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Meet the Two Congressmen Who Facilitated Today’s Derivatives Nightmare at Wall Street’s Mega Banks

Courtesy of Pam Martens

Former Congressman Randy Hultgren

Former Congressman Randy Hultgren Is Now President and CEO of Illinois Bankers Association

By Pam Martens and Russ Martens

When high risk derivatives start blowing up again at Wall Street’s mega banks and tanking the U.S. economy, be sure to send your thoughts along to these two men: former Congressman Randy Hultgren (R-IL) and former Congressman Kevin Yoder (R-KS). You can reach Hultgren at the Illinois Bankers Association where he now sits as President and CEO after losing his seat in Congress in the 2018 election. Yoder…wait for it…is a registered lobbyist at Hobart Hallaway & Quayle Ventures after also losing his seat in the general election of 2018.

Former Congressman Kevin Yoder

Former Congressman Kevin Yoder Is Now a Registered Lobbyist

These two men were effectively the handmaidens of Wall Street in getting a critical derivatives provision in the Dodd-Frank financial reform legislation repealed in 2014. We’ll get to the specifics of the role the two men played in a moment, but first some background.

According to the official analysis and report from the Financial Crisis Inquiry Commission, derivatives played an outsized role in the severity of the financial and economic collapse in the U.S. in 2008 – the worst downturn since the Great Depression. According to documents released by the Financial Crisis Inquiry Commission (FCIC), at the time of Lehman Brothers’ bankruptcy on September 15, 2008, it had more than 900,000 derivative contracts outstanding and had used the largest banks on Wall Street as its counterparties to many of these trades. The FCIC data shows that Lehman had more than 53,000 derivative contracts with JPMorgan Chase; more than 40,000 with Morgan Stanley; over 24,000 with Citigroup’s Citibank; over 23,000 with Bank of America; and almost 19,000 with Goldman Sachs.

The U.S. government had to take over the giant insurer, AIG, because it was counterparty to tens of billions of dollars in derivatives to Wall Street banks and had no money to pay them.

Another chart from the Financial Crisis Inquiry Commission shows that Goldman Sachs had turned itself into a giant derivatives casino. By June of 2008, Goldman Sachs held $5.1 trillion notional (face amount) of exposure to the most dangerous form of derivatives, credit derivatives. Its counterparties were subsequently propped up by secret revolving loans from the Federal Reserve. In the case of Merrill Lynch and Morgan Stanley, where Goldman had more than $600 billion exposure to each counterparty, the Fed made $2 trillion in secret, cumulative, below-market rate loans to each firm, according to an audit by the Government Accountability Office (GAO) that was released in 2011.


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