{"id":303,"date":"2020-03-24T16:55:54","date_gmt":"2020-03-24T16:55:54","guid":{"rendered":"https:\/\/goldsilverdesk.com\/news\/?p=303"},"modified":"2024-07-08T18:07:44","modified_gmt":"2024-07-08T18:07:44","slug":"this-is-the-fear-chart-that-the-smart-money-on-wall-street-is-watching","status":"publish","type":"post","link":"https:\/\/goldsilverdesk.com\/news\/this-is-the-fear-chart-that-the-smart-money-on-wall-street-is-watching\/","title":{"rendered":"This Is the Fear Chart that the Smart Money on Wall Street Is Watching"},"content":{"rendered":"\n

By Pam Martens and Russ Martens: March 24, 2020 ~<\/strong><\/p>\n\n\n\n

The chart that tells you\nhow all of today\u2019s economic troubles are going to end is not the bar graph of\nnew deaths from coronavirus in Italy versus deaths in the U.S. It\u2019s the chart\nthat shows the number of potential deaths among the banks and insurance companies\nthat have gorged themselves on risky derivatives and serve as counterparties to\neach other in a daisy chain of financial contagion.<\/p>\n\n\n\n

The chart above is why\nthe Federal Reserve is throwing unprecedented sums of money in all directions\non Wall Street. Because despite being a primary regulator to these massive bank\nholding companies, the Fed has no idea who is actually in trouble on derivative\ntrades, other than looking at a chart like the one above.<\/p>\n\n\n\n

The chart above also\njustifies the Democrats refusing to sign off on the fiscal stimulus legislation\nthat would have given U.S. Treasury Secretary Steve Mnuchin a $500 billion\nslush fund where the names of the recipients of bailouts could be withheld from\nthe public.<\/p>\n\n\n\n

In January 2007, prior\nto the last financial crisis, Citigroup\u2019s stock was trading at the\nsplit-adjusted level of $550 a share. At yesterday\u2019s stock market close,\nCitigroup\u2019s stock price was $35.39. If you are a long-term shareholder in\nCitigroup, you\u2019re still down 94 percent on your principal, not including\ndividends. After receiving the largest taxpayer and Federal Reserve bailout in\nbanking history during the Wall Street financial crash of 2007 to 2010,\nCitigroup did a 1-for-10 reverse<\/em> stock\nsplit to dress up its share price. In other words, if you owned 100 shares of\nCitigroup previously, you now owned just 10 shares at the adjusted price. If\nCitigroup had not done that, you would have seen a closing price yesterday of\n$3.54 cents instead of $35.39.<\/p>\n\n\n\n

Citigroup is the poster\nchild for everything that is wrong with the banking structure in the United\nStates today. After blowing itself up with derivatives in 2008, in December\n2014 it got the repeal of a key component<\/a> of the\nDodd-Frank financial reform legislation that would have forced derivatives out\nof federally-insured banks. Then in 2016, it went full speed into the very\nderivatives that were at the heart of the financial crisis in 2008, Credit\nDefault Swaps. (See Bailed Out Citigroup Is Going Full Throttle into Derivatives that\nBlew Up AIG<\/a>.)<\/p>\n\n\n\n

Citigroup is not alone\nin loading up on derivatives again. Together with JPMorgan Chase, Morgan\nStanley, Goldman Sachs and Bank of America, these five bank holding companies\nnow control a notional (face amount) of derivatives amounting to $230 trillion<\/em>, representing 85 percent of all derivatives\nheld by U.S. banks.<\/p>\n\n\n\n

And their counterparties\nare just as questionable as they were at the peak of the crisis in 2008, which\nled to the biggest Wall Street bailout in U.S. history.<\/p>\n\n\n\n

The 2017 Financial Stability Report<\/a> from the Office of\nFinancial Research (whose budget and staff have now been gutted by the Trump\nadministration) included this cautionary text:<\/p>\n\n\n\n

\u201c\u2026some of the largest insurance companies have extensive financial connections to U.S. G-SIBs [Global Systemically Important Banks] through derivatives. For some insurers, evaluating these connections using public filings is difficult. Insurance holding companies report their total derivatives contracts in consolidated Generally Accepted Accounting Principles (GAAP) filings. Insurers are required to report more extensive details on the derivatives contracts of their insurance company subsidiaries in statutory filings, including data on individual counterparties and derivative contract type. But derivatives can also be held in other affiliates not subject to these statutory disclosures, resulting in substantially less information about some affiliates\u2019 derivatives than required in insurers\u2019 statutory filings.\u201d<\/em><\/strong><\/p>\n\n\n\n

Insurance counterparties\nnamed in the report were Lincoln National Corp., Ameriprise Financial,\nPrudential Financial, Voya Financial and (wait for it), AIG, the insurance\ncompany that blew itself up with Wall Street derivatives in September 2008 and\nrequired a $185 billion bailout \u2013 with more than half of that sum going out its\nbackdoor to pay off Wall Street and foreign global banks that had saddled it\nwith derivatives that were structured bets that things would blow up. (Some\nof those funds were also used to settle securities lending programs with Wall\nStreet banks and hedge funds.)<\/p>\n\n\n\n

The 2016 Financial Stability Report<\/a> from the Office of\nFinancial Research provided more granular detail, noting the following:<\/p>\n\n\n\n

\u201cAt the end of 2015, U.S. life insurers\u2019 derivatives exposure, as reported in statutory filings, totaled $2 trillion in notional value. This $2 trillion does not include derivative contracts held in affiliated reinsurers, non-insurance affiliates, and parent companies that do not have to file statutory statements. Details on these entities\u2019 derivatives positions are not publicly available.\u201d<\/em><\/strong><\/p>\n\n\n\n

The report further\nindicates that a dangerous interconnectedness with a high potential for\ncontagion has grown between U.S. life insurers and Wall Street banks:<\/p>\n\n\n\n

\u201cAccording to statutory data on insurance company legal entities, nine large U.S. and European banks are counterparties to about 60 percent of U.S. life insurers\u2019 $2 trillion in notional derivatives. These data show that despite central clearing, derivatives interconnectedness between the U.S. life insurance industry and banks remains substantial.\u201d<\/em><\/strong><\/p>\n\n\n\n

Deutsche Bank, whose\nshare price has been regularly setting historic lows, is one of the European\nbanks that is heavily intertwined with Wall Street\u2019s derivatives. (See related\narticle below.)<\/p>\n\n\n\n

As Treasury Secretary Steve Mnuchin repeats ad nauseum that this is a health crisis not a financial crisis, just remember when the financial crisis actually started: September 17, 2019 \u2013 five months before the first death from coronavirus in the U.S. (See our more than five dozen articles on this latest financial crisis here<\/a>.) <\/p>\n\n\n\n

___________________<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

By Pam Martens and Russ Martens: March 24, 2020 ~ The chart that tells you how all of today\u2019s economic troubles are going to end is not the bar graph of new deaths from coronavirus in Italy versus deaths in the U.S. It\u2019s the chart that shows the number of potential deaths among the banks … Continue reading “This Is the Fear Chart that the Smart Money on Wall Street Is Watching”<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"om_disable_all_campaigns":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[1],"tags":[],"class_list":["post-303","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"yoast_head":"\nThis Is the Fear Chart that the Smart Money on Wall Street Is Watching - Gold Silver Desk<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/goldsilverdesk.com\/news\/this-is-the-fear-chart-that-the-smart-money-on-wall-street-is-watching\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"This Is the Fear Chart that the Smart Money on Wall Street Is Watching\" \/>\n<meta property=\"og:description\" content=\"By Pam Martens and Russ Martens: March 24, 2020 ~ The chart that tells you how all of today\u2019s economic troubles are going to end is not the bar graph of new deaths from coronavirus in Italy versus deaths in the U.S. It\u2019s the chart that shows the number of potential deaths among the banks … Continue reading "This Is the Fear Chart that the Smart Money on Wall Street Is Watching"\" \/>\n<meta property=\"og:url\" content=\"https:\/\/goldsilverdesk.com\/news\/this-is-the-fear-chart-that-the-smart-money-on-wall-street-is-watching\/\" \/>\n<meta property=\"og:site_name\" content=\"Gold Silver Desk\" \/>\n<meta property=\"article:published_time\" content=\"2020-03-24T16:55:54+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2024-07-08T18:07:44+00:00\" \/>\n<meta name=\"author\" content=\"david@goldsilverdesk.com\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"david@goldsilverdesk.com\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"5 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\\\/\\\/goldsilverdesk.com\\\/news\\\/this-is-the-fear-chart-that-the-smart-money-on-wall-street-is-watching\\\/#article\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/goldsilverdesk.com\\\/news\\\/this-is-the-fear-chart-that-the-smart-money-on-wall-street-is-watching\\\/\"},\"author\":{\"name\":\"david@goldsilverdesk.com\",\"@id\":\"https:\\\/\\\/goldsilverdesk.com\\\/news\\\/#\\\/schema\\\/person\\\/7985cc77bfb2b705aec4b5dd3e07c748\"},\"headline\":\"This Is the Fear Chart that the Smart Money on Wall Street Is Watching\",\"datePublished\":\"2020-03-24T16:55:54+00:00\",\"dateModified\":\"2024-07-08T18:07:44+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\\\/\\\/goldsilverdesk.com\\\/news\\\/this-is-the-fear-chart-that-the-smart-money-on-wall-street-is-watching\\\/\"},\"wordCount\":943,\"inLanguage\":\"en-US\"},{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/goldsilverdesk.com\\\/news\\\/this-is-the-fear-chart-that-the-smart-money-on-wall-street-is-watching\\\/\",\"url\":\"https:\\\/\\\/goldsilverdesk.com\\\/news\\\/this-is-the-fear-chart-that-the-smart-money-on-wall-street-is-watching\\\/\",\"name\":\"This Is the Fear Chart that the Smart Money on Wall Street Is Watching - 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