The shadow bailout: How big banks bilk US towns and taxpayers
Published Mar 22 2012 by Common Dreams, Archived Mar 22 2012
http://www.energybulletin.net/stories/2012-03-22/shadow-bailout-how-big-banks-bilk-us-towns-and-taxpayers
The shadow bailout: How big banks bilk US towns and taxpayers
by Ellen Brown
The toxic culture of greed on Wall Street was highlighted again last week, when Greg Smith went public with his resignation from Goldman Sachs in a scathing oped published in the New York Times. In other recent eyebrow-raisers, LIBOR ratesthe benchmark interest rates involved in interest rate swapswere shown to be manipulated by the banks that would have to pay up; and the objectivity of the ISDA (International Swaps and Derivatives Association) was called into question, when a 50% haircut for creditors was not declared a default requiring counterparties to pay on credit default swaps on Greek sovereign debt.
Interest rate swaps are less often in the news than credit default swaps, but they are far more important in terms of revenue, composing fully 82% of the derivatives trade. In February, JP Morgan Chase revealed that it had cleared $1.4 billion in revenue on trading interest rate swaps in 2011, making them one of the banks biggest sources of profit. According to the Bank for International Settlements: