Too big to fail or too small to matter?

A Credit Default Swap (CDS) is insurance on loans to insure the lender of payment if default occurs, it’s called hedging, and on Wall Street, they’re easy to buy. First, the companies take out a loan from the bank, then the banks who loan the money and sell the CDS’ buy or sell stock in the borrowers’ company which manipulates the price of the stock and the value of the company.


JPMorgan Chase lost $2 billion in six weeks with depositors money on CDS’. So who’s defaulting on their payments and why aren‘t we hearing about it?

The Volcker Rule in the Dodd/Frank law which recently passed allows for hedging of risk, but doesn’t allow banks to use depositors money to make high risk bets, since the deposits are insured by the federal government. CEO and Chairman Jamie Dimon urged traders in their London office to take more risk and at the same time saying he didn’t know what was going on, he had people he trusted. Now he’s calling the practice an “economic hedge.” The new definition of a bankers’ casino bets gone bad.

The real risk eliminator on Wall Street has been the US Government, bailing out banks since Nixon was president. Subsequently, and with the implicit backing of the US tax payer, risk knows no bounds on Wall Street. It’s a different story on Main Street, make a bad bet and you lose, no hedging for us. Yet Jamie Dimon won’t even so much as lose his job making bad bets with depositors’ money, as “moral hazard” has been eliminated for big banks too big to fail. But it‘s still held as a major obstacle against a reduction of principal amongst those too small to matter, or can’t afford the lobbyists.

Matt Taibi of Rolling Stone magazine said of Wall Street Bank Goldman Sachs, that they’re a “giant squid on the face of humanity”. It’s all the banks, they have become one giant financial system herding people and governments into giving them global fortunes and international power.