Who Were the Winners on Interest-Rate Swaps? 27 comments
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In recent months, we have been hearing about institutions and municipalities all over the world who are suffering huge losses on the interest-rate swaps negotiated by U.S. big-banks.
Jefferson County, Alabama, is set to become the largest municipal bankruptcy in U.S. history – due solely to massive losses on the interest-rate swaps sold to the county by JP Morgan (JPM). A recent Bloomberg article on this victim of Wall Street provided no firm estimates as to the ultimate amount of losses suffered. However, we can infer the amount of those losses by looking at another institution scammed in this manner: Harvard University.
Harvard recently announced a $500 million loss on its own interest rate swaps, merely to partially exit those swaps. The $500 million covers swaps on just $1.1 billion of Harvard debt (equal to an annual interest rate of nearly 50%). A Bloomberg article on this scam noted that Harvard would pay an additional $425 million in penalties on swaps covering another $764 million of Harvard debt.
With Jefferson County using interest-rate swaps on about $5 billion of debt, clearly its losses will exceed $1 billion – the only question is how many billions will the county lose. The Alabama bureaucrat who negotiated the deals is now looking at spending decades in prison. It seems that the bankers who operated this scam didn't think the interest-rate swaps would sell themselves, so they showered him with gifts like Rolex watches and designer clothes – in exchange for the $7 million in fees alone which the bankers received for scamming the county.
There are two pieces of information which have not been included in any article on this topic – since this story first broke nearly one year ago. First, who was the bankster-intermediary who negotiated the deal (and presumably also made the bribes to close the deal)? More importantly, who will be making over a billion in profits on this scam?
Most likely it was JP Morgan, but for some strange reason JP Morgan has no comment on this deal – despite how much banksters love to brag about their “profits”. It is a very simple question, since there are only two possibilities, yet no one in the mainstream media seems to have the slightest curiosity about this enormously important fact.
While it is possible that JP Morgan served as an intermediary, negotiating this deal between Jefferson County and another third-party financial institution, most likely it was JP Morgan, itself, who also took the other side on this bet. Keep in mind that unlike many financial transactions, it is guaranteed that there will be a loser and a winner on every one of these swaps. Interest rates can only go up or down. If they go up, one party wins the bet, if they go down, the other bettor wins.
If JP Morgan negotiated and financed this deal, there is a clear conflict of interest – due to a lack of an “arm's length” relationship because the negotiator is also the other bettor (much like a “bookie”). On the other hand, if a third-party was involved, it raises other issues about these “negotiations”.
Obviously the JP Morgan banker who scammed Jefferson County was able to con them into believing that U.S. interest rates would be going much higher. But what would this same banker be saying to a third-party bank who assumed the other side of the bet? Presumably it would be something along the lines of “I found another sucker willing to bet on higher interest rates, do you want to cash-in on this deal?” The only alternative message would have been something like, “I'm trying to help this county save money on their interest payments. Will you take the losing side of this bet to help subsidize the county's debt?”
Knowing bankers as we now know them, which scenario has the ring of truth to it?
The reason why conflict of interest arises in this situation as opposed to a normal insurance contract, where the insurer negotiates and finances their insurance contracts is because of one, very important factual difference. When an insurer sells fire insurance on a home, the insurer's own behavior has no effect on the probability of a fire occurring. Conversely, with U.S. bankster-oligarchs dominating the entire U.S. debt market, their own behavior dramatically influences which side will/would win the bets on these interest-rate swaps.
Given the inherent conflict of interest in all these interest-rate swaps, and given that all the news reports on these transactions show the non-bank always on the losing end of these bets, you don't have to be a suspicious precious metals commentator to conclude that interest-rate swaps represent yet another trillion dollar Wall Street scam.
Let us not lose site of the accomplice who made this interest-rate swap scam possible. Even at the absolute peak of the U.S. housing bubble, when anyone with even a modest understanding of economics knew that a huge crash was coming, “Helicopter” Ben was telling the world (and Wall Street scam-victims) that the U.S. had a “Goldilocks economy” where U.S. markets and U.S. house prices would simply keep moving higher forever.
Without Bernanke's propaganda, there is no way that Wall Street could have lined up a huge string of victims who would all willingly take the losing side on Wall Street's scam. Never forget that as the perpetrators of this multi-trillion Ponzi-scheme based on the U.S. housing “bubble”, Wall Street bankers knew that a crash in financial markets was coming – when (as with all Ponzi schemes) the scam eventually 'blew up'. Thus, they knew in advance which side would win all of these interest-rate swaps – since their own, criminal conduct guaranteed this.
Thus, the bigger news on all these stories on the huge bets made on interest-rate swaps is not “who lost?”, but rather “who won?” For instance, if the shills in the business media could report on even a single swap where a bank was not on the winning end, it might be possible to convince people that interest-rate swaps were not simply another, giant Wall Street fraud-scheme. Absent such examples, the circumstantial evidence is overwhelming. For those who sneer at such “proof”, I should point out that the U.S. criminal justice system regularly executes people – based upon circumstantial evidence.
This brings me to the Harvard scam. There is one critical difference between the Harvard interest-rate swap scam and the Jefferson County scam. At the time Harvard made its billion-dollar bad bet, the president of Harvard was life-time banker, and now senior economic advisor to the Obama regime, Larry Summers.
As one of the most arrogant people on Earth, Summers will tell anyone who would listen that he's much too intelligent (and experienced in the banking industry) to be scammed for $1 billion in financing less than $2 billion of Harvard's debt. Thus, the open question is how could this brilliant economist, and experienced banker allow the institution which he ran to be cheated in this manner?
Presumably, Summers would not have been given the inane spiel of a “Goldilocks economy”, which the banksters used to con all their other scam-victims. So how did Summers allow Harvard to get scammed out of $1 billion?
Bloomberg also did a long piece on the scamming of Harvard. Yet in all those paragraphs, they only could squeeze in two sentences about Summer's role in the scam. One short sentence noted he was Harvard's president when the scam occurred, the other short sentence was a “no comment” from a White House spokesman.
Surely if Bloomberg couldn't summon up more curiosity about Summer's role in the fleecing of Harvard that they could have come up with a follow-up piece – on the extraordinarily poor judgment and inherent corruptness of the Obama regime, as evidenced by Obama's choices for senior positions in his government.
The first act of Obama as president was to hand the keys to the U.S. Treasury to a confirmed tax-cheat – Tim Geithner. As regular readers will recall, Geither was also head of the New York Fed, and thus the primary regulator of Wall Street during its crime-spree. Obama followed this up by naming as his senior economic advisor a man who managed to suffer a $1 billion loss in financing less than $2 billion of debt.
While nearly the entire U.S. financial sector has become a cesspool of corruption, some aspects of its relentless scamming are much easier to identify and prove than others. Clearly, the deals involving interest-rate swaps are one such example. These are deals with huge losers and huge winners – and apparently all the winners were U.S. banks.
Absent any evidence to the contrary, we have yet another example of the blind (or spineless?, or corrupt?) media not even willing/able to zero-in on the real “news” from these stories. As a result, I would encourage readers to keep their own “score-cards” on the interest-rate swaps which get mentioned. Observe whether 100% of the winners continue to be U.S. banks. Observe whether the media ever takes note of this peculiar fact.
Previously, I heaped scorn upon Wall Street banksters – by pointing out how they had gotten caught holding trillions of dollars worth (in nominal value) of their own scam-products. However, apparently I have failed to give them enough credit. While Wall Street was too greedy to (willingly) cease to expand its housing-sector Ponzi scheme, as the end approached, the banksters were extremely busy in contriving their own trillion-dollar “insurance policy”.
To pay for this “insurance” (essentially another Wall Street bail-out), countless thousands of innocent victims have already lost their jobs as these institutions try to recover from these huge losses. More than a thousand people in Jefferson County alone will lose their jobs just from this single contract. Multiply that by the hundreds (thousands?) of such “deals” arranged by Wall Street, and we begin to get an idea of the real story on interest-rate swaps.
Disclosure: I hold no position in JP Morgan
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This "smart guy" took more campaign contributions from Wall Street (since he first became a senator) than ANY other U.S. politician over that same period of time.
Does this sound like a man who will "crack down" on the Wall Street banksters?
On Oct 22 06:50 AM Moochacha wrote:
> Interesting point on L. Summers.
>
> Maybe the only ones that can clean up this mess are the ones who
> made it, eg AIG had to pay million dollar bonuses to employees who
> are unwinding the swaps they created because no one else knows how
> to.
>
> You have given Obama an unfair shake by saying he is corrupt I think
> he is a smart guy trying to deal with bankers from hell.
I seen the greatwhite post above, and I thought your name was familiar. I think you sold me my South African Gold Bullion Krugerrand from California Numismatic Investments over the phone a few years back.
Are you that Jeff Nielsen
Thanks
GoldLovingPuppy
P.S. Don't pay attention to those mean words from the shark poster, you were nice to me!
On Oct 22 10:36 AM GreatWhite wrote:
> "Banksters" "Parrots", "cheer Leaders", "pretend-journalists" "Market
> Pumpers", " pseudo-journalists"
>
> You try perpetrate yourself as an expert, professional, and more
> knowledgeable than all the "shills" out there in the media and yet
> your use of name calling and made up words (banksters...) and accusations
> is endless. Also since you are non-stop challenging the credentials
> and economic knowledge/theory of John Keynes, Ben Bernanke, Barron's,
> Fortune, and a host of other well known and educated people, journalists,
> govt and publications I believe that give us, the readers the right
> to question and challenge your credibility and experience. There
> is no indication in your profile about having any kind of economics
> degree, business degree or even ANY work experience in economics
> or business at all. You say you have a background in "Economics and
> Law". This is very obtuse and lacking in anything substantive about
> who you are. When Googled the only job reference found anywhere for
> you, (who I am assuming is you which a reasonable assumption, unless
> there is another gold pumping Jeff Nielsen out there, please correct
> me if I am wrong) is some helpless fool thanking you for your assistance
> in pawning off some gold coins to him over the phone. The only conclusion
> that can be drawn from this is you are a phone sales jockey for a
> company peddling gold. What I also find amusing is that this "Job"
> experience about you was referenced before in someone else's comments
> and then surprisingly the website removes it from their testimonials
> a short time later. Fortunately Google still has it cached, so you
> can't hide very easily in this day and age of the internet.
>
> Here is the quote incase anyone is interested:
> "I recently received my first shipment of gold coins from you (invoice
> ... "Enclosed are…per my order to Jeff Nielsen by telephone…this
> is payment in full.
>
> So my question is. What gives you credentials that we as reader should
> take for fact from your opinion and analysis over that of Baron's,
> Fortune, Bernanke, Keynes or any of the people who openly acknowledge
> there education and work experience to the public, so we the reader
> know how serious to take what you have to say as anything but rambling
> babble from someone who wants you to buy gold!!
>
> GreatWhite
Ah..Unrequited love. I see you've been spending a lot of time 'investigating' Jeff.
On Oct 22 10:36 AM GreatWhite wrote:
"What gives you credentials that we as reader should take for fact from your opinion and analysis over that of Baron's, Fortune, Bernanke, Keynes or any of the people who openly acknowledge there education and work experience to the public.."
So I take it you disagree with Jeff. There is a simple solution. Just stop reading Jeff's articles. If not for your own sake please do it for us. No..Really..Please.
It wasn't hard - I've been in the business for nearly 3 decades and I had my clients out of most US stocks two years ago.
You need to understand that media and most so-called experts are merely Wall Street's mouthpieces much as Pravda and Tass were for the Soviet Union.
On Oct 22 10:36 AM GreatWhite wrote:
> "Banksters" "Parrots", "cheer Leaders", "pretend-journalists" "Market
> Pumpers", " pseudo-journalists"
>
> You try perpetrate yourself as an expert, professional, and more
> knowledgeable than all the "shills" out there in the media and yet
> your use of name calling and made up words (banksters...) and accusations
> is endless. Also since you are non-stop challenging the credentials
> and economic knowledge/theory of John Keynes, Ben Bernanke, Barron's,
> Fortune, and a host of other well known and educated people, journalists,
> govt and publications I believe that give us, the readers the right
> to question and challenge your credibility and experience. There
> is no indication in your profile about having any kind of economics
> degree, business degree or even ANY work experience in economics
> or business at all. You say you have a background in "Economics and
> Law". This is very obtuse and lacking in anything substantive about
> who you are. When Googled the only job reference found anywhere for
> you, (who I am assuming is you which a reasonable assumption, unless
> there is another gold pumping Jeff Nielsen out there, please correct
> me if I am wrong) is some helpless fool thanking you for your assistance
> in pawning off some gold coins to him over the phone. The only conclusion
> that can be drawn from this is you are a phone sales jockey for a
> company peddling gold. What I also find amusing is that this "Job"
> experience about you was referenced before in someone else's comments
> and then surprisingly the website removes it from their testimonials
> a short time later. Fortunately Google still has it cached, so you
> can't hide very easily in this day and age of the internet.
>
> Here is the quote incase anyone is interested:
> "I recently received my first shipment of gold coins from you (invoice
> ... "Enclosed are…per my order to Jeff Nielsen by telephone…this
> is payment in full.
>
> So my question is. What gives you credentials that we as reader should
> take for fact from your opinion and analysis over that of Baron's,
> Fortune, Bernanke, Keynes or any of the people who openly acknowledge
> there education and work experience to the public, so we the reader
> know how serious to take what you have to say as anything but rambling
> babble from someone who wants you to buy gold!!
>
> GreatWhite
There was an interest rate swap swindle in my area also pulled off by JP Morgan. They "swindled" the Pittsburgh Water Authority and caused water rates to skyrocket.
I tried to get this "swindle" brought to light to the local media here, but was of course shot down.
They were interested in talking to me at first when they saw my years of experience in the investment industry and writing, but when I told them what I wanted to talk about - how the management at the Pittsburgh Water Authority was taken advantage of by Wall Street, they suddenly 'lost interest'.
Education Is Not Wisdom. You Do Not Need Credentials To Be Wise and A Credential Does Not Guarantee Wisdom. Status Does Not Effect Truth.
Language Is Ever Changing - "Made Up Words" That Effectively "Communicate" Sometimes Become Vernacular.
Yes, Jeff has a Cynical Presentation; Anger Is Merited. No One Is Correct All The Time; The Ones That Are Close Are More Valuable. Paradigm And Perspective Alter What Is Perceived.
Reality Will Be Reality, Whether Believed In Or Not.
Debate Is The Distillation Of Reality.
Choose Substance Over Symbolism.
On Oct 22 10:36 AM GreatWhite wrote:
> "Banksters" "Parrots", "cheer Leaders", "pretend-journalists" "Market
> Pumpers", " pseudo-journalists"
>
> You try perpetrate yourself as an expert, professional, and more
> knowledgeable than all the "shills" out there in the media and yet
> your use of name calling and made up words (banksters...) and accusations
> is endless. Also since you are non-stop challenging the credentials
> and economic knowledge/theory of John Keynes, Ben Bernanke, Barron's,
> Fortune, and a host of other well known and educated people, journalists,
> govt and publications I believe that give us, the readers the right
> to question and challenge your credibility and experience. There
> is no indication in your profile about having any kind of economics
> degree, business degree or even ANY work experience in economics
> or business at all. You say you have a background in "Economics and
> Law". This is very obtuse and lacking in anything substantive about
> who you are. When Googled the only job reference found anywhere for
> you, (who I am assuming is you which a reasonable assumption, unless
> there is another gold pumping Jeff Nielsen out there, please correct
> me if I am wrong) is some helpless fool thanking you for your assistance
> in pawning off some gold coins to him over the phone. The only conclusion
> that can be drawn from this is you are a phone sales jockey for a
> company peddling gold. What I also find amusing is that this "Job"
> experience about you was referenced before in someone else's comments
> and then surprisingly the website removes it from their testimonials
> a short time later. Fortunately Google still has it cached, so you
> can't hide very easily in this day and age of the internet.
>
> Here is the quote incase anyone is interested:
> "I recently received my first shipment of gold coins from you (invoice
> ... "Enclosed are…per my order to Jeff Nielsen by telephone…this
> is payment in full.
>
> So my question is. What gives you credentials that we as reader should
> take for fact from your opinion and analysis over that of Baron's,
> Fortune, Bernanke, Keynes or any of the people who openly acknowledge
> there education and work experience to the public, so we the reader
> know how serious to take what you have to say as anything but rambling
> babble from someone who wants you to buy gold!!
>
> GreatWhite
Thanks for discussing "Interest Rate Derivatives". More - Who Cares The Casualties, We Got The Fees - "Financial Engineering" Abused By The "Too Big To Fail".
To Add Another Level Of "Conflict Of Interest" - JP Morgan IS One Of The Functional Arms Of The Presidents Working Group On Financial Markets. Result - Insider Information AND Back Door Capital When "Calamity" Is Detected.
How Nice To Be Under The Protection Of The - GMob. You Can Do No Wrong. If Reprimand Is Presented, The Effectiveness Of The "Market Lever" Is Reduced; Guess The Outcome.
Que Bono; Follow The Money => Reveals Much.
You appear to hold yourself of higher moral character than him and that is the FARCE>
Great rocket science from you again.
GW
On Oct 22 03:45 PM Jeff Nielson wrote:
> You REALLY are brain-dead. Kindly point out where (either here or
> anywhere else) I "challenged the intellect" of Obama.
>
> I have never disputed he's an intelligent man (and a gifted orator).
> Just because he's intelligent doesn't mean he's not corrupt.
>
> I noticed you 'forgot' to address any of those points.
1st you never re-addressed from a previous POST the fact that this Author does think 9-11 was a US conspiracy and the US government was responsible for over 3000 deaths of our citizens, which leads me to my second point. There is no use debating him with facts because unless it is negative data/news that is being reported by every major government it is held as LIES. ..So to summarize ..If it's Negative its true, if its positive its a LIE..So the housing numbers, every economic indicator, gold inventories, 9-11 they are all lies unless they suit his hate mongering ways. Yet he then holds all data from China as fact and some smucks website on a residential DSL line as the holy grail of info. So there is no use in logical debate or swordsmanship.
So my motives at this point is to inform those who are NOT his sheep following shills that he is a data twisting, gold pushing, pocket padding FARCE of an author and don't take what they read as serious.
GreatWhite
On Oct 22 11:22 AM El Pedro wrote:
> Exactly what about Mr Nielsen's commentary do you dispute factually?
> We already know you opinion.
To much coincidence for me!
GreatWhite
On Oct 22 03:40 PM Jeff Nielson wrote:
> GoldLoving,
>
> Since neither you (nor those idiots) are even spelling my name CORRECTLY,
> I think that's a pretty good 'clue' that I am not.
GLP
On Oct 22 03:40 PM Jeff Nielson wrote:
> GoldLoving,
>
> Since neither you (nor those idiots) are even spelling my name CORRECTLY,
> I think that's a pretty good 'clue' that I am not.
Thanks again for all your help & take care.
GoldLovingPuppy
On Oct 22 03:40 PM Jeff Nielson wrote:
> GoldLoving,
>
> Since neither you (nor those idiots) are even spelling my name CORRECTLY,
> I think that's a pretty good 'clue' that I am not.
The pot calling the kettle black!
GW
On Oct 22 08:40 PM Jeff Nielson wrote:
> 1. It is not a crime to sell bullion. We have TALKED about doing
> it at some point in the future, and very likely will do so. However,
> we are not doing so now, and I have never done so in the past.<br/>
>
> 2. The mental-midgets who seem to think that the idea of me selling
> gold has some great significance (who ever heard of a "financial
> advisor" who sells investments?) seem to think I have the luxury
> of sitting beside a phone all day taking orders AND doing all the
> writing on our site AND doing extensive "networking" on sites like
> Seeking Alpha.
>
> While I suppose it's somewhat flattering in how it implies I'm capable
> of "multi-tasking", hopefully the RATIONAL people who read my work
> will understand how entirely idiotic these two clowns are with their
> endless/pointless ranting.
>
> Finally, I would hope that Seeking Alpha would do a BETTER job of
> "policing" its site - and not allow these SAME two idiots to continually
> RE-REGISTER, after each time they have gotten their accounts CANCELED
> for their defamatory attacks.
You complain about "Defamatory attacks"
But just a little reading what you write about my country shows you defame us almost every day. You call our people dead beats, our president a liar, a crook, a peddler, our government is all liars, a killer of it's own people on sept 11 and then you complain when
someone puts a shoe in your mouth. What do you expect young man. You should try to be nicer and then maybe people would be
nicer to you. Your so angry did you get fired from your job or something?
GoldLovingPuppy
Those who bet on movement of interest rates through Government bond futures can suffer hefty loss as well, if their bet is wrong - and there are many of them. I don't know if government bonds, by your logic, are some evil products as well. That the bet is wrong is not a proof that dealing practice is problematic, and vice versa. Even when a bet is won, the ethnics need to be addressed. However, in suggesting that Harvard endowment's loss in IR Swap is a result of con practice by dealers, you either are really ignorent about this market, or being intentionally misleading.
GreatWhite
On Oct 23 12:05 AM acttang wrote:
> Jeff, you mixed many issues together in your piece to create a sensation.
> IR Swaps are used to put bets on interest rates (I know if I ever
> mentioned that it can be used to hedge rates risk it would sound
> like propagander), so naturally there is always a winner and loser.
> What's to be said about it? Aren't parties involved in all derivatives
> of all forms and shapes subject to the same consequence of being
> either winners or losers? Conflict of interest that might occur in
> derivatives dealing is not such a different issue than in the dealing
> of all other securities, including new issuance of debt or equity
> stocks.
>
> Those who bet on movement of interest rates through Government bond
> futures can suffer hefty loss as well, if their bet is wrong - and
> there are many of them. I don't know if government bonds, by your
> logic, are some evil products as well. That the bet is wrong is not
> a proof that dealing practice is problematic, and vice versa. Even
> when a bet is won, the ethnics need to be addressed. However, in
> suggesting that Harvard endowment's loss in IR Swap is a result of
> con practice by dealers, you either are really ignorent about this
> market, or being intentionally misleading.
You are a Shill for all the "Nielsen" bots and after reading your previous comments you are not even worth taking seriously,
GW
On Oct 23 02:22 AM Grumley wrote:
> Great White, I'm sorry to have to tell you this...but you are an
> idiot.
>
> GoldLoving you are not far behind.
>
> Try being stupid somewhere else. You are not influencing anyone here.
Choose Substance Over Symbolism.
What About "Event and Incident" Makes The Testimony Of An Angry Persona Untrue ???
Gold Loving Puppy => How does apearance factor in to Validity?? Do Not Be Mentally Minuscule.
All Information Is Filtered Through Others. You should be grateful there is discussion of the "Derivatives Market" At All. Without discussion it will never be fixed.
Stifling A "Position" By Insolence, Is Not Furthering Knowledge Nor Understanding.