Far from reducing risk, derivatives increase risk, often with catastrophic results.
—Derivatives expert Satyajit Das, Extreme Money (2011)
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 rates—the benchmark interest rates involved in interest rate swaps—were 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.
by Ralph Nader
Hat tip: The Nader Page
March 1, 2010
The twin swelling heads of Empire and Oligarchy are driving our country into an ever-deepening corporate state, wholly incompatible with democracy and the rule of law.
Once again the New York Times offers its readers the evidence. In its February 25, 2010 issue, two page-one stories confirm this relentless deterioration at the expense of so many innocent people.
The lead story illustrates that the type of massive speculation—casino capitalism, Business Week once called it—in complex derivatives is still going strong and exploiting the weak and powerless who pay the ultimate bill.
Titled “Banks Bet Greece Defaults on Debt They Helped Hide,” the article shocks even readers hardened to tales of greed and abuse of power. Here are the opening paragraphs: “Bets by some of the same banks that helped Greece shroud its mounting debts may actually now be pushing the nation closer to the brink of financial ruin.”