In case of another Bank crisis, a question has been raised, ” Are depositors at risk?” Read the data, dear reader, and draw your own conclusions. Derivatives are an important part of the wind down. All trading in Derivatives would be stopped for one day as these trades are neutralized. However, they could be disruptive to the Financial System as some continue to remain active.
If you are skeptical on the importance of Derivatives to our fiscal soundness, run , don’t walk to your nearest movie house playing, ” the Big Short”. This movie defines quite accurately how these financial instruments of mass destruction brought down the Global Economy in 2008.
Some facts before reading the data:
Derivatives are a hedge ( a bet) against a profit or loss position on a specified commodity.
They were not a legalized financial instrument till Bill Clinton legalized them under the guidance of Robert Rubin in 1998.
According to Warren Buffett and Charlie Munger of Berkshire Hathaway, derivatives can be replaced by an insurance policy. They consider them “Weapons of Mass Destruction”.
My thoughts and others, they should be eliminated. Huge sums of money may be made or lost depending on ” the bet”
Who stands to gain? Large Hedge Funds and Bankers
Who stands to lose? Not the taxpayer. It is understood we can no longer bail out the Bankers. However, could the FDIC decide to implement the 8% rule used by Europe which cuts insured deposits to $100,000 leaving depositors at “risk”? Doubtful.
1. When I reported on the Derivative market last year, Derivatives were at $1.1 Quadrillion . I postulated that a 6 cent tax on every $100.00 bundled of these instruments, the Country would gain $660 Billion in additional revenue. An enormous sum to be responsibly tracked , insuring that “infrastructure” and other projects employ real people at all levels of income.
2. If we applied the same tax on Millisecond Trades as we apply to Derivatives, AMERICA and Americans would reap part of the revenue enjoyed by Banks and Hedge Funds with the added benefit of curtailing risk.
3. According to Joseph Stiglitz , the Economist and Charlie Munger, the Vice Chairman of Berkshire Hathaway, we might put ” these guys out of business”! My thought, no loss to AMERICANS. In fact, it could be a “big” win for the American people.
“In conclusion, If there is any chance that the American people would suffer a second time during “a fiscal crisis”, I’d ask for a tax on Derivatives now. It would self regulate the industry and prevent further harm to our fragile economy. 2 nd , I’d tax ” Fast Trades” similarly to provide transparency to their trades and more liquidity to the American economy by diverting money from the Bankers and Wall Street to Main Street and the Middle Class.”
Since, many believe we are on the cusp of more Financial Uncertainty, I have included several articles on Derivatives for your review, along with the DODD FRANK regulation which unwinds Banks, including Title ll.
http://www.nytimes.com/2016/01/04/business/international/shifting-who-bails-out-troubled-banks-in-europe.html?smprod=nytcore-iphone&smid=nytcore-iphone-share The European Union has wasted so much taxpayer money
on bailing out banks in recent years that it is right
to try to get investors to help foot the bill.
The OCC and other supervisors have examiners on-site at the largest banks to continuously evaluate .... next three paragraphs, as well as the data in Table 2.
Please read the data and let’s discuss the facts! Then, do we mobilize and demand a #Tax on Risk , to Stop Inequality. NOW! Politics does indeed effect us!
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