Financiers Scrambling over Imminent Derivatives Blow-Out
Aug. 23, 2016 (EIRNS)—Wall Street’s Bloomberg news service admitted on Monday that the financiers are desperately trying to "unwind" or dump onto somebody else the so-called "Level 3" assets claimed on the books of the casino banks. Bloomberg named three European giant banks, Deutsche Bank, Crédit Suisse, and Barclays, as their greatest concern, which claimed to have $102.5 billion of these financial derivatives on their books at the end of June. That’s "more than half their combined shareholders’ equity," Bloomberg wrote.
"Level 3" assets are financial derivatives to which the banks assign whatever value its officers choose, because the derivatives have no "market" valuation, since no one is willing to buy them. It is an open secret that, in the current breakdown of the system, "Level 3" assets have become totally "illiquid," that is, worthless, because there is no one who could, or would, buy them. (Except, apparently, Citigroup, which bought a portfolio of credit-default swaps from Credit Suisse recently!)
In an interview with Bloomberg TV on Monday, Royal Bank of Scotland chairman Howard Davies acknowledged that so-called Level 3s "are hard to unwind... It’s not that they are not performing," he lied, "but if a bank needs more capital, they are impossible to realize, as there just isn’t a ready market for them." He spoke of how some credit default swaps and interest-rate "hedging products" classified as Level 3 have maturities of as much as 30 years and structures that make them "very, very difficult to exit."
New shocks to the derivatives bubble are projected from the Sept. 1 deadline for the big casino banks to meet new collateral requirements and other regulations on derivatives, imposed by the United States and Japan in a futile effort to make "more secure" the over-the-counter derivatives market which the bankers estimate at no less than $493 trillion globally. The new rules were supposed to be imposed also by the European Union, Singapore, Hong Kong, and Australia, but those nations extended the deadlines, from fear of the results.