My my. A few, now government funded, I might add, mega financial institutions (made that way with U.S. taxpayer help) are now lobbying against derivatives regulation.
It appears the great unregulated casino hall of derivatives can sometimes generate winnings. The last 6 months haul? $35 billion dollars.
Wall Street is suiting up for a battle to protect one of its richest fiefdoms, the $592 trillion over-the-counter derivatives market that is facing the biggest overhaul since its creation 30 years ago.
Five U.S. commercial banks, including JPMorgan Chase & Co., Goldman Sachs Group Inc. and Bank of America Corp., are on track to earn more than $35 billion this year trading unregulated derivatives contracts. At stake is how much of that business they and other dealers will be able to keep.
“Business models of the larger dealers have such a paucity of opportunities for profit that they have to defend the last great frontier for double-digit, even triple-digit returns,” said Christopher Whalen, managing director of Torrance, California-based Institutional Risk Analytics, which analyzes banks for investors.
The Washington fight, conducted mostly behind closed doors, has been overshadowed by the noisy debate over health care. That’s fine with investment bankers, who for years quietly wielded their financial and lobbying clout on Capitol Hill to kill efforts to regulate derivatives.
I think we need to kick out all of those financial institution lobbyists and sentence them to mandatory gamblers anonymous meetings.
Note, this is like going to a weekly poker game and one player, every single week on end, wins and you can lose...
Who is that winner? Goldman Sachs. But take heart...if you lose so big you can't pay them....you'll be sure to get a rescue under some claim of systemic risk. (See AIG pays out CDses at 100%).
Very nice reporting by Bloomberg, including linking to this report on Q1 2009 derivatives holdings by the Comptroller of the Currency.
I suggest reading this report, if you have not seen it, loaded with graphs, statistics and break downs on the derivatives market.
It shows 95% of all derivatives in the U.S. are in the hands of just 5 banks. Note of these five, Goldman Sachs, BoA, JPMorgan Chase, Citigroup, Morgan Stanley, three still have large amounts of TARP money (and we have no idea on the $2 trillion in loans from the Federal Reserve either). Morgan Stanley and GS repaid their TARP funds, GS returning large profits.