Full details on the US banking system’s narrow miss of a complete systemic collapse and a full banking holiday Tuesday are below:
From Jim Sinclair:
The entire Western World banking system just missed the need for a bail-in by a hairs length.
The next crisis in finance in North America will be a product of the FASB, the Guardians of Auditing, allowing banks to value OTC derivative paper at whatever the bank wishes. This is a camouflaged black hole loss unstated that Western Banking system deposits could fall into to disappear partially or wholly, made up of your deposits. Washington made moves to override the CFTC, mandating proper valuations which the FASB has run away from. Had the banks been required by the CFTC to value these derivatives at anything resembling a real market (there isn’t any markets for the legacy OTC derivatives of 1991 to 2008), we would have had another banking crisis in the USA on Tuesday after Memorial Day. The USA just missed another banking crisis by a hair’s length. Next time it will be closer.
If the banks had to realize the real loss in this paper, now valued way above real worth, facing that loss would vaporize the bank’s entire capital, impacting the next line of financial defense which is the funds of the depositors, seriously reducing to totally wiping out your deposits. This distance between the bail in of Cyprus and of the entire Western financial world stands on the question of honestly valuing OTC derivatives or not lying about the value of the legacy paper banks are carrying. This is the real PONZI of not just the century but all written history in finance. The real number of notional value of OTC derivatives outstanding is not $700 trillion but rather over a quadrillion as it stood and was reported by the BIS printed hear before the BIS reduced the number to $700 trillion by adopting a new computer program for valuation named “Value to Maturity,” a total cartoon.
We, the entire Western Financial World, are a bankruptcy just waiting to happen.
Had the CFTC implemented this regulation before it’s alteration, which is in fact a cancelation, you would have been bailed-in. Without this cancellation of this standing regulation, the USA would have had to have Bail-In Tuesday.
This is why I will be speaking in London next week, not because I need to see the place for the 100th time.
5 Biggest Banks Gain another Victory in Control of $700 Trillion Derivatives Market
Tuesday, May 21, 2013
Federal regulators have softened a new regulation intended to make the derivatives market—which helped cause the financial crisis—more competitive among banks. A derivative is a contract whose value is based on other underlying assets, such as stocks, bonds, commodities, currencies, interest rates and market indexes.
Currently, just five banks control 90% of all derivatives contracts: JPMorgan Chase, Citigroup, Bank of America, Morgan Stanley and Goldman Sachs. The Commodity Futures Trading Commission (CFTC) had planned to require firms wanting a price for a derivatives contract to contact at least five banks.
But after lobbying from financial institutions, the CFTC lowered the requirement to two banks. CFTC officials claim the standard will increase to three banks in about 15 months.
The $700 trillion derivatives market allows companies to essentially gamble on deals made on Wall Street. Such activity nearly destroyed insurance giant American International Group before the federal government rescued it.