Only 3 mega wall street banks hold $150 Trillion in derivatives which are basically insurance policies on financial asset prices. If they have to pay on these policies… well they can’t. So the central banks better keep those bubbles propped up.
Risky derivative bets made by the mega banks on Wall Street, offloaded onto inadequately capitalized counterparties, were at the core of the collapse of the U.S. financial system in 2008. That collapse left millions of Americans without jobs, which led to millions of families and traumatized children losing their homes to foreclosure. The bank bosses got their million-dollar bonuses from the taxpayer bailouts and the Federal Reserve secretly pumped in $29 trillion over 31 months to shore up the failing trading houses on Wall Street and their foreign derivative counterparties.
Wall Street banks have rebuilt that derivatives doomsday machine today – a $168 trillion monster concentrated at four mega banks on Wall Street. But as we read through dozens of pages of written testimony submitted by witnesses for today’s Senate Banking hearing, the word “derivative” did not appear once.