The Biggest Casino in the History of the World…

What do derivatives, credit swaps, collateralized mortgage obligations, and the alphabet soup of high finance have to do with Liberty?  Well, the potential yoke of generations of high taxes to pay off debt WE didn’t incur could be here, and it sounds more like serfdom that freedom…

Bloomberg.com reported $9.7 trillion has been lent, spent or pledged by the Treasury, Federal Reserve and FDIC to “solve” the financial crisis — $9.7 trillion is $33,000 for every man, woman and child in the US, it’s 70% of our total GDP! And only the $700 billion TARP program for bank bailouts was ever voted on (we’re not including the stimulus moneys here…).

If this sounds too outrageous, listen to this five minute clip of Rep. Alan Grayson, (D-Orlando) asking the Federal Reserve Inspector General, Elizabeth Coleman, what is happening with the money. Are you satisfied with her responses: we haven’t gathered that information, we don’t have the authority to audit (”bull” meter jumps to 100%)? It’s frightening and incredible at the same time…

Where is the money going?  To the world’s secret casino, where the financial industry is both the house and the gambling addict, and the taxpayer is the ATM.   The Office of the Comptroller of the Currency’s 4th quarter report shows banks have placed $200 trillion in bets on “derivatives,” the “side bet” at the craps tables, almost all of it unregulated in “over the counter” (OTC) transactions, and almost all of it, 94% held by FOUR banks — JP Morgan/Chase, Citigroup, Bank of America, and ante-ing up to the table, investment firm now with bank status, Goldman Sachs. From Reuters FACTBOX:

BANK             TOTAL DERIVATIVES     PCT OF DERIVATIVES
                 OUTSTANDING ($ MLN)   THAT ARE OTC
JPMorgan         $87,362,672           97.0
Bank of America  $38,304,564           94.3
Citi             $31,887,869           98.0
Goldman Sachs    $30,229,614           98.4
All banks total $200,381,607           96.6 ($193,597,433 mln)

$200 trillion is 3.3 times the GDP of the entire world! The graph below, from the Comptroller’s report, just shows how popular this game has become.

derivatives

(And by the way, the bulk of AIG’s business is selling insurance to back these bets).  If you have the financial inclination, please read the full Office of the Comptroller of the Currency report — apparently the “pit bosses” at Secretary Geithner’s Treasury Department are confident that everything is balanced and under control, but what they gloss over is that the basic assumption to all the models they use to value and project says that the value of the “things” underlying the derivatives never goes down in the long run…

…unless, of course, they do, but then you just run to the taxpayer ATM for the bailout.

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