Sign up today for an exclusive discount along with our 30-day GUARANTEE — Love us or leave, with your money back! Click here to become a part of our growing community and learn how to stop gambling with your investments. We will teach you to BE THE HOUSE — Not the Gambler!

Click here to see some testimonials from our members!

Congress Is Facilitating “Catastrophic Risk” by Allowing Federally-Insured Banks to Be Owned by Wall Street’s Trading Houses

Courtesy of Pam Martens

NY Stock Exchange Trading Floor-150pixWe recently read the report conducted by the Special Committee of the Board of Directors of Credit Suisse into how the bank had lost $5.5 billion when the Archegos family office hedge fund that was being financed by Credit Suisse and other Wall Street firms blew itself up this past March. One paragraph in particular caught our attention:

“The Archegos-related losses sustained by CS are the result of a fundamental failure of management and controls in CS’s Investment Bank and, specifically, in its Prime Services business. The business was focused on maximizing short-term profits and failed to rein in and, indeed, enabled Archegos’s voracious risk-taking. There were numerous warning signals—including large, persistent limit breaches—indicating that Archegos’s concentrated, volatile, and severely under-margined swap positions posed potentially catastrophic risk to CS. Yet the business, from the in-business risk managers to the Global Head of Equities, as well as the risk function, failed to heed these signs, despite evidence that some individuals did raise concerns appropriately.”

(For a more succinct look at the Archegos blowup, see our report: Archegos: Wall Street Was Effectively Giving 85 Percent Margin Loans on Concentrated Stock Positions – Thwarting the Fed’s Reg T and Its Own Margin Rules.)

What grabbed our attention in that paragraph from the Credit Suisse report is that the Board of Directors is actually acknowledging that trading positions posed “catastrophic risk” to the bank. What also grabbed our attention is that banking regulators in the United States have been reading this same kind of assessment of catastrophic risk within the mega banks on Wall Street since the financial crisis of 2008, while doing absolutely nothing meaningful to rein it in.

Even more striking, banking regulators and Congress continue to allow the majority of the largest trading houses on Wall Street to continue to own federally-insured deposit-taking banks where the taxpayer would be on the hook for bailouts if they blow themselves up.

Consider these three paragraphs from the report prepared by the Senate’s Permanent Subcommittee on Investigations after JPMorgan Chase lost at least $6.2 billion gambling in derivatives in London using deposits from its federally-insured bank:

Continue Here


Do you know someone who would benefit from this information? We can send your friend a strictly confidential, one-time email telling them about this information. Your privacy and your friend's privacy is your business... no spam! Click here and tell a friend!





You must be logged in to make a comment.
You can sign up for a membership or get a FREE Daily News membership or log in

Sign up today for an exclusive discount along with our 30-day GUARANTEE — Love us or leave, with your money back! Click here to become a part of our growing community and learn how to stop gambling with your investments. We will teach you to BE THE HOUSE — Not the Gambler!

Click here to see some testimonials from our members!