Over-leveraged U.S. banks? Top 4 have $235.05 Trillion in OTC Derivatives

October 4, 2011 by · 3 Comments
Filed under: Credit News 

DAMN!?!?!??!   The United States only has a $14 trillion dollar annual GDP.  The world is around $100 trillion.    Sure looks like all that financial reform and new rules did a bunch.   All I seem to see from that is we have codified “Too Big Too Fail” so that we have to bail out these banks and they still are allowed these outrageous derivative positions.   Welcome to America, the place where as long as you make a big enough mess, we will not only bail your out but we won’t even bother throwing you in jail.

For all the crap I have given Ben Bernanke on this site (I do hope this makes it to you),  he did make one really good call today on C-Span and it gave me a little perspective into him as a person/chairmen/professor.   The question came from a Senator in the hearing about what Mr. Bernanke did to investigate and pursue these alleged criminal issues that have arisen since the crisis made all this wrong-doing apparent.  Mr. Bernanke responded in such an honest manner but it was a well needed slap in the face to our representatives.   He turned around an said that this was not the purview of the Federal Reserve.   AND HE IS CORRECT.

It is our responsibility as a society to punish these people but either because we are incompetent or our representatives are too lobbied, we did nothing.  How can we have the largest financial crisis in the history of the world and really no one goes to jail??? Even after the S&L crisis, we had over 700 prosecutions.  I am so sick of having to say this but we have to do something after every crisis and make sure to set the right precedence.  Quit letting politicians tell you “we need to look forward and not into the past”.   You know what I say to that?   F*$k Y*@! (really)

USA Watch Dog (Greg Hunter) – I keep hammering away at the fact the Fed doled out $16 trillion in the wake of the credit crisis of 2008.  This is an enormous sum that is greater than the all goods and services produced in the U.S. in a single year.  Domestic banks and companies got the money, right along with foreign banks and companies.  In effect, the Federal Reserve bailed out the world financial system.  Now, we are right back to square one facing another financial meltdown with European banks and sovereign debt.  If the Fed spent $16 trillion, why in the heck is this problem not fixed and why isn’t the world economy taking off like a rocket?”  The simple answer is it wasn’t enough money.

The Bank of International Settlements pegs the total world over-the-counter (OTC) derivative exposure at around $600 trillion, but many experts say the real figure is more than twice that amount.  No matter which figure you use, it is a gargantuan sum.  OTC derivatives are an unregulated dark pool of money with no public market.  These are basically debt bets between two entities on things such as credit risk, currencies, interest rates and commodities.  According to the latest report from the Comptroller of the Currency, just four U.S. banks have an eye popping $235 trillion of OTC derivative leverage. (Click here for the complete Comptroller of the Currency report.)  As a nation, U.S. banks have a total OTC derivative exposure of $250 trillion. So, the fact that just four U.S. banks have this much leverage and risk is astounding!  The banks are listed below in order of size and approximate OTC exposure:


$78.1 trillion OTC derivatives


$56.1 trillion OTC derivatives


$53.15 trillion OTC derivatives


$47.7 trillion OTC derivatives

Considering that the total assets of these four banks are a little more than $5 trillion, I see a frightening amount of risk with a total derivative exposure of $235 trillion! This is nearly 50 to 1 leverage.  On top of that, assets such as real estate or mortgage-backed securities can be held on the books at whatever value the banks think they can sell them for in the future.  I call this government sanctioned accounting fraud, or mark to fantasy accounting.  Who knows what the true value of the banks “assets” really are.

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3 Responses to “Over-leveraged U.S. banks? Top 4 have $235.05 Trillion in OTC Derivatives”
  1. MarcusFenix says:

    This is a great read. I was digging into the OCC Documentation on Derivatives and I was blown away. How is none of this discussed in the media? Every American needs to wake up and realize that we are one more move away from complete financial ruin.

    97% of these Derivatives according to the OCC are all CREDIT DEFAULT SWAPS. So what are these banks underwriting, and further, how can the ISDA Judge on what is or is not a “Default Event” triggering these in Greece, when top banks make up the ISDA?


    It’s all been a long time coming. Was it Pope Leo who heard Jesus answering Satan’s complaints and gave him the 20th Century to decieve the whole world (with wealth –phoney wealth, fiat wealth), Socialism/Communism and the like? At any rate, the dice were cast when Nixon took us off the gold standard: Banking regulations became non-existent, required reserves are in name only, and since money is really only computerized ones and zeroes, the banks are producing money, not the FED, not the US Treasury –out of thin air.

    Truly, the last desperate act of a failing and bankrupt government is to raid its own treasury. In the end, the government, grown huge and bloated, cares nothing for its own people, and the votes of the people mean nothing. The whore of Babylon …drunk on the blood of the martyrs –We the People.

    Terrible times lie just ahead.

  3. Peter says:

    Government is not going to do anything about it, the people of government (at top) are involved in it and profiting like there is no tomorrow.

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