The Looming Quadrillion Dollar Derivatives Tsunami
The Looming Quadrillion Dollar Derivatives Tsunami
On Friday, March 10, Silicon Valley Bank (SVB) collapsed and was taken over by federal regulators. SVB was the 16th largest bank in the country and its bankruptcy was the second largest in U.S. history, following Washington Mutual in 2008. Despite its size, SVB was not a “systemically important financial institution” (SIFI) as defined in the Dodd-Frank Act, which requires insolvent SIFIs to “bail in” the money of their creditors to recapitalize themselves.
Technically, the cutoff for SIFIs is $250 billion in assets. However, the reason they are called “systemically important” is not their asset size but the fact that their failure could bring down the whole financial system. That designation comes chiefly from their exposure to derivatives, the global casino that is so highly interconnected that it is a “house of cards.”
Read the full article on ScheerPost here.
At this point the Fed should be pressured to intervene when there's a "safe harbor" stampede for collateral and then let the matter play out in court all the way up to the Supremes. Isn't it time for the Federalist Society to decide whose side they're on? As the Fed most recently demonstrated in 2019 the repo market can be stabilized. Let the OTC derivatives junkies twist in the wind. That's a better solution than anything North Dakota can deliver.
Bush jr. as I recall, allowed the M3 money supply information to go unreported thus bringing the system collapse ever closer and the timing would be known only to few.