1. This site uses cookies. By continuing to use this site, you are agreeing to our use of cookies. Learn More.

US Commercial banks own $202 trillion in derivatives

Discussion in 'Market Predictions and Reports' started by godoftrading, Aug 5, 2009.

  1. godoftrading

    godoftrading Private, 1st Class

    Joined:
    Jan 4, 2008
    Messages:
    3
    Likes Received:
    0
    Five Reasons the Market Could Crash This Fall -- Seeking Alpha

    Few commentators care to mention that the total notional value of derivatives in the financial system is over $1.0 QUADRILLION (that’s 1,000 TRILLIONS).

    US Commercial banks alone own an unbelievable $202 trillion in derivatives. The top five of them hold 96% of this.

    Bear in mind, these are “notional” values of derivatives, not the amount of money “at risk” here. However, if even 1% of the $1 Quadrillion is actually at risk, you’re talking about $10 trillion in “at risk.”

    What are the odds that Wall Street, when allowed to trade without any regulation, oversight, or audits, put a lot of money at risk? I mean… Wall Street’s track record regarding financial instruments that were ACTUALLY analyzed and rated by credit ratings agencies has so far been stellar.

    After all, mortgage backed securities, credit default swaps, collateralized debt obligations… those vehicles all turned out great what with the ratings agencies, banks risk management systems, and various other oversight committees reviewing them.

    I’m sure that derivatives which have absolutely NO oversight, no auditing, no regulation, will ALL be fine. There’s NO WAY that the very same financial institutions that used 30-to-1 leverage or more on regulated balance sheet investments would put $50+ trillion “at risk” (only 5% of the $1 quadrillion notional) when they were trading derivatives.

    If Wall Street did put $50 trillion at risk… and 10% of that money goes bad (quite a low estimate given defaults on regulated securities) that means $5 trillion in losses: an amount equal to HALF of the total US stock market.

    This of course assumes that Wall Street only put 5% of its notional value of derivatives at risk… and only 10% of the derivatives “at risk” go bad.

    Do you think those assumptions are a bit… low?
    _________________
    Online Trading and Investing Community - Zantrio
    Day Trading - Strategies for Day Trading in the Financial Markets
    Swing Trading - Swing-Trading Stock Picks with Price Targets and Alerts
     
  2. ernest8fingers

    ernest8fingers Master Sergeant

    Joined:
    Feb 25, 2008
    Messages:
    488
    Likes Received:
    7
    I really admire your work and dedication here Godoftrading.I also agree with this posts sentiment. The worst is yet to come and the crash (IMO) will be "epoch". Of course, it will be the day after I finally "make it"-lol. Where did ALL this money go-who has it now?
     

Share This Page