A two billion dollar loss may not seem like much to a company that’s worth 2.3 trillion dollars but this is a very big deal and here is why:
US banks have 200 trillion dollars in derivatives on their books and taxpayers guarantee that debt.
Q: What is a derivative?
A: No one knows
Not even the experts. Well, they say it’s basically a bet that someone will pay their mortgage, but it’s much more convoluted than that. It’s more like a bet that a 1,000 people will pay their mortgage and what happens if 800 people pay and 200 don’t? Or if 500 people refinance? No one knows.
And in 2009, economic advisor to Margaret Thatcher, Christopher Story, went before Parliament and claimed “all derivatives are worth zilch.”
And why FOR THE LOVE OF GOD have US taxpayers been placed on the hook for such a risky bet?
This is a situation of epic and historic proportions. I have been trying to alert people about it for the past 4 years. I was trying to tell people at the time of the bank bailout that it was NOT about 700 billion dollars. That was peanuts. It was about changing the rules….placing the responsibility for these atrocious bets onto the people and that occurred when the majority of mortgages were placed on Fannie and Freddie.
In July of 2008, a law enabled the expansion of Fannie Mae and Freddie Mac from a paltry $800 billion, to a total of $10.7 trillion in anticipation of the potential need for the Treasury to bail out the federal home loan banks (which had coincidentally become investment banks and vice versa).
In June of 2010, Fannie Mae and Freddie Mac were delisted from the NYSE. The Federal Housing Finance Agency directed the delisting after Fannie’s stock traded below $1 a share for over 30 days.
Ok, WTF? All US mortgages were only valued at a mere 700 billion dollars so why was 10.7 trillion needed to back them?
There was clearly a problem here. In short, the bets far exceeded the actual value these mortgages held.
Now prepare yourself for this because 10.7 trillion dollars is peanuts. There are 200 trillion dollars worth of bets on these mortgages in the US! This is beyond any rhyme or reason. It suggests that these people committed fraud on a level that is beyond comprehension and to me. It suggests this fraud and the inevitable implosion of the US economy was intentional.
Remember, we have a government that LOVES a major crisis — see the bank bailout or the stimulus bill which moved 100s of billions to corporate America and allowed the big banks to get bigger.
We CAN fix this, but people have to understand the magnitude of this emergency and understand that NOTHING else matters right now. If we don’t fix this, the US dollar will be worth absolutely nothing by the end of the year.
We have a tool in place from 1933 that just needs to be re-instated (and this is a BIG problem for the banks that want to use this crisis to usher in more powers). If re-instated, it will separate the 200 trillion in fraudulent bets from the real money.
I am talking about the Glass–Steagall Act. In short, it separated investment banks from regular banks so that people were not put at risk for the bank’s bad investments. It was President Bill Clinton (who we all know loves a party) that repealed Glass-Steagall in 1999. That is when the real party and the real problems began.
Elizabeth Warren is pushing to re-instate this Act and she is running for Congress. So, for the love of God, do everything you can to get that girl elected! And, contact your representatives and DEMAND they re-instate this Act immediately so we can get this situation resolved.