$700 Trillion Derivatives – Regulators v. Banks

Let me repeat that….$700 TRILLION in derivatives!

There used to be an old show on TV called Celebrity Death Match pitting two celebrities in a clay-mation fight to the death…I’d like to see the Regulators v. Mega Banks match over the derivatives market. However, I believe the ultimate loser will still be the US taxpayer.

The Federal Reserve and the FDIC have are taking two paths to try and prevent another financial system collapse: (1) Rejecting large US banks from their plans of how to structure derivatives and suggested a different method or face much higher capital requirements or go out of business, and (2) going directly to the International Swaps and Derivatives Association controlling other countries to modify their definition (master agreement) of derivatives.

This all is done outside the normal legislative process.

We will see who the victor will be…?

WSJ, August 7, 2014, C8

Note: The struggle between the banks and regulators stems from what’s termed as “annual living wills” where the 2010 Dodd-Frank law requirement of mega banks to either (a) develop dismantling and asset transfer plans in cases of eminent bank failure, or (b)face higher cash reserves and other requirements from the regulators. (WSJ, 8-6-14, C1)

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