I remember when they 1st came to Cleveland, early 70's I think, 69c and the burger WAS flame broiled and the meat was bigger than the bun. Now...not so much. Perhaps they flame broil it, freeze it then nuke it...not the same as before. Sad.
I remember when they 1st came to Cleveland, early 70's I think, 69c and the burger WAS flame broiled and the meat was bigger than the bun. Now...not so much. Perhaps they flame broil it, freeze it then nuke it...not the same as before. Sad.
Cheap, plentiful and always where you don’t want it to be—and yet somehow, everyone who needs it is running out of sand. We can’t get more, we can’t make more, but the demand for sand won’t stop.
We're addicted to something we didn’t even know we were using: sand. And now we’re starting to run out of it. The addiction began thousands of years ago, when civilizations began making glass and ceramics. Glassworking led to revolutionary technologies like the microscope, the telescope, and eyeglasses. Over time, more uses for sand were discovered. Reinforced concrete, made from water and cement that’s mixed with sand, gravel, and other aggregates and then reinforced with metal bars or mesh, allowed us to build 160-story skyscrapers, and asphalt let us create millions of miles of roadways. Sand is used to make glass and silicon for televisions, computers, and smartphones, and in hydraulic fracturing (“fracking”) by oil and gas drillers.
We use sand to make elastics in our clothing, as an anticaking additive in our food, and (as an ingredient in silicone) as a way to enlarge our breasts. It’s even dumped along coasts to expand land masses. All these innovations and constructions and conveniences require sand, lots and lots of sand. Coastal sand dunes, beaches, and riverbeds are all made from quartz. While quartz is one of Earth’s most abundant natural resources, it can take hundreds or even thousands of years of erosion to create sand from quartz.
The invention of reinforced concrete in the early 1900s made buildings more resistant to natural disasters and prompted a demand for sand that nobody could have predicted. Today, rapid urban population growth and the related global construction boom has created a massive demand for homes and buildings and infrastructure made of concrete. The number of people living in cities globally has risen from around 750 million in 1950 to around 4 billion today, according to the United Nations.
To accommodate the demand of a growing global population, about 50 billion tons of construction-grade sand is needed each year. As a result, the quartz sand supply is being depleted at an astonishing and unsustainable rate. Author Vince Beiser has written the authoritative book on sand, The World in a Grain, in which he describes not only how sand has transformed civilization, but also how our insatiable demand for it is affecting the environment.
Beiser says that urban developers in the United States dredged and mined sand from beaches, riverbeds, floodplains, and bays close to the cities they were building. In time, however, nearby natural habitats were decimated, local sand sources dwindled, and environmental regulations tightened, leading sand-mining companies to look abroad to meet the growing demand. Sand is now shipped vast distances to get to construction sites.
The sand shortage is sending prices ever higher. The price of gravel and sand has more than quintupled since 1978, according to the U.S. Bureau of Labor Statistics. The cost is passed on to consumers, including homeowners. Unsustainable sand mining and dredging practices destroy river and ocean ecosystems and generate pollution, and the process of making cement is itself a major greenhouse gas contributor, Beiser notes.
Instead of employing more sustainable mining practices, some mining companies take advantage of countries with less restrictive environmental laws, lackadaisical enforcement, and minimal community opposition. Demand for sand is so high in some countries that black markets have emerged.
Beiser says that a “not in my backyard” response can do a lot of harm when it comes to sand mining, and that activists should instead push for use of more sustainable mining methods so that companies don’t just move to places with fewer barriers to extraction.
Unfortunately, the sand that modern civilization demands so much of—coarse, water-swept sand from beaches, as opposed to smooth, wind-swept sand from deserts—is being dredged and mined at a far greater rate than it is naturally replenished.
While much of the world struggles to get enough quartz sand, other parts of the world are being inundated with desert sands.
Beiser writes that “at the same time that we’re running out of the sand we need, we’re generating more of the kind we don’t.”
In the ancient Saharan cities of Chinguetti in Mauritania and Araouane in Mali, sand from the desert is lifted by wind and settles atop streets and buildings. Such desertification is happening around the world.
Beiser describes the desertification he saw firsthand in Duolun County, southeast of the Gobi Desert, in Inner Mongolia. He explains that communities such as Duolun County are seeing underground aquifers depleted, native plants dying, and the topsoil blown away, leading to an ever-encroaching desert. Contributing factors include a growing population, over-farming, overgrazing, deforestation, and the water demands of industry.
Since 1978, China has planted tens of billions of trees in hopes of reversing the desert’s expansion. But researchers worry that trees—as opposed to native shrubs and grasses that have grown in the area for thousands of years—are depleting subterranean aquifers to such an extent that soon nothing will flourish in the area. It may take decades to see the long-term effects of afforestation efforts such as China’s project.
Confronted with colossal challenges such as the global sand shortage and the significant environmental impact of the cement-making industry, Beiser suggests that “the question is not how do we use less sand, but how do we use less of everything?”
Beiser says cities must adapt and build in ways that require less resources. “Let’s have more bikes and fewer cars,” he says. “If you reduce car ownership by 10 percent, that’s 10 percent of homes without a need for garages and driveways,” which require sand to build.
While the sand shortage may seem bleak, there are many people responding to this problem. Scientists at the Imperial College of London are testing a low-carbon, biodegradable alternative to concrete. Their product, called Finite, uses desert sands and other abundant fine powders that until now have not had any industrial use.
Another approach, by the Canadian company CarbonCure, is to reduce the construction industry’s carbon footprint by using carbon dioxide as an ingredient in the concrete-mixing process.
Students at MIT are experimenting with the use of shredded plastic to fortify concrete and therefore use less cement. Similarly, engineers at Brawijaya University in Malaysia are evaluating the use of bamboo fiber to reinforce concrete. Even coffee grounds are being tested as a possible replacement for sand in concrete by scientists at Swinburne University of Technology in Australia.
Japan's Shinagawa Incineration Plant is not only generating energy from trash, but also making a sand replacement material out of it. To minimize landfill use around Tokyo, trash is incinerated at high temperatures, in order to reduce toxic emissions. After hazardous materials are removed from the exhaust, the leftover ash is used in concrete as a substitute for clay in the production of cement and for sand in the production of concrete.
The price of sand isn’t likely to drop any time soon, so the world will increasingly need to consider alternative materials, sustainable mining practices, and possibly even collective consumer actions. Initiatives similar to Fair Trade Certified coffee or Forest Stewardship Council–certified forests would allow consumers to make informed decisions when it comes to purchasing sand, in whichever miraculous form it may take.
The more things change the more they stay the same.
China is nothing more than massave amount of unseen slave labor.
No matter if it's that $99 weed wacker or $199 tv...... it's made by slaves, imported, profits made by a few at the very top all the while our society sinks, looses skills. A rising tide lifts all boats when everyone contributes...... but a tide of debt (either welfare / public or personal) is simply living on borrowed time, distorting reality and using up assets earned in the past..
Bitcoin jumps 20 percent, mystery order seen as catalyst
Today’s gain was probably triggered by an order worth about $100 million spread across U.S.-based exchanges Coinbase and Kraken and Luxembourg’s Bitstamp, said Oliver von Landsberg-Sadie, chief executive of cryptocurrency firm BCB Group.
Ex-workers say scrutiny of individual clients was discouraged
German lender’s U.S. subsidiary draws focus of Fed regulators
Years before regulators learned about what may be one of the biggest money-laundering pipelines in history, low-level bank employees in Jacksonville, Florida, sounded repeated alarms.
Compliance workers for Deutsche Bank AG flagged some of at least $150 billion in transactions that the bank’s U.S. subsidiary handled for a tiny Estonian unit of Danske Bank A/S, according to a former compliance officer.
It’s not clear how urgently the Florida team warned executives at Deutsche Bank Trust Co. Americas. But when workers sought broader scrutiny of certain clients, they got a familiar response from some higher-ups, the officer said: Shut up, focus on the transaction in front of you, file your paperwork and move on.
Internal documents, court records and interviews with dozens of people -- including more than 20 current and former employees of the troubled German lender -- show that its U.S. unit largely resisted strict money-laundering compliance for years. The insider accounts help explain why
Deutsche’s U.S. subsidiary kept handling Danske’s business after competitors quit.
Although U.S. executives routinely promised regulators they’d get tough, former staffers say such efforts were often disregarded in favor of cozy relationships with overseas customers. The suspicious billions kept flowing -- not just from Danske’s Estonian branch, but from various clients that would eventually be snared in other global money-laundering scandals.
Frankfurt-based Deutsche Bank, which is in talks to merge with Commerzbank AG after years of losses, declined to address allegations about its past practices. But the bank said in a statement that its U.S. operations “have increased our anti-financial crime staff and enhanced our controls in recent years.” The lender takes compliance with money-laundering laws and related provisions seriously, it said. In the Danske case, bank executives have said they’re cooperating with investigators in multiple jurisdictions and that they met their legal obligations as they dealt with the Danish lender from 2007 to 2015.
“Their defense would have more appeal if Deutsche Bank didn’t have such a poor track record,” said Jimmy Gurulé, a former undersecretary for enforcement in the U.S. Treasury Department and a professor at Notre Dame Law School. “There’s been one problem after another.”
Deutsche’s U.S. trust company, which houses a global transaction bank, a private wealth unit and a lender, has attracted attention for the hundreds of millions of dollars in loans it extended to President Donald Trump’s real estate business. But it’s now the focus of a Federal Reserve probe into the Danske affair, according to a person briefed on the situation who asked not to be named because the regulator’s work isn’t yet public. The U.S. Department of Justice has also sought information from the bank, two other people have said.
It’s hardly the first time for such scrutiny. Over the trust bank’s 20-year history, government authorities have concluded at least five times that it either failed to police the money flows it handled or enabled efforts to evade U.S. law.
Deutsche Bank Trust Co. Americas -- which is separate from Deutsche Bank Securities Inc., the better-known trading division -- rose from the ashes of another scandal-plagued bank. The century-old Bankers Trust was largely uncontroversial until the 1990s, when it began innovating in financial derivatives. Customers lost money and sued, and the litigation unearthed taped conversations among traders who called their deals “gravy trains.”
In transcripts, an employee discussed a client’s loss on a trade, saying, “Pad the number a little bit.” Another worker told a colleague, “Funny business, you know? Lure people into that calm and then just totally f--- ’em.” By 1999, Bankers Trust was ripe for rescue by a German buyer with about $9 billion to spend.
Soon the new institution had its own tumultuous history. From 1999 through 2006, it handled almost $11 billion in U.S. dollar transactions for customers in nations under sanctions: Iran, Syria, Libya, Burma and Sudan. Later, it helped rich Russians move $10 billion from their country using “mirror trades” -- simultaneous stock trades in separate jurisdictions that bypassed customary hoops for transferring money.
In between, in cases where the bank wasn’t accused of any wrongdoing, it also provided banking services for:
Russia’s Sberbank PJSC while the government-controlled bank was involved in a years-long scheme that funneled millions to a man in the U.S. who admitted to smuggling $65 million worth of potential nuclear technology to Russia, according to federal prosecutors;
Kenyan fraudsters who scammed U.S. income tax refunds using identities stolen from Indiana sex offenders;
and a Colombian drug cartel that received payments from the U.S. Drug Enforcement Administration as part of an undercover operation. The payments, disguised as profits from auto-parts sales, were transferred into a Deutsche account and exhibited what a DEA undercover agent called “obvious red flags.”
Today, Deutsche Bank Trust Co. Americas is one of the last Wall Street banks that’s actually on Wall Street. Former employees say the subsidiary -- housed in a skyscraper that’s sheathed in glass and lined with mahogany paneling -- has been a kind of legal mirage for most of its existence. The unit provides an entrée for Deutsche Bank to operate as a lender in America, those people said, but its U.S.-based executives have had little authority.
Much of its behind-the-scenes work is akin to plumbing: It opens channels for international cash, takes care of customers’ assets and clears transactions in dollars. It’s high-volume, low-margin work -- not glamorous, but necessary to the global economy.
For foreign banks like Danske, the unit opens an industrial-scale teller window into the U.S. financial system that their customers can use -- what’s known as a correspondent banking relationship. Of course, when the plumbing fails, the results can be unpleasant.
In Danske’s case, Danish regulators say Estonian employees covered up money-laundering violations for years. The bank has admitted that roughly $230 billion that passed through that unit between 2007 and 2015 -- much of it from Russian clients -- was suspicious. A person familiar with the matter confirmed that at least $150 billion flowed through Deutsche Bank, and one report put the figure at about $185 billion.
When that money flow began, the chief of the German lender’s U.S. business was Seth Waugh, a perpetually tanned executive who wore his graying hair a bit long by bankers’ standards. Waugh pledged to regulators in 2005 that he’d overhaul the bank’s money-laundering protections. But in a 2013 letter that served as a scathing review of his tenure, the Federal Reserve Bank of New York concluded that “no progress was made” on concerns first raised in 2002.
Waugh, widely described as affable and approachable, had only limited influence over staff members’ bonuses or other personnel matters -- or even key points of Deutsche’s U.S. balance sheet, according to several former colleagues. Employees say he often couldn’t answer questions about bank operations or regulatory matters because the real decision-makers were sitting in Europe.
One New York executive recalled visiting Waugh’s 46th-floor office to tell him about bonus-hungry co-workers who ignored danger signs to chase risky accounts. Waugh seemed sympathetic but said he wasn’t sure what he could do, the executive recalled.
Waugh declined to be interviewed, but said in a statement that during his tenure, Deutsche made it a priority to be “best in class” in regulatory compliance. He also said he led the bank from “relative obscurity to a top position in the market.”
He pursued attention-getting projects. The bank installed the world’s highest solar panel on its headquarters in 2012. It sponsored a professional golf tournament from 2003 to 2016. (Waugh was appointed chief executive officer of the Professional Golfers Association of America in August.) And he advocated for a program to recruit military veterans into Wall Street jobs.
That’s how a retired general wound up overseeing the Jacksonville office.
In 2010, Brigadier General Michael Fleming of the Florida Army National Guard began talking to Deutsche about a new career, running its veteran-recruitment program. He got a bigger job instead: running its new outpost in North Florida.
“I really didn’t have any corporate investment banking experience at that point,” the one-star general told Fox Business Network in 2013. Fleming, who left Deutsche Bank in 2014, didn’t respond to requests for comment.
Former employees said he wasn’t a hands-on leader. Before his arrival, Deutsche executives had transferred some bank functions, including anti-money-laundering efforts, to the main Jacksonville site, several low-slung concrete buildings that surround a man-made pond in a suburban office park. It grew to become the bank’s second-largest office in the U.S., with approximately 2,000 employees working in various operations. Former compliance workers there describe a disregard for their work that emanated from New York.
Throughout Deutsche Bank, compliance staff members were considered to be “one step above the janitors,” an unnamed former executive told lawyers who filed a 2016 lawsuit against the bank. The suit, in which investors claimed Deutsche Bank misled them about the effectiveness of its anti-money-laundering efforts, was later dismissed.
Know Your Customer
Banks’ efforts to prevent money laundering revolve around three words: “Know your customer.” U.S. rules under the Bank Secrecy Act require bankers to keep tabs on who they’re doing business with. The goal is to keep criminals and terrorists from plowing illicit cash into legitimate investments.
In Jacksonville, that task fell to an office that was understaffed and overly permissive, insiders recall. It was akin to assembly-line work with little review of potential clients and transactions, said a former employee who added that the organization’s willingness to bank just about anybody was a running joke.
Files submitted to compliance workers from overseas often lacked detail about who was transmitting money, according to former workers and legal filings in the 2016 lawsuit. Specialists hired to advise the bank on gaps in its monitoring systems were instead assigned to review individual transactions that those systems had flagged. They were often rebuffed by New York executives or supervisors in New Jersey if they singled out particular customers for deeper scrutiny.
In such cases, staff members were directed to file routine “suspicious activity reports,” or SARs, a basic legal requirement in cases where bank employees consider a source of funds to be questionable. Such filings record potentially problematic activity but don’t trigger government reviews on their own. Often, they simply languish at the Treasury Department.
Deutsche executives’ public responses to the Danske case tend to sidestep concerns about “know your customer” efforts. Because their bank had a correspondent relationship with Danske, they’ve argued that the Danish bank was the only customer they were required to know -- not clients who were banking with Danske.
“The primary duties rest with the bank that has the immediate contact with the client,” said Karl von Rohr, Deutsche Bank’s co-deputy CEO and legal head, on Feb. 1.
As Douglas Sloan, then a financial crimes investigative chief for Deutsche’s U.S. unit, said in testimony in December 2017: “We don’t know our customers’ customer on the other side of the planet.”
But it’s not that simple. U.S. banking laws require correspondent banks to make sure their customers are policing their own clients -- especially on big transactions. Another bank clearly had qualms about Danske; JPMorgan Chase & Co. ended its correspondent relationship with Danske’s Estonian branch in 2013. Bank of America Corp. cut off its relationship with the unit in May 2015. Deutsche Bank was the last to break with Danske later that year.
Why? Stephan Wilken, who runs Deutsche’s anti-money-laundering operations, told the European Parliament that he couldn’t speculate on what other banks saw, but a decision to break off business must be organized and planned.
Still, some aspects of the bank’s approach raise questions. Like other correspondent banks, it relies on a largely automated system called “straight-through processing,” or STP. That system checks names and places against government risk lists and other factors. For years, executives have bestowed an “STP Excellence Award” on customers that successfully move money through Deutsche’s system while raising the fewest red flags. The awards have sometimes gone to questionable recipients.
Cyprus-based FBME Bank Ltd. won eight of them through 2013, according to news releases. The Treasury Department later accused that bank of having weak money-laundering controls that allowed customers to conduct more than $1 billion in suspicious transactions through various correspondent accounts, including one with Deutsche Bank’s U.S. unit, from 2006 to 2014. Treasury officials said FBME helped organized crime and terror groups move money, evade sanctions and develop banned weapons. Deutsche Bank wasn’t accused of wrongdoing in the case.
The “mirror trades” scandal surfaced another issue: Warning bells sounded at the U.S. investigations unit after another European bank questioned some of the transactions, but the unit failed to follow up, according to an internal Deutsche report and a 2017 consent order issued against the bank by New York’s Department of Financial Services. Beyond that, the German bank didn’t even deem Russia to be at high risk for financial crime until late 2014 -- much later than its peers -- according to that 2017 order.
In that 2017 order, regulators sounded optimistic that the bank was finally cracking down on money laundering, saying it attempted “genuine reform” in 2016. By then, Susan Skerritt had become CEO of Deutsche Bank Trust Co. Americas as the bank implemented a global campaign aimed at preventing financial crime and known internally as “Get Sharp.”
Training sessions were held. Posters adorned the walls. The new CEO spoke publicly about the lender’s willingness to end perilous correspondent banking relationships. Skerritt, who didn’t respond to requests for comment, left in early 2018.
The bank has had trouble retaining its reformers elsewhere too. One executive hired to combat financial crime globally left after just six months. Another left to work at Danske.
Deutsche’s most attention-getting U.S. addition was Richard Weber, a veteran federal prosecutor and former chief of the Internal Revenue Service’s criminal investigations. Weber, who declined to comment, was part of a team that prosecuted HSBC Holdings Plc in an unprecedented 2012 money-laundering and sanctions case. Deutsche trumpeted his 2016 hire as demonstrating its “commitment to fighting financial crime.”
The bank gave investors a frank warning about the importance of that fight in its annual report last month. Failure to fix its money-laundering protections quickly would mean its “financial condition and reputation could be materially and adversely affected,” the bank said. Weber might have been just the person to help. But he quit three months ago.
The most recent 10Ks (annual reports) filed by the largest Wall Street banks covering their financial condition as of December 31, 2018, provide the strongest argument thus far for Congress to enact legislation to separate the Federally insured, deposit-taking commercial banks from the trading casinos on Wall Street. In other words, Congress needs to restore the Glass-Steagall Act, which kept the U.S. financial system safe for 66 years until its repeal in 1999.
If the average American knew that the very same banks that blew up the U.S. economy, devastated the housing market, crashed the stock market, threw millions of Americans out of work just a decade ago were warning in their own 10K legal filings with the Securities and Exchange Commission that the same thing could happen again at any moment, there would be mobs with pitchforks in the street. But because corporate media does not put this critical information on the front pages of newspapers, the public remains in the dark and Congress dawdles.
According to JPMorgan’s 10K, it has sold credit derivative protection on $177 billion of “subinvestment grade” i.e., junk credits. When you sell credit protection, you are on the hook to pay the buyer if that entity goes belly up. When you are selling credit protection on subinvestment grade entities, it is far more likely that they could go belly up. JPMorgan Chase will likely argue that they have also purchased boatloads of credit derivatives, which might be on the same entities, but there is no way for anyone to accurately predict if this mega bank has aligned these risks correctly. Even the bank admits that, writing in its 10K the following:
“JPMorgan Chase could incur significant losses arising from concentrations of credit and market risk. JPMorgan Chase is exposed to greater credit and market risk to the extent that groupings of its clients or counterparties:
“Engage in similar or related business, or in businesses in related industries;
“do business in the same geographic region, or;
“have business profiles, models or strategies that could cause their ability to meet their obligations to be similarly affected by changes in economic conditions.
“For example, a significant deterioration in the credit quality of one of JPMorgan Chase’s borrowers or counterparties could lead to concerns about the creditworthiness of other borrowers or counterparties in similar, related or dependent industries. This type of interrelationship could exacerbate
JPMorgan Chase’s credit, liquidity and market risk exposure and potentially cause it to incur losses, including fair value losses in its market-making businesses…
“JPMorgan Chase regularly monitors various segments of its credit and market risk exposures to assess the potential risks of concentration or contagion, but its efforts to diversify or hedge its exposures against those risks may not be successful.”
We know very well that JPMorgan Chase “may not be successful” in managing its derivative risks because as recently as 2012 it lost at least $6.2 billion of its bank depositors’ money gambling in derivatives in London. That episode was known as the London Whale incident and triggered a 9-month investigation by the U.S. Senate’s Permanent Subcommittee on Investigations.
According to documents released by that Subcommittee, as of the close of business on January 16, 2012, JPMorgan’s Chief Investment Office held $458 billion notional (face amount) in domestic and foreign credit default swap indices. Of that amount, $115 billion was in an index of corporations with junk bond ratings, which the bank was not allowed to own. To get around that, according to the Office of the Comptroller of the
Currency, JPMorgan “transferred the market risk of these positions into a subsidiary of an Edge Act corporation, which took most of the losses.” An Edge Act corporation refers to the ability of a bank to obtain a special charter from the Federal Reserve. By establishing an Edge Act corporation, U.S. banks are able to engage in investments not available under standard banking laws.
Now fast forward to today where JPMorgan Chase has no qualms about telling one of its Federal regulators, the SEC, that it has sold protection on $177 billion of “subinvestment grade” credit derivatives.
According to the Office of the Comptroller of the Currency, JPMorgan Chase had $48.2 trillion (yes, trillion with a “t”) in notional (face amount) of derivatives as of December 31, 2018. Of that amount, 58 percent remained in over-the-counter (OTC) contracts rather than centrally cleared. Regulators have very little insight into these OTC contracts. For all we know, the Wall Street mega banks could have enormous amounts of risk concentrated with one derivatives counterparty – the very thing that brought down the giant insurance company AIG in 2008 – forcing a taxpayer bailout of the insurance company to the tune of $185 billion.
Citigroup has also produced alarm bells in its most recent 10K filing with the SEC. This is the same bank that received the largest taxpayer bailout in global banking history in 2008. It also received over $2 trillion cumulatively in secret revolving loans from the Federal Reserve from the end of 2007 to at least July 2010 because of its shaky condition.
According to the OCC, as of December 31, 2018 Citigroup had $47 trillion notional amount of derivative exposure. This is how Citigroup explains its risk from a major counterparty getting into trouble:
“Citi also routinely executes a high volume of securities, trading, derivative and foreign exchange transactions with non-U.S. sovereigns and with counterparties in the financial services industry, including banks, insurance companies, investment banks, governments, central banks and other financial institutions. A rapid deterioration of a large counterparty or within a sector or country where Citi has large exposures or unexpected market dislocations could cause Citi to incur significant losses…The fair value of financial instruments incorporates the effects of Citi’s own credit risk and the market view of counterparty credit risk, the quantification of which is also complex and judgmental.”
In other words, a bank that blew itself up a decade ago in epic fashion still has no scientific or reliable method of assessing counterparty risk – it simply remains “judgmental.”
Another reason that Citigroup blew up in a short period of time was that its regulators allowed it to have enormous amounts of off-balance sheet exposure. In Citi’s most recent 10K it reports that it has $568.7 billion in “certain off-balance sheet exposures.”
Another Wall Street mega bank is the Bank of America which owns the giant retail brokerage firm Merrill Lynch. According to the OCC, as of December 31, 2018 its bank holding company had $31.7 trillion in notional derivatives. This is how it explains its potential to blow up in its current 10K:
“…While our activities expose us to many different industries and counterparties, we routinely execute a high volume of transactions with counterparties in the financial services industry, including broker-dealers, commercial banks, investment banks, insurers, mutual funds and hedge funds, and other institutional clients. This has resulted in significant credit concentration with respect to this industry. Financial services institutions and other counterparties are inter-related because of trading, funding, clearing or other relationships. As a result, defaults by, or even market uncertainty about the financial stability of one or more financial services institutions, or the financial services industry generally, could lead to market-wide liquidity disruptions, losses and defaults. Many of these transactions expose us to credit risk and, in some cases, disputes and litigation in the event of default of a counterparty. In addition, our credit risk may be heightened by market risk when the collateral held by us cannot be liquidated or is liquidated at prices not sufficient to recover the full amount of the loan or derivatives exposure due to us. Further, disputes with obligors as to the valuation of collateral could increase in times of significant market stress, volatility or illiquidity, and we could suffer losses during such periods if we are unable to realize the fair value of the collateral or manage declines in the value of collateral….
“We are party to a large number of derivatives transactions, including credit derivatives. Our derivatives businesses may expose us to unexpected market, credit and operational risks that could cause us to suffer unexpected losses. Severe declines in asset values, unanticipated credit events or unforeseen circumstances that may cause previously uncorrelated factors to become correlated and vice versa, may create losses resulting from risks not appropriately taken into account or anticipated in the development, structuring or pricing of a derivative instrument….”
Then there is Goldman Sachs which owns the federally-insured, deposit-taking bank called Goldman Sachs Bank USA. According to the OCC, Goldman Sachs’ bank holding company has $42.3 trillion notional in derivatives. This is how Goldman explains what could go wrong in its current 10K:
“In the ordinary course of business, we may be subject to a concentration of credit risk to a particular counterparty, borrower, issuer, including sovereign issuers, or geographic area or group of related countries, such as the E.U., and a failure or downgrade of, or default by, such entity could negatively impact our businesses, perhaps materially, and the systems by which we set limits and monitor the level of our credit exposure to individual entities, industries and countries may not function as we have anticipated.”
And, finally, there is Morgan Stanley, which the OCC says holds $32 trillion notional in derivatives at its bank holding company. Morgan Stanley reveals in its latest 10K that some of the counterparties it is using for its derivative trades have below-investment-grade ratings — i.e., junk ratings.
There is one Federal agency that has repeatedly attempted to warn against the dangers to the safety and soundness of the U.S. Federally-insured banking system as a result of the interconnectedness of a handful of Wall Street megabanks and also from these megabanks concentrating their risks among the same counterparties.
In 2015, the Office of Financial Research (OFR), which was created under the Dodd-Frank financial reform legislation of 2010 to sound the alarm bells to regulators and the public on the buildup of systemic risks, released a study showing dangerous levels of interconnected risk among the mega banks on Wall Street.
Authored by Meraj Allahrakha, Paul Glasserman, and H. Peyton Young, the report found that five U.S. banks had high contagion index values — Citigroup, JPMorgan, Morgan Stanley, Bank of America, and Goldman Sachs. The authors write:
“…the default of a bank with a higher connectivity index would have a greater impact on the rest of the banking system because its shortfall would spill over onto other financial institutions, creating a cascade that could lead to further defaults. High leverage, measured as the ratio of total assets to Tier 1 capital, tends to be associated with high financial connectivity and many of the largest institutions are high on both dimensions…The larger the bank, the greater the potential spillover if it defaults; the higher its leverage, the more prone it is to default under stress; and the greater its connectivity index, the greater is the share of the default that cascades onto the banking system. The product of these three factors provides an overall measure of the contagion risk that the bank poses for the financial system.”
In 2016, the OFR again sounded the alarm, this time effectively saying that the Federal Reserve’s stress tests were ineffective in correctly measuring risk. The OFR researchers, Jill Cetina, Mark Paddrik, and Sriram Rajan, found that the Fed’s stress test was measuring counterparty risk on a bank by bank basis. The real problem, according to the researchers, is not what would happen if the largest counterparty to a specific bank failed but what would happen if that counterparty happened to be the counterparty to other systemically important Wall Street banks. In other words, a replay of the AIG saga. The researchers write:
“A BHC [bank holding company] may be able to manage the failure of its largest counterparty when other BHCs do not concurrently realize losses from the same counterparty’s failure. However, when a shared counterparty fails, banks may experience additional stress. The financial system is much more concentrated to (and firms’ risk management is less prepared for) the failure of the system’s largest counterparty. Thus, the impact of a material counterparty’s failure could affect the core banking system in a manner that CCAR [one of the Fed’s stress tests] may not fully capture.” [Italic emphasis added.]
That so little has actually changed since the 2008 financial crash – the most devastating U.S. economic collapse since the Great Depression – should be a priority issue for every engaged American and every candidate running for President in 2020.
word on the street re oil, is that the sauds are holding firm on supply, libya is descending into civil war where their production is being disrupted, of course Vene, and lastly CB's stimulating economies saying demand stays strong
that is what is being put out there regarding the non stop ascent of oil
meanwhile, gold and silver chop and wait for some resolution re the dollar. No direction other than sideways for the dollar for some time now.
$150 bbl was the number required to temporarily bring the collateral in the system back into equalibrium with the collateral that was destroyed in the 2007 - 2009 GFC debacle.... IOW an increase to $80 bbl would indicate 1) the increase in macro credit in the system, 2) asset/collateral destruction and/or obsolescence in the system 3) a combination of 1 & 2.
this is too good, 'involuntary supply cuts',
a complete societal breakdown and .gov failure is referred to as 'involuntary'
Oil rises as supply constraints outweigh China slowdown fears, by
Oil prices rose on Friday as involuntary supply cuts from Venezuela, Libya and Iran supported perceptions of a tightening market, already underpinned by a production reduction deal from OPEC and its allies.
A little quick maths. If the average cost of giving vaginal birth today is $12,500 and the Fed has devalued currency by 94% since 1913, then that hospital bill needs to be increased ten times in order to make things right in this world. Sorry too lazy to check inflation since 1949.
Sears sues Lampert, claiming he looted assets and drove it into bankruptcy
NEW YORK (Reuters) - Sears Holdings Corp sued longtime former Chairman Eddie Lampert, his hedge fund ESL Investments and others like Treasury Secretary Steven Mnuchin, claiming they illegally siphoned billions of dollars of assets from the retailer before it went bankrupt.
The lawsuit, made public on Thursday, was filed by the restructuring team winding down Sears' bankruptcy estate and suing on behalf of creditors, many of whom blame Lampert for the retailer's downfall.
It followed the billionaire's $5.2 billion purchase in February of most Sears assets, including the DieHard and Kenmore brands, after a bankruptcy auction.
The complaint seeks the repayment of "billions of dollars of value looted from Sears," including while it was in what Lampert would later call a "death spiral" where it sold core assets to meet daily expenses with no real plan for becoming profitable.
"Had defendants not taken these improper and illegal actions, Sears would have had billions of dollars more to pay its third-party creditors today and would not have endured the amount of disruption, expense, and job losses resulting from its recent bankruptcy filing," the complaint said.
Sears filed for Chapter 11 protection in October after a prolonged decline under Lampert marked by large losses, scant investment and lost market share to retailers such as Walmart Inc, Home Depot Inc and Amazon.com Inc.
Others sued include ESL President Kunal Kamlani; Bruce Berkowitz and his Fairholme Capital Management, which was a large Sears shareholder; and Seritage Growth Properties, which took over 266 of Sears' best stores in a 2015 spinoff.
Mnuchin, a college roommate of Lampert's at Yale University, had been a director at Sears and ESL, and previously worked with Lampert at Goldman Sachs.
In a statement on behalf of ESL, Lampert and Kalmani, ESL said it vigorously disputed the lawsuit, calling the allegations "misleading or just flat wrong," and saying all transactions were done in good faith and for shareholders' benefit.
Fairholme said it was reviewing the complaint. Seritage and the Treasury Department did not immediately respond to requests for comment.
Lampert created Sears Holdings through the 2005 merger of Sears, Roebuck & Co and Kmart Holdings Corp.
According to the complaint, Lampert and other insiders had by 2011 begun hatching a plan to "strip" Sears of assets, as the Hoffman Estates, Illinois-based retailer's performance fell short and more ESL investors were demanding their money back.
The complaint said Lampert ordered the creation of bogus financial plans projecting a Sears turnaround, and used them to help transfer five major assets worth more than $2 billion, including Land's End and Sears Hometown Outlet.
Sears' estate criticized Lampert for rejecting as a "non-starter" a potential offer from Tommy Hilfiger and Leonard Green & Partners for Lands' End, which they valued at $1.6 billion including net debt, and instead spinning it off to himself, ESL and others, with Sears getting just a $500 million dividend.
It also said the $2.58 billion Seritage spinoff undervalued the real estate by at least $649 million, stuck Sears with hundreds of millions of dollars of rent and fees from leasing most of the 266 stores back, and was structured to benefit shareholders like
Lampert, in part through Seritage's payment of dividends.
Seritage won a vote of confidence last July by obtaining a $2 billion loan package from Warren Buffett's Berkshire Hathaway Inc. Berkshire is not a defendant.
Thursday's lawsuit seeks a declaration that the alleged looting constituted "fraudulent transfers" that should be undone or, more likely, justified damages.
It was filed with the U.S. bankruptcy court in White Plains, New York less than an hour after Sears filed a proposal to create a liquidating trust that could pursue lawsuits over the Land's End and Seritage transactions.
The reorganized Sears was expected to have about 425 Sears and Kmart stores, down from roughly 3,500 at the time of the 2005 merger.
The case is Sears Holdings Corp et al v Lampert et al, U.S. Bankruptcy Court, Southern District of New York, No. 19-ap-08250.
The main bankruptcy case is In re Sears Holdings Corp in the same court, No. 18-bk-23538.
Jet airways, the second largest private airline in India has filed for bankruptcy. Pilots, airline employees, jet fuel have not been paid for the last three months leading to the seizure of a plane in Amsterdam.
Converting existing debt into equity. Even after 75 percent haircut, the asset has no bidders? Shows how overvalued many of the stock prices are. Wonder how many crores of loans that the banks have and how much more loans have been given based on the stock price of jet airways. No wonder why public sector banks have huge losses. These are systemic problems that no banks, courts can adjudicate fairly?
A friend of mine who is a trucker invited me to join their Trucker's group the other day. Today a thread was started in the group concerning cargo, actuall the slack in cargo that has been ongoing since December of last year. They were saying Intermodal Cargo has been hit hardest followed by general cargo available for delivery. The consensus among these truckers is that a recession is developing.....
Banking giant Deutsche Bank AG and its crosstown rival Commerzbank AG Thursday ended merger talks, leaving in tatters the German government's hope to shore up both banks and create a banking powerhouse.
The failure to unite the two ailing lenders is likely to unleash fresh attempts by other banks to scoop up one or both of the banks, a process that could spur the biggest reshuffling of European banking assets since the financial crisis.