address the expatriation of US-based companies, the Treasury will lay out its own plans “in the very near future.” Goldman interprets this to mean an announcement in the next couple of weeks. While the substance of the Treasury’s forthcoming announcement is still unknown, Lew’s comments seemed consistent with Jan Hatzius’ expectation that the steps the Treasury will announce will be incremental and not enough to fundamentally alter the outlook for these transactions.
Via Goldman Sachs’ Jan Hatzius,
Tax-focused activity in Congress is also likely to pick up. Legislation is expected to be introduced in the House and Senate in coming days to reduce the economic incentives for companies to move their tax domiciles. While a vote in the Senate is possible over the next couple of weeks, we continue to believe enactment of legislation on the issue is very unlikely prior to the election. In the “lame duck” session of Congress following the election in November/December, Congress looks likely to pass legislation renewing expiring or expired corporate tax provisions; those bills do not address inversions, but it would not surprise us to see some lawmakers try to raise the issue again in that context. More generally, we continue to hold the view that “something has to give” regarding corporate tax policy. The less the Treasury is able to address inversions through regulation this year, the more pressure will grow on Congress to address next year. Many lawmakers have said they prefer to address the issue as part of broader tax reform, and next year they will presumably have to at least try to do so. There are plenty of reasons that corporate tax reform legislation might not be enacted in the next two years, but the list of reasons it might be enacted does seem to be growing.

This post was published at Zero Hedge on 09/09/2014.

More Lost IRS E-Mails. The IRS Tells Congress: ‘Go Fish.

Congress is impotent.
The IRS knows Congress is impotent.
The IRS can safely thumb its nose at Congress in full public view.
Everyone knows the IRS did illegal things when it refused to grant the privilege of tax exemption to conservative groups. ‘Go fish.’ Everyone knows the IRS destroyed the incriminating e-mails. ‘Go fish.’ Everyone knows the IRS is lying when it blames a hard disk crash. ‘Go fish.’ Everyone knows Boehner & Co. has only one response with teeth: to cut the IRS’s budget next year in retaliation. Everyone knows that Congress dares not cut one agency’s budget, above all government agencies: the IRS’s. ‘Go fish.’
I suppose I should be outraged. ‘The arrogance of these people!’ But why get upset this late in the history of the American welfare-warfare state? This is nothing new. It goes back to – in round numbers – 1789. Executive agencies have done their best to thwart Congress since the beginning. It just gets worse over time.
Congress has two meaningful powers over the other branches of the federal government. It refuses to use either of them. First, it has the power of the purse. It can refuse to fund any agency at any time for any reason. It can, in short, shrink the power of the President. It never doers this. To do this would mean shrinking the federal government. It absolutely will not tolerate such a suggestion.
The other power is to lock the Supreme Court in a box. It can withdraw the Court’s jurisdiction on any judicial issue except those enumerated by the Constitution. The Constitution is clear.

This post was published at Tea Party Economist on September 6, 2014.

New bill: Congress engineering yet another financial crisis

September 5, 2014 Santiago, Chile
Say hello to the next financial crisis, brought to you courtesy of the dumbest new bill of the week: H. R. 5148: Access to Affordable Mortgages Act.
Ordinarily whenever an individual wants to borrow money for a mortgage, the bank conducts due diligence… both on the borrower as well as the property.
It’s in the banks’ interest (as well as the banks’ depositors) to ensure that the property is at least worth as much as the amount being borrowed. Duh.
Congress doesn’t agree. Apparently when banks conduct property appraisals, that seems to unfairly discriminate against some segment of the population trying to buy crap properties.

This post was published at Sovereign Man on September 5, 2014.

QE3’s Ominous End Looms

The Federal Reserve’s third quantitative-easing campaign is on track to wind down in late October. At that point the Fed will likely stop printing new money to buy bonds, a sea-change shift with ominous implications for the stock markets. Their entire surreal levitation during QE3 mirrored the huge growth in the Fed’s balance sheet from QE3′s bond monetizations. When they cease, another major selloff is likely.
QE3′s impact on the global financial markets has been vast beyond belief. The Fed launched QE3 in September 2012, just before the important United States elections. This goosed the US stock markets in that critical final couple months ahead of the elections, right when they were on the verge of selling off dramatically. Odds are very high that the Fed’s brazen market manipulation gave the election to Obama.
In the 28 presidential elections since 1900 prior to that 2012 one, the stock markets rallied in September and October 16 times. The incumbent party won 15 of those elections! And during the 12 times when the stock markets fell in September and October, the incumbent party lost 10. The Fed choosing to launch a stock-market-boosting QE campaign in those pre-election months forced stock markets higher.
If the S&P 500 (SPX) had dropped as it was set to do in September and October 2012, Obama would’ve almost certainly been a one-term president. The Fed’s colossal market and political manipulation was no accident. Since QE2, Republican lawmakers had been highly critical of the Fed’s money printing to buy bonds. The low interest rates that spawned enabled Obama’s record debt-fueled spending binge.
Since the Fed faced serious challenges to its independence all the way up to its very existence from a Republican president and Congress, it massively intervened in the markets to sway an election. And QE3 just got worse from there. The Fed expanded it to include direct monetizations of US Treasuries a few months later in December 2012. That forced rates lower, farther fueling Obama’s epic deficit spending.
QE3 was far different from QE1 and QE2, which were finite from their births. QE3 was the Fed’s first open-endeddebt-monetization campaign, with no prescribed limits. This potentially unlimited scope of QE3 helped create an exceedingly unfortunate side effect in the stock markets. Since QE3 had no defined end, stock traders figured it would be around to backstop stock markets more or less indefinitely.
Led by uber-inflationist Ben Bernanke, the Fed’s dovish communications fanned this popular belief among traders. Over and over during QE3 the Fed implied that it was ready to act, in effect to increase the scale of QE3′s monthly money printing to buy bonds, if the stock markets slid. This incessant Fed jawboning left stock traders utterly fearless, as they figured the Fed would arrest any major stock-market selloff.
So every dip was quickly bought, leading to the stock markets soaring. The SPX blasted 29.6% higher in 2013, the only full year of QE3! And this flagship index is up 39.5% since QE3′s birth. And it wasn’t like the stock markets were low before the Fed hatched its QE3 scheme. As of the day before, the SPX had powered 112.3% higher over 42 months in a very large cyclical bull. Stock markets were already lofty.

This post was published at ZEAL LLC on September 5, 2014.

The 60 Day Countdown Begins, Will This Lead To The False Flag Event? – Episode 457

The following video was published by X22Report on Sep 2, 2014
The manufacturing around the world starts to decline, meanwhile the US manufacturing is improving. Gold has been pushed down once again to give the illusion that the dollar and economy are strong. US Senator wants to take passports away from US fighters who fight in Syria. Ebola is hurting the economies of West Africa and pushing food prices higher. NATO soldiers reported fighting in Ukraine. Libya tribes have now taken over government buildings. Obama notifies congress of strikes in Armeli Iraq, this gives Obama 60 days to use military assets in the region. Afterwards he will need approval from congress, this time frame brings us to Oct-Nov. Islamic State has reportedly beheaded Sotloff in a new video. This is just another event to push the main event.

I Didn’t Believe the IRS Anyway

Lois Lerner’s emails are back from the dead – sort of. The former IRS official’s BlackBerry, however, is still long gone. The IRS intentionally destroyed it in June 2012 (after congressional staffers interviewed Lerner about the IRS targeting conservative groups) as the Deputy Assistant Chief Counsel acknowledged in a recent sworn declaration.
We’ve all met someone we just don’t trust but don’t know why. There’s often a pretty good reason to feel that way.
Has someone ever made an insincere attempt to flatter you? Their words might be complimentary, but their body language, tone, and/or context let you know the compliment is phony. Does this guy really think I’m that stupid?
So, up goes your trust wall. If he’ll lie about this, he’ll lie about anything.
The IRS debacle is a prime example of why we build trust walls. The emails Congress requested had (supposedly) been deleted when several hard drives crashed. I asked my colleague Alex Daley (our in-house technology guru) what the probability was of that happening. Here’s what he had to say:
Everyone who ever owned a computer knows that hard drives are finicky beasts. In fact, Google uses a LOT of hard drives and so they have published all kinds of research on their failure rates. The gist: there’s about a 1 in 36 chance a hard drive fails in any given month. The math says then that if the IRS was practicing good data center management practices – we have to assume, however silly it might seem, that the agency responsible for holding the most personal information on American citizens outside the NSA is following best practices – then the chance of seven hard drives failing at the same time and wiping out the data on them is about 1 in 78 billion.

This post was published at GoldSeek on 2 September 2014.

Bloomberg Reports on Ruin in Hong Kong But Leaves Out the Larger Picture

To Save the Rich, China Ruins Hong Kong … When they meet on Sunday, legislators from China’s rubber-stamp National People’s Congress are expected to disregard even the most moderate proposals to open up Hong Kong’s political system. In all likelihood the decision will provoke street protests, drive moderates into the more radical pro-democracy camp and call into question the former British colony’s standing as a global financial center and bastion of free enterprise. And for what? The good of Hong Kong, of course. – Bloomberg
Dominant Social Theme: Capitalism creates prosperity, but the Chinese don’t understand.
Free-Market Analysis: What’s going on in China and Hong Kong is ironic because it seems to mimic much that has held the West back in modern times. In fact, much that China suffers from at its current level of development corresponds to a similar evolution in the West.
Bloomberg resolutely avoids making the comparison – though in our view, this article would have provided a perfect opportunity. Instead, Bloomberg tries to treat Chinese authoritarianism as an Asian problem.
Here’s more:
Wang Zhenmin, a Chinese law professor who sat on the committee overseeing Hong Kong’s constitution, laid out the case most blatantly on Thursday, when he told journalists that the interests of the city’s powerful tycoons had to be safeguarded from unchecked democracy.
“If we just ignore their interest, Hong Kong capitalism will stop,” he said. “Democracy is a political matter and it is also an economic matter.”

This post was published at The Daily Bell on September 02, 2014.

Franklin Roosevelt: On Labor, Wages, and Confidence

“After many requests on my part the Congress passed a Fair Labor Standards Act, what we call the Wages and Hours Bill. That Act –applying to products in interstate commerce — ends child labor, sets a floor below wages, and a ceiling over hours of labor.
Except perhaps for the Social Security Act, it is the most far-reaching, the most far-sighted program for the benefit of workers ever adopted here or in any other country. Without question it starts us toward a better standard of living and increases purchasing power to buy the products of farm and factory.
Do not let any calamity-howling executive with an income of $1,000.00 a day, who has been turning his employees over to the Government relief rolls in order to preserve his company’s undistributed reserves, tell you — using his stockholders’ money to pay the postage for his personal opinions — tell you that a wage of $11.00 a week is going to have a disastrous effect on all American industry.
Fortunately for business as a whole, and therefore for the Nation, that type of executive is a rarity with whom most business executives most heartily disagree…
Some of my opponents and some of my associates have considered that I have a mistakenly sentimental judgment as to the tenacity of purpose and the general level of intelligence of the American people.

This post was published at Jesses Crossroads Cafe on 01 SEPTEMBER 2014.

CBO “Revises” Its 2014 GDP Forecast, Hilarity Ensues (As Always)

The gross, in fact epic, incompetence of the Congressional Budget Office when it comes to doing its onlyjob, forecasting the future state of the US economy, has previously been extensively documented here (andhere and here and here). This incompetence is in the spotlight once again this morning with the CBO’s release of its latest forecast revision of its original February 2014 projection.
And while every aspect of the revised projection has changed, in an adverse direction of course, the punchline is the chart below: the CBO’s revised projection for 2014 GDP. It’s one of those “no comment necessary” visuals.

This post was published at Zero Hedge on 08/27/2014.

Ron Paul and Mark Spitznagel Talk Freedom, Farming, and the Fed

Ron Paul and Mark Spitznagel share a passion for non-interventionism, free markets, and Austrian economics. Congressman Paul served many years as a U. S. Representative from Texas, spanning 1976 to 2013, and was a Republican presidential candidate in 2008 and 2012. He has written extensively on liberty and politics, including The Revolution: A Manifesto and End the Fed. Spitznagel is the founder of Universa Investments, an investment advisor that specializes in tail-hedging, and is the author of The Dao of Capital, for which Paul wrote the Foreword. The two friends sat down recently to discuss topics ranging from the liberty movement and agricultural policy, to the consequences of Federal Reserve monetary policy. Here is a transcript of their conversation:Mark Spitznagel: Ron, you have been the galvanizing force of a resurgent liberty movement in the United States. Yet, we find ourselves in this world where interventionism is on the rise, and much of America remains complacent about it. For instance, I think we would agree that today’s crony-capitalism and monetary-interventionism by central banks is at an unprecedented scale that will once again leave destruction in its wake. Why is America letting this happen, and moving away from its Jeffersonian ideals? Moreover, I have to ask you, has the liberty movement stalled, or even failed?Ron Paul: Mark, on the surface and in Washington it may appear that interventionism is on the rise but in reality it’s on the defensive, more so than ever. Indeed there is a lot of complacency as that is frequently the rule for the majority of people regardless of the system. Where there is little complacency is with the intellectual leaders now leading the charge against the foreign and economic interventionists who have been in charge for decades and created the major crisis that we face today. It’s never easy politically to turn off bad policies and many times we have to wait until the policies self-destruct. The philosophy of non-intervention is growing significantly and that is crucial since ideas do have consequences. The obvious failure of the current system, and the current intellectual leaders of the younger generation who are more favorably inclined toward non-intervention, provide the encouragement we need to clean up the mess. During my presidential campaigns, I was always quite pleased when students held up signs saying: ‘You cured my apathy.”A question for you, Mark: I know you and a very few others like Jimmy Rogers know about authentic non-intervention in the economy, but what are Wall Street traders and investors like? Are they helpful in exposing crony-capitalism or are they part of the problem?
Mark: Unfortunately, Wall Street can’t help but respond to monetary intervention, like puppets to the Federal Reserve puppet master. Not only has the Fed turned just about every investor into a crazed gambler desperate for any yield above today’s artificially low interest rates, for professional investors the desperation is compounded by the career risk associated with underperforming in the very next period. If you’re fired for not having played the Fed’s game in the next round, who cares about what will happen in future rounds, and who cares about the long-run implications of this crony-capitalist game?

This post was published at Ron Paul Institute on August 26, 2014.