WONDER IF THESE BOND HOLDERS ARE GETTING TWO FOR THE PRICE OF ONE-----PARTIAL PAYMENT FROM MUNICIPAL BANKRUPTCY AND CDS PAYMENTS!
Below you see the canary in the cage as a state attorney general states loudly and strongly the public is in line for the same kind of financial soaking as with the subprime mortgage loans as the market speculation and manipulation combined with a saturation of municipalities with debt are all part of imploding the state and city economies. It is clear that is what is happening and all of this is what makes it public malfeasance------YOUR NEO-LIBERAL POLS KNOW THAT THESE DEALS ARE BAD FOR THE PUBLIC AND DOING IT ONLY TO MOVE MONEY TO INVESTORS. This is illegal as was the subprime loan process and we simply need to prosecute and recover the money lost. WHAT IS TRUE IN THE CASE OF THESE MUNICIPAL BOND FRAUDS IS THAT ALL OF THESE DEVELOPMENT DEALS NO ONE LIKES WILL BE NULL AND VOID AS THE CONTRACTS ALL INVOLVE FRAUD.
In Baltimore the development deals have gotten so ridiculous that we watch the news of City Finance heads telling us that a Hilton Hotel that was a boondoggle for the public from the start is losing hundreds of millions of taxpayer money because we are partnered with the hotel. The Finance head tells the reporter that proceeds are climbing and will see profits several years from now-----billions of dollars in city losses that Hilton should be absorbing. Then we hear the reporter out the Finance head as lying about the proceeds as all City Hall did was add tax revenue that would come to city coffers as hotel revenue. WHAT LITTLE TAX REVENUE THAT COMES FROM THIS HOTEL IS NOW BEING CATEGORIZED AS REVENUE FOR THE HOTEL.
ALL OF THIS IS ILLEGAL.
What people do not understand that the losses will become incredible when the bond market crashes as all of this is tied to this hotel deal as well.
BALTIMORE CITY AND MARYLAND HAS BEEN MADE A HOUSE OF CARDS BY FINANCIAL INSTRUMENTS AND CREDIT BOND DEALS THAT HAVE MORTGAGED THE PUBLIC FOR DECADES. Luckily-----
ALL OF THIS IS ILLEGAL AND CONTRACTS ARE THEREFORE VOID!
I want to remind Baltimore citizens again that the $1 billion school building bond is all part of this and it is designed to hand public school buildings over to private investors because of the coming default.
Officials Optimistic on Money-Losing Hilton's Future
Thursday, October 31 2013, 09:54 PM EDT WBFF
Baltimore City officials met with media at city hall on Thursday, making the case that the taxpayer-backed Hilton hotel is turning the corner. The $300 million hotel opened in 2008 and has been losing money ever since. Last year the hotel had to dip into the general fund to pay its debt by using hotel occupancy taxes which were supposed to go to city coffers. Now Baltimore City officials say the hope is to wind down the use of occupancy taxes beginning in 2014 and turn a profit at the end of the decade. However, projections are based on using a city tax credit as a profit, an assumption that city officials say is perfectly normal.
Can you imagine what it will cost Baltimore citizens when the economy crashes next year? Do you really think this one example of credit bond deal gone wild among dozens will be met? Think about the $1 billion school bond on top of all of this and who will own all the rights the public has now?
SEE WHY NEO-LIBERALS ARE NOT WORRIED ABOUT IT? THEY WORK FOR WEALTH AND PROFIT AND THIS TRANSFERS MORE PUBLIC WEALTH TO THE TOP----JUST AS WITH THE OTHER MASSIVE FRAUDS.
WE NEED TO RUN AND VOTE FOR LABOR AND JUSTICE CANDIDATES AND STOP ALLOWING THIS CRONY FARM TEAM STAY IN PLACE!
When Hilton Hotel debt obligation comes, who will pay? Taxpayers may have to foot hotel debt obligation
UPDATED 7:15 AM EDT Jul 11, 2013 WBAL
The taxpayer-funded hotel has lost millions each year since it opened in 2008. Then Mayor Martin O'Malley pushed the project through City Council to boost Baltimore's convention business.
Now governor, O'Malley blames former Gov. Bob Ehrlich for not committing state taxpayers to the project.
"You may recall, at the time, that we asked, and we were told no by the then-governor," O'Malley said Wednesday.
The hotel is owned by the Baltimore Hotel Corp. and run by Hilton. Earlier this year, the BHC withdrew $1 million from reserves and $1.5 million from a hotel occupancy account to cover its bond payments.
City finance officials cite concern that the city will have to dig deeper to make the next payment due in September. The money may have to come from the city's general fund and/or other hotel tax revenues -- and not from the financially-strapped Hilton.
"The hotel board is very fiscally responsible and I'm sure has all options on the table," Baltimore Mayor Stephanie Rawlings-Blake said.
Surprisingly, given the fact the debt payment may have to come out of the general fund, the mayor is now distancing herself from the issue, I-Team reporter David Collins said.
When asked if the city is considering selling the hotel, she responded, "As I said, the hotel board will make recommendations. I wouldn't make any decisions until I was fully informed about all the options."
O'Malley said he's open to talking with the mayor about how the state could help the city with the problem, saying the Hilton alone is performing well and would be an attractive asset.
According to a recent audit, the hotel is generating enough business to cover operating expenses but not its large debt payments.
"So, you might well be able to get a private entity to take this over, to refinance it and save the city the interest rates that were all done pre-recession," O'Malley said.
The city is responsible for the principal and interest payments, Collins reported. In 2017, that obligation is $4 million, and it starts to rise in 2018 through 2022, at which point the obligation becomes $28 million. After that, it escalates even more.
The city has hired an advisory firm to come up with options.
Credit default swaps are the most common form of derivative in the fixed-income market. The swaps are complex investment vehicles that can be used to protect a bond buyer from the risk of default.
If a bond issuer fails to keep to the terms of its debt agreement, the owner of the swap can collect face value of the bond.
Bond investors use credit default swaps to reduce risk. Speculators invest in the swaps as a way to place bets on the likelihood of a bond default.
When the price of credit default swap falls, it's an indicator that investor confidence in a bond issuer is rising.
A CDS can be used as an alternative to bond insurance, which is a popular tool in the muni bond market.
Bondholders Losing Ground in City Bankruptcies Bondholders stand to be among the biggest losers in the latest wave of municipal bankruptcies if current trends continue, but the trend surprisingly may not sour potential future investors.
by Liz Farmer | October 24, 2013 GOVERNING
Michigan Central Station in Detroit, which declared bankruptcy in July.
Bondholders stand to be among the biggest losers in the latest wave of municipal bankruptcies if current trends continue, but the trend surprisingly may not sour future investors.
The creditor group could recover as little as 50 cents on the dollar in bankruptcy trials in Detroit; Jefferson County, Ala.; Stockton, Calif. and Harrisburg, Penn., according to research by Moody’s Investor Services. The recovery is far below the average of nearly 80 cents on the dollar for defaulted municipal bonds since 1970.
But restructuring plans for Detroit, Jefferson County and Harrisburg all depend on the municipalities' ability to continue to borrow as they call for new financings to partially repay existing bondholders. It’s a trend that Moody’s analyst Dan Seymour says is relatively new among restructuring strategies.
The strategy carries risks – most notably that interest rates will rise and the plan won’t work as proposed. That’s what’s happening in Jefferson County, which declared bankruptcy in 2011, and is proposing to issue new bonds and redeem defaulted ones at a loss to bondholders. But in the months since the plan to partially refund $3.2 billion in bonds was first proposed, interest rates have increased, meaning it's more expensive now for the county to borrow. So, county commissioners are asking bondholders to take a deeper cut – an additional $350 million in concessions to make the bankruptcy exit plan viable. That moves the group from taking a loss of about 40 cents on the dollar to losing half their investment value.
The proposed recoveries for Detroit and Harrisburg also would involve the issuance of new debt (to a lesser degree). Bondholders can vote against the plan but municipalities have the option to “cram-down” their plan of adjustment as long as another creditor group approves it.
It’s a stark contrast to just a few years ago in Central Falls, R.I., where officials sought to keep the city’s borrowing ability intact and made bondholders whole by cutting retiree pensions. (The former mill town was also helped by a new state law that secured the city’s general obligation bonds in the event of bankruptcy, having the effect of putting bondholders first in line for recovering their money.)
But what about the effect of Jefferson County’s strategy on its already high-risk (Caa3) credit rating?
“They can’t get much lower,” says Moody’s analyst Greg Lipitz.
Bondholders in Detroit face a potentially worse recovery as Emergency Manager Kevyn Orr in June proposed paying back just 10 percent of the city’s debt. The plan was immediately rejected and the city filed for bankruptcy a month later. Orr is now attempting to shift more of the cost burden onto employees and retirees by cutting pensions but that will be a hard-fought battle as the legality of cutting pensions, protected by the state constitution, is an unknown in federal bankruptcy court. Orr’s planned cuts to retiree healthcare (benefits that are not protected) has already prompted a lawsuit filed this week by groups representing workers.
In Stockton, bond insurer Assured Guaranty argued that pensioners (via the California Public Employees' Retirement System) should take their place in line with other creditors rather than be made whole. But the Northern California city is instead proposing no cuts to pensions and recovery rates varying between 1 and 100 percent for bondholders. As the largest creditor, Assured Guaranty is slated to receive about 50 percent of what it is owed.
Harrisburg’s recovery plan could be the most generous for bondholders; its exit proposal would refund roughly 60 to 70 percent on total defaulted principal and accrued interest for General Obligation-guaranteed resource recovery bonds. (Harrisburg also does not seek to cut pensions.) Ultimate recoveries may prove to be higher over the longer term, Moody’s notes, given that the plan outlines the potential for additional future revenues for creditors. Still, “an inability to execute the plan could lead to lower recoveries,” the ratings agency says.
Bondholders are losing because of the nature of these types of municipal bankruptcies, Seymour says. Issuers are faced with long-term, fundamental credit deterioration instead of short-term cash flow problems as in municipal bankruptcies of the past. These challenges include mounting pension costs and other post-employment benefits, a weak overall economic recovery, and declining revenue sources, such as state aid and property taxes. In extreme cases these persistent credit problems may lead to default on bonded debt.
“In these, the cause of default is long-term insolvency,” Seymour says. “Issuers are not able to provide basic services and pay their debt at the same time.”
The varying fates of bondholders has led to uncertainty about the group’s status in Chapter 9, especially in light of the fact that most cities are avoiding any cuts to pension obligations. But a recent Moody’s report on the situation observed that there is still an appetite for investment, even in shaky municipalities, from “hedge funds and other nontraditional buyers who are more accustomed to the high yield market.”
That prospect may also mean that scenarios like Central Falls’ protection of creditors are a thing of the past: “To the extent that issuers retain market access at a tolerable cost,” the report says, “then the disincentives to bankruptcy and/or default would be greatly diminished.”
Did you know that the economy is ready to collapse harder than it did in 2008, this time from massive bond malfeasance and the market is ready to implode. Did you know that all of this involves all that is public....municipal bonds are the target this time whereas city real estate was the target of the subprime loan frauds. Why do I say malfeasance? Your neo-liberal pol is loading states and cities with credit bond debt knowing the market is going to crash and leaves states near default. THEY DO THIS TO TIE PUBLIC ASSETS TO FINANCIAL INSTRUMENTS THAT WILL LEAVE THIS IN THE HANDS OF INVESTORS AND THEY DO THIS TO IMPOVERISH GOVERNMENT COFFERS TO THE POINT OF NOT AFFORDING PUBLIC PENSIONS, EMPLOYEES, SOCIAL SERVICES. IT IS DELIBERATE AND IS WHAT HAPPENED TO THE EUROPEAN NATIONS.
'But about two-thirds of Dodd-Frank's rules have not yet been finalized, and more than one hundred rulemaking deadlines have been missed'.
The 5 Things Obama Must Do For Financial Reform
Posted: 01/16/2013 12:01 am EST | Updated: 01/24/2013 1:48 pm EST
When President Barack Obama first swore the oath of office, the backdrop was a financial system in flames. Four years on, the fires are out, but those who hoped Obama would make capitalism fundamentally safer are disappointed.
Barring another crisis in the next four years, the president may have missed his best chance for a more significant overhaul of finance. But there are still things he can do in a second term to at least ensure that the accomplishments of his first term, embodied in the Dodd–Frank Wall Street Reform and Consumer Protection Act, don't go to waste.
Obama can't rewrite laws or bend independent agencies such as the Federal Reserve to his whim. Any reform efforts are countered by a multitude of tireless financial lobbyists who have resisted every step of the way -- often successfully -- bankrolled by a deep-pocketed industry with influence over regulators, lawmakers and the media.
But Obama can set the agenda, with his words and with the people he puts in key jobs, to let Wall Street know that Main Street will always come first.
Because Main Street may be starting to wonder.
"We are losing public support," said Sheila Bair, former chairman of the Federal Deposit Insurance Corporation, expressing disappointment with the sluggish pace of reform. "The longer this drags on, the more people get cynical."
The sprawling Dodd-Frank reform act, passed in 2010, is chock full of rules that could help avert another crisis. It forces banks to pay penalties for being too large and gives officials tools to possibly wind down a failing big bank safely. It orders the regulation of complex derivatives and tries to make it harder for banks to gamble with their own money. It establishes new bodies to oversee risks in the financial system and protect consumers.
But about two-thirds of Dodd-Frank's rules have not yet been finalized, and more than one hundred rulemaking deadlines have been missed. Meanwhile, no banker has yet gone to jail for any of the actions leading up to the crisis, and efforts to hold the banks accountable have been few and far between, consisting mainly of modest fines, with the banks neither admitting nor denying wrongdoing.
That raises questions about where financial reform will rank among Obama's many second-term priorities, from seemingly endless battles with Congress over the federal budget deficit to gun control, immigration and national security.
"In fairness, the president has very big issues he has to deal with," said University of Maryland law professor Michael Greenberger, a former director of the Division of Trading and Markets at the Commodity Futures Trading Commission. "But I don't see the inner workings of the White House worrying about the market reform issue."
The White House did not respond to a request for comment.
Reform advocates warn that retreating from even the modest advances of Obama's first term mean his presidency could ultimately be known, like those of Ronald Reagan and Bill Clinton, as having planted the seeds of future financial disasters.
There are reasons to doubt the system is significantly safer than it was before the crisis. The biggest banks are bigger than ever, and their risks are still mainly hidden from public view. At the same time, financial markets are more complex, and financial regulators are still outgunned, outstaffed and outsmarted by the powerful banks they regulate.
"I think the failure to set our economy straight with regard to the financial sector could well be the blight that the president had a chance to but did not correct," said Bart Naylor, financial policy advocate for the nonprofit group Public Citizen.
Many reformers were particularly discouraged by Obama's recent nomination of White House Chief of Staff Jacob "Jack" Lew for the post of Treasury secretary in his second term. As secretary, Lew would be one of the nation's top financial regulators and chair the Financial Stability Oversight Council established by Dodd-Frank to watch out for risks in the financial markets.
Though all agree that Lew is smart and a peerless expert on the federal budget, he has professed limited understanding of financial markets. He also made millions working for Citigroup just before it was bailed out in the crisis, in a unit that made bets against mortgage-backed securities. He got that job on the recommendation of a colleague in the Clinton administration, former Treasury Secretary Robert Rubin, one of the chief architects of market deregulation in the 1990s. Lew has said that he didn't think deregulation led to the financial crisis, a view in line with Rubin's laissez-faire approach. Lew's pick signals that financial reform will take a back seat in Obama's second term to matters of the budget. That may prove shortsighted.
"If you care about the fiscal crisis, the first place to start is to make sure we prevent another financial crisis," said Neil Barofsky, former inspector general for the Troubled Asset Relief Program, the crisis-era bailout fund. "We're having this fiscal crisis now because of the financial crisis. If we have a $4 trillion or $5 trillion hit from another crisis, negotiations over the sequester will be nothing."
In interviews with The Huffington Post, Barofsky and other reform advocates identified at least five things that must happen in Obama's second term to maintain the momentum for reform and make another devastating crisis less likely.
They agree that there is almost certainly no chance that Obama will embrace more dramatic reform ideas being advocated in some circles, including breaking up large banks or reinstating the Depression-era Glass-Steagall Act separating commercial and investment banking. Even the five modest goals presented here might be too much of a stretch, they fear. But they are possible.
One: First, Do No Harm
Dodd-Frank is far from perfect. It does not clear up the murk of bank balance sheets, bring sanity to executive compensation or much reduce the influence of flawed credit-rating agencies. Its provisions for winding down big banks might not work. But doing away with Dodd-Frank could be much worse; even the administration's harshest critics on the left admit it is better than nothing.
Critics on the right, meanwhile, wish it would just disappear, and they have been working with bank lobbyists to kill it, or at least water it down as much as they can. If he accomplishes nothing else on financial reform in his second term, Obama at least needs to keep fighting to preserve Dodd-Frank, these advocates said.
"Protecting what we have is first and foremost," said Bair.
Bair is hopeful that Obama and the Democratic senators who created Dodd-Frank have a strong incentive to preserve it. Others see Obama's attention wandering and worry the banks have an even stronger incentive to neuter the law.
Two: Finish The Rules Already
Congress passed the buck on putting Dodd-Frank's rules into effect to various regulatory agencies, where they have often gotten bogged down for one reason or another. According to a recent tally by the law firm Davis Polk, just a third of Dodd-Frank's rules are done. Only about half of the law's rules for derivatives have been finalized. Only about a quarter of the rules for winding down troubled banks are in place. Less than 10 percent of the bank regulations are done.
The Securities and Exchange Commission is still on the hook for finishing dozens of rules. But the process has ground to a halt with the departure of former chairman Mary Schapiro, leaving only four commissioners on the SEC: two Democrats who will vote to put rules in place and two Republicans who often won't.
"We need three votes to get rules through, or Dodd-Frank will be crippled," said Greenberger.
Three: Solve Too Big To Fail
One reform concept with bipartisan support is the idea that the biggest banks are still too big to fail -- in fact, they are bigger than before the crisis. The five biggest U.S. banks held about $8.7 trillion in assets at the end of the third quarter, the latest data available, or about 55 percent of the entire U.S. annual gross domestic product. That's up from about 43 percent before the crisis, Bloomberg noted recently.
Dodd-Frank offers at least two possible solutions to this problem, according to Marcus Stanley, policy director at the nonprofit Americans For Financial Reform: higher capital requirements for big banks, and the so-called Volcker Rule, which prohibits banks from gambling with their own money.
Both provisions could force big banks to get smaller, hiving off trading operations or other parts that make them too bulky. So far, neither provision has been finalized, and the Volcker Rule has been riddled with exemptions before it even takes effect.
Four: Get The Right People In Place
Though Lew may not eventually run the Treasury as a natural-born regulator, he should at least have a top deputy who will play the role of riding herd on regulation in a second term, many reformers said -- someone to speak up for Dodd-Frank, rebut bank lobbyists and understand the risks lurking in the system. The reported top pick to be Lew's No. 2, Morgan Stanley chief financial officer Ruth Porat, has the necessary expertise, but has lobbied regulators frequently on behalf of Wall Street since Dodd-Frank's passage.
Other key personnel decisions include getting that fifth SEC commissioner in place and making sure Commodity Futures Trading Commission Chairman Gary Gensler, the reformers' favorite Wall Street regulator, gets another term after his current stint ends in 2013.
The problem, though, is that even if you get good people in key positions, the agencies will be understaffed relative to the banks and lobbying firms they're opposing.
"The CFTC is radically underfunded," said Stanley. "Their personnel count is roughly pretty similar to the mid-1990s, and Dodd-Frank has increased their workload by eight-fold."
Five: Loophole-Free Derivatives Regulation
Perhaps even more important than fixing the problem of too-big-to-fail banks is making sure regulators can keep tabs on the exotic derivatives that contributed to the last crisis, from credit default swaps (CDS) to collateralized debt obligations (CDO) to CDOs stuffed with CDSs.
Again, Dodd-Frank has rules for that, but banks are pushing hard for a way out. Republicans last year introduced HR 3283, the Swap Jurisdiction Certainty Act, which would exempt overseas derivatives trades from Dodd-Frank rules as long as they were routed through a foreign subsidiary.
The bill is in limbo, but it's just one of many examples of banks tirelessly working to carve loopholes into obscure corners of the law dealing with obscure matters, where they can quietly make tons of money, while leaving the financial system at risk.
If anything is certain in Obama's second term, it is that this will continue.
"Part of the lobbying strategy is to wear you down, drag it out, until people get frustrated and lose confidence in regulators to do anything and the pressure subsides," said Bair. "That's why it's important that this stuff get done soon, not later, and as cleanly and effectively as possible.
"You will never make this industry happy," Bair warned of banks. "They will always want more."
Below you see that the derivative market has exceeded the leveraging levels before the last crash and there is no meaningful law protecting us from yet another massive fraud in this next collapse. The numbers are staggering. Yet, I listen to my Senator Ben Cardin tell me he is ready to compromise on reforming entitlements and Social Security because after all, the Trusts have been raided and there is no money. The tens of trillions of dollars from the previous frauds took that money!
Actually, all that is needed is a short term plan to recover the tens of trillions in corporate fraud and that would take care of Wall Street and its overreaching hold on the US economy! Stop allowing the press to scare us into believing we have to allow them to cut all our public wealth to pay down the national debt in order to appease the markets.
If you listen to neo-liberals they will say 'the republicans are defunding the financial oversight agencies and the writing of rules'!
THE FEDERAL GOVERNMENT HAS GOTTEN HUNDREDS OF BILLIONS IN FRAUD FROM SETTLEMENTS THAT REQUIRED SOME OF THOSE MONIES BE USED FOR JUST THIS PROCESS!
Wall Street Bets a Quadrillion of Everybody Else’s Money
Wed, 10/09/2013 - 13:48 — Glen Ford
Americans are driven to panic at the prospect of a technical federal default, later this month – an event that could cost the public treasury billions. But Wall Street’s quadrillion dollar gambling obsession actually does threaten to bring down the whole system. “The Lords of Capital are pure gamblers who have transformed the global financial marketplace into a machinery of perpetual uncertainty.”
Wall Street Bets a Quadrillion of Everybody Else’s Money
by BAR executive editor Glen Ford
“Even if the whole planet were offered as collateral, it could not cover Wall Street’s bets.”
The clock is ticking, we are told, on the “good faith and credit” of the United States government, which might technically be unable to pay its bills after October 17 if the two corporate parties don’t make a deal on the debt limit. Congressional Republicans and the White House are “playing Russian roulette with the global economy,” says an editorial in the Dallas Morning News, warning of impending “economic Armageddon” as financial markets “crater,” the economy stalls and interest on future federal borrowing skyrockets.
Given that capitalism has entered a terminal stage of acute and escalating crises, the Dallas editorialists may be right; anything could set off another spasm of financial mayhem in a system that is ever more unstable. However, it is the “markets” – a euphemism for the financial capitalist class – that are the ultimate source of instability, the folks who play Russian roulette 24-7 and have dragged humanity to a place where an actual Armageddon is only a twirl of the chamber away. In this game, everybody’s head is in play.
It is proper that the corporate press speak of the impending fiscal threat – a minor one, in the maelstrom of crises that beset the system – in gambling terms. An increase of interest rates by a few basis points (fractions of a percent) on trillions of borrowed dollars amounts to quite a chunk of public money, to be paid directly into the accounts of these very same private “markets” that are supposedly biting their nails with anxiety over the budget. The Dallas Morning News and its fellow corporate propaganda spores spread the myth that the “markets” (bankers, hedge funds, etc.) crave stability, when the vital statistics of the real world of finance capitalism scream the opposite.
The Lords of Capital (the “markets”) are pure gamblers who have transformed the global financial marketplace into a machinery of perpetual uncertainty, in which all the wealth of the world is bet many times over by people who don’t actually own it, in a casino whose operators scheme against each other as well as their patrons, most of whom are not even aware that they are in the game – much less, that it is Russian roulette.
“Derivatives are valued at six times more than the total accumulated wealth of the world.”
The notional value of derivative financial instruments is now estimated at $1.2 quadrillion – that is, one thousand two hundred trillion dollars. This statistic is fantastic in every sense of the word, amounting to 16.7 times the Gross World Product, which is the value of all the goods and services produced per year by every man, woman and child on the planet: $71.83 trillion. Derivatives are valued at six times more than the total accumulated wealth of the world, including all global stock markets, insurance funds, and family wealth: $200 trillion.
The great bulk of known derivative deals are held by banks that are considered too big to be allowed to fail, with the top four banks accounting for more than 90 percent of the exposure: J.P. Morgan Chase, Citibank, Bank of America, and Goldman Sachs.
We are told that derivatives are simply bets between knowledgeable partners – hedges against loss – and that every time one of these financial institutions loses, another gains, so that there is no net loss or threat of global collapse. But that’s a lie. Never in the history of the world has finance capital so dominated the real economy, and only in the past two decades have derivatives been so central to finance capitalism. The players do not know what they are doing, nor do they care. The meltdown of 2008 was caused primarily by derivatives, requiring a bailout in the tens of trillions of dollars that is still ongoing, with the Federal Reserve buying up securities that no one would purchase – that is, bet on – otherwise. Yet, the universe of derivatives deals has grown much larger than in 2008, effectively untouched by President Obama’s so-called financial reforms.
The casino has swallowed the system. The sums the players are betting are not only far larger than the value of the rest of their portfolios, but six times larger than the combined assets of every human institution and family on Earth, and almost 17 times bigger than the worth of humankind’s yearly output. Even if the whole planet were offered as collateral, it could not cover Wall Street’s bets.
“Detroit has been rendered a failed city by the full range of derivatives and securitization.”
The events of 2008 demonstrated that derivatives collapses, like other speculative financial events, behave as cascades of consequences, rather than orderly “resolutions.” Derivatives deals infest or overhang every nook and cranny of the U.S. and other “mature” economies, poisoning pension systems and municipal finance structures. Detroit has been rendered a failed city by the full range of derivatives and securitization. When the casino is the economy, everyone is forced to play, and the poor go broke first.
Reformers of various stripes tell us that derivatives can either be regulated to a less lethal scale or abolished, altogether, while leaving Wall Street otherwise intact. That’s manifestly untrue. Finance capital creates nothing, reproducing itself through the manipulation of money. The derivatives explosion occurred because Wall Street needed a form of “fictitious” capital to continue posting ever higher profits, and ultimately, fictitious portfolios full of tradable bets. Derivatives deals are the ultimate expression of financial capitalism: they are primarily bets on transactions, rather than investments in production. The rise of derivatives signals that capitalism has run its course, and can only do further harm to humanity. The derivatives economy – all $1.2 quadrillion of it – is the last stage of capitalism.
If the Occupy Wall Street movement had understood this, and articulated the necessity to overthrow and abolish Wall Street, its impact would have been far more profound. As it stands, Americans are directed to quake in fear as the clock ticks down to some technical federal budgetary deadline on October 17 – as if that’s the sword of Damocles hanging over the world.
BAR executive editor Glen Ford can be contacted at Glen.Ford@BlackAgendaReport.com.
THIS INVOLVES YOUR MARYLAND ASSEMBLY POLS EVEN MORE AND REMEMBER----
ALL OF THE PEOPLE RUNNING FOR STATE ATTORNEY GENERAL AND CITY ATTORNEY ARE ALL CONNECTED WITH THIS CRONY GROUP. WE MUST HAVE GOOD PEOPLE RUNNING FOR PUBLIC JUSTICE!
Members of the Baltimore City Council
Helen Holton 410-396-4818
Room 518, City Hall
William "Pete" Welch 410-396-4815
Room 532, City Hall
410-545-7353 fax Room 511, City Hall
William H. Cole IV 410-396-4816
Room 527, City Hall
Carl Stokes 410-396-4811
Room 509, City Hall
Warren Branch 410-396-4829
Room 505, City Hall
Mary Pat Clarke 410-396-4814
Room 550, City Hall
Bernard C. "Jack" Young 410-396-4804
Room 400, City Hall
James B. Kraft 410-396-4821
Room 503, City Hall
Brandon M. Scott 410-396-4808
Room 525, City Hall
Robert Curran 410-396-4812
Room 553, City Hall
Bill Henry 410-396-4830
Room 502, City Hall
Rochelle "Rikki" Spector 410-396-4819
Room 521, City Hall
Sharon Green Middleton 410-396-4832
Room 516, City Hall
Nick Mosby 410-396-4810
Room 513, City Hall
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