Tuesday, December 18, 2007


This is fascinating. If this were you or me asking for money on these terms we'd be laughed out of the bank.

Citigroup, Bank of America and JPMorganChase, holders of major quantities of derivatives in which, one way or another, your bank account/pension fund may be invested, and who are losing big time as a result (right now we're only feeling the spray of the tsunami), are calling upon other banks around the world to put money into a fund to rescue whichever poor banks that in their mastery of financial acumen threw big money (i.e., yours) onto these mountains of derivatives and then sold them on, all the way to the last fool, just ahead.

Now they want everybody to chip in and rescue them. Though the proposed fund would comprise but one droplet in the tsunami of derivative-linked debt that is now looming over the world, you gotta admire the chutzpah, the sheer, imitation brass of it. The biggest holders of derivatives? Citigroup, Bank of America and JPMorganChase. ("Today, more than ever before in the short history of derivatives, one leading United States institution effectively IS the derivatives market. This company, as we will explore in this essay, is the American giant superbank JPMorganChase (www.JPMorganChase.com)."

But for reasons to do with the economic vision and loss-avoidance generally associated with financial institutions, big Japanese banks are saying: do we really want to throw this much more money out the window?

The coming collapse of the modern banking system

"The banks don't have the reserves to cover their downgraded assets and the Federal Reserve cannot simply monetize their bad bets. There's no way out."

Dec 22 update: Banks Decide Not to Go Ahead With Super-SIV Fund, WSJ Reports...
They'll make the Scrooge announcement on Christmas eve, to take advantage of extended holiday amnesia... Mortgage holders, fund investors and pensioners should be this crafty...

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