April 2011

Geithner Exempts a $30 Trillion Derivatives Market From Regulation and Oversight

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On Friday, the witching hour of government press releases they want no one to read, the Treasury Department announced they will block regulation of large classes of derivatives:

Treasury is today issuing a Notice of Proposed Determination providing that central clearing and exchange trading requirements would not apply to FX swaps and forwards.

This proposed determination is narrowly tailored. FX swaps and forwards will remain subject to Dodd-Frank’s rigorous new trade reporting requirements and business conduct standards. Additionally, the Dodd-Frank Act makes it illegal to use these instruments to evade other derivatives reforms. Importantly, the proposed determination does not extend to other FX derivatives, such as FX options, currency swaps, and non-deliverable forwards. These other FX derivatives will be subject to clearing and exchange requirements.

The entire press release is almost burying the announcement for no regulation of FX swaps and forwards. Multinational corporations use FX swaps to hedge on currency fluctuations. According to Better Markets, this will bring out the financial engineers for some sort of derivative trickery fiction:

Paul Craig Roberts: IMF Says the Age of America is Over

paul craig roberts

Today the Swiss franc made yet another new high against the super dollar, as it has been doing for 120 days. What you are reading in the graphs is less and less of the foreign currency that one dollar can buy. Of course, gold and silver also consistently hit new highs. Swiss franc:

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As did the Australian dollar:

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Europe Probing Goldman Sachs on Sovereign Credit Default Swaps

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YES! Bloomberg is reporting 16 banks, including Goldman Sachs are being probed by the EU for anti-trust for manipulation of the the financial derivative, credit default swaps, market.

Goldman Sachs Group Inc., JPMorgan Chase & Co. and 14 other investment banks face European Union antitrust probes into credit-default swaps for companies and sovereign debt.

The EU is investigating whether 16 banks, including Citigroup Inc. and Deutsche Bank AG, colluded by giving market information to Markit Group Ltd., a data provider majority-owned by Wall Street’s largest banks. It will also examine if nine of the firms struck unfair deals with Intercontinental Exchange Inc.’s European derivatives clearinghouse, shutting out rivals.

“Lack of transparency in markets can lead to abusive behavior and facilitate violations of competition rules,” Joaquin Almunia, the EU’s competition commissioner, said in an e-mailed statement. “I hope our investigation will contribute to a better functioning of financial markets.”

Global regulators have sought to toughen regulation of the $583 trillion credit-default swaps market, saying the trades helped fuel the financial crisis. The EU’s probes add to separate investigations in the U.K. and U.S. into whether banks colluded to manipulate the London interbank offered rate.

Credit default swaps allow anyone, not directly involved in the underlying asset, to place bets on whether that underlying security, asset will default or not. Credit default swaps are used for speculation. In the case of sovereign debt, that causes the cost of financing that debt to increase, dramatically.

The Bipartisan Citizen Beat Down and the End of Democracy

Michael Collins

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Both political parties are manifestly hostile to citizens. This hostility reduces electoral participation to just over 50% of the voting age population for presidential elections and less than 40% for off-year congressional elections. The absence of 50% to 60% of those eligible to vote creates minority rule and threatens the legitimacy of any ruling party. Truly, every election ratifies the rejection of both parties.

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