Shadow Elite: Derivatives, A Horror Story

[jtuck004]

Janine Wedel is a social anthropologist, whose book "The Unplanned Society" documented her take (vs. that of the Russians) of Poland's transition from Communism. She said that most explanations were wrong, and to understand why she said one had to get beneath the surface to see the unofficial institutions and connections.

She credits that experience with her ability to "burrow under the surface" of the financial institutions that are at the root of our financial crisis to get at the information that is overshadowing the real threat.

...bankers (like Tajik villagers) operate as a tightly defined group, with specific cultural patterns and a quasi language (or jargon) of their own. Also like Tajik villagers, bankers are generally trained to think in rigid "silos" and, as a result, find it hard to see how their overall system operates, or to see the contradictions in their own rhet­oric and internal organizations.

...

Talking about their "narrative, Wedel says " that empowers the who can say, 'listen Congress, listen policymakers, we're the ones who know what's going on. So just back off. There's no way you can understand unless you have a degree in advanced math or advanced physics."

...

With journalists stumped, could anyone in the Washington power "village" stand in the way of runaway derivatives, and the banks that wanted to keep them unregulated? Ironically, there were few policymakers more capable of understanding derivatives or their real world impact than Clinton Treasury Secretary Robert Rubin and his deputy Lawrence Summers. And both were there when derivatives could have been at least partially reined in before they became, to quote Warren Buffett, "financial weapons of mass destruction." Instead they did exactly the opposite, blocking key regulation at pivotal moments, as we saw in Summers' remarks above, with Rubin going on to benefit from this deregulated Wild West when he left Washington and returned to Wall Street as a top executive.

...

And derivatives remain unchecked. Just because the economy cratered doesn't mean that all these money-printing machines have disappeared. According to calculations by Bernstein Research, Goldman Sachs could lose 41 percent of its profits if the new derivatives regulations pass. Banks generally don't break down their figures on this part of their business (surprised?), but it seems fair to estimate the percentage of the bank revenue that comes from derivatives is solidly in the double-digits (at some it could be more than 50%) To put this in perspective, imagine a food company that gets half its revenue from selling products that go totally unregulated by the FDA, and whose practices are hidden from both regulators and journalists.

More here...

As it turns out, Goldman has nothing to worry about. The regs that would have caused the above mentioned loss in their earnings have been stripped from the finreg legislation. Much of the work will continue to operate away from public scrutiny.

The behavior of these groups on Wall Street, along with the cooperation and support they have gotten from the current and past administrations is at the root of why 30 million people are unemployed and underemployed. Despite their recent history they are rebuilding the very financial structures that led to the lives of so many people being ruined, perhaps forever.

[Hawkowl]

1. This is why the 'Reform' is a sham

The very bomb that detonated, i.e; the derivative bomb, has been rearmed. Nothing has been done to TBTF or the murderous oligopoly running the world's money supply. The economy simply can not recover until these problems are fixed. WILL. NOT. RECOVER.

[girl gone mad]

2. Rec. n/t

[Festivito]

3. Imagine that food analogy as a food supply 40 times what we eat each year.

and it all would be unregulated and untested health-wise, and its shelf life is not known.

Now imagine that the amount out there is disappearing since around 2008 at a rate close to the amount people in the country would eat and no one is noticing its disappearance.