Courtesy of Pam Martens
Systemic Risk Among Deutsche Bank and Global Systemically Important Banks (Source: IMF — “The blue, purple and green nodes denote European, US and Asian banks, respectively. The thickness of the arrows capture total linkages (both inward and outward), and the arrow captures the direction of net spillover. The size of the nodes reflects asset size.”)
By Pam Martens and Russ Martens
According to today’s New York Times, Democrats now in charge of the House Intelligence and Financial Services Committees, have issued subpoenas to Deutsche Bank, JPMorgan Chase, Bank of America and Citigroup, related to the President’s finances and/or Russian money laundering.
We’d like to suggest that while that may well be a fruitful avenue of inquiry (see Russian Bank Chairman Met with Kushner, Citigroup and JPMorgan Chase), it does not rise to the level of national security risk posed by the derivative interconnectedness of those same banks. The President’s approximate $300 million in loans from Deutsche Bank and its ties to Russian money laundering, pales in comparison to trillions of dollars in interconnected derivative exposure of these same banks.
Americans saw what can happen when Congress ignores repeated red flags about derivatives. From 2008 through 2010 when derivatives and subprime debt imploded the U.S. financial system, millions of Americans lost their jobs, millions more lost their homes to foreclosure, and U.S. taxpayers were stuck with the greatest Wall Street bailout in U.S. history. The country is still struggling to recover from that period with the greatest wealth inequality since the 1920s and an unprecedented and ballooning national debt, much of which went to stimulate subpar growth left by the ravages of the so-called Great Recession – which many Americans feel was really the Great Wealth Transfer to Wall Street.
What the House Intelligence and Financial Services Committees should also be subpoenaing pronto is derivative counterparty exposure at each of those four banks, as well as at Goldman Sachs and Morgan Stanley. Americans need to know right now, not after the next financial crash, how much derivative exposure U.S. banks have to Deutsche Bank, to each other, and to other foreign banks, hedge funds, etc.
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