Jim Sinclair’s Commentary
OTC derivatives are themselves an ABUSE. They are the new Blitzkrieg of the Financial Reich.
CDS have declared war on the Greeks and in time will get around to everyone.
What makes you think Greece is the only country that utilized these venomous instruments? What do you think killed Iceland?
OTC derivatives marketed out of London killed Iceland so the big wigs of Iceland see no reason to pay back depositors. The vote was a plausible denial for those up top in Iceland.
Other than making these instruments a capital crime, as the Chinese have, there is no stopping them.
"Money has no motherland; financiers are without patriotism and without decency; their sole object is gain."
–Napoleon Bonaparte, 1815
Volcker Criticizes Greek Budget Derivatives ‘Abuse’ (Update1)
By Rainer Buergin
March 6 (Bloomberg) — White House adviser Paul Volcker said the “abuse” of derivatives to hide the size of Greece’s budget deficit highlights the need for regulation and European Central Bank President Jean-Claude Trichet said derivatives still pose risks to financial stability.
“Surely the recent revelations about the use (and abuse) of complex derivatives in obscuring the extent of Greek financial obligations reinforces the need for greater transparency and less complexity,” Volcker said in the text of a speech to the American Academy in Berlin, a transatlantic research institute. Speaking at the same event, Trichet said “what I fear really is that we are currently underestimating the systemic instability which is associated with” derivatives.
European and U.S. officials are examining the role that investment banks including Goldman Sachs Group Inc. may have played in Greece’s debt crisis, joining an outcry in the European Union over whether swaps contracts helped conceal the size of its deficit. Goldman Sachs helped Greek officials raise $1 billion of off-balance-sheet funding in 2002 through swaps, which EU regulators said they knew nothing about until last month.
German Chancellor Angela Merkel, who said on Feb. 18 it would be a “scandal” if banks helped Greece massage its budget, called for restrictions on derivatives to halt “speculators.”
“Credit-default swaps, where you insure your neighbor’s house just to destroy it and make money from it, that’s exactly what we have to curb,” she said yesterday at a press conference in Berlin with Greek Prime Minister George Papandreou.
Jim Sinclair’s Commentary
Credit default swap OTC derivatives are weapons of real warfare. They are already operating against US state debt.
Soon states will be falling like bowling pins. The US dollar will follow as it drops below .7200.
Cash-Strapped States Delay Paying Income-Tax Refunds
On Friday March 5, 2010, 12:23 pm EST
This year, more Americans and businesses may be asking: Where’s my tax refund?
That’s because cash-strapped states such as North Carolina, Alabama and Hawaii have been forced to slow down issuing income tax refunds to individuals and businesses because of a lack of funds in their budget.
Kansas has hinted that a delay might be possible, and processing paper refunds in Iowa has slowed because the state doesn’t haven’t enough employees to get them processed faster.
Another state, New York, is still considering whether they’ll follow the likes of Hawaii and delay refund payments.
"States typically do this when they are tight and they don’t have a budget in place," said Karla Dennis, CEO of Cohesive, a nationwide tax preparation firm. Things are dire at many states: forty-one states are expected to have mid-year budget gaps totaling $37.7 billion, according to the Center on Budget and Policy Priorities.
Delaying the refund, Dennis says, "gives the state funds to work with in the interim to fill a gap in their revenues."
Jim Sinclair’s Commentary
Breach of contract is what you would sue for when an OTC derivative fails to perform.
If Greece fails the credit default swaps on Greek debt would fail en masse.
Citi sues Morgan Stanley over CDS, claims $245 million
(Reuters) – Citigroup Inc (C.N) sued Morgan Stanley (MS.N) on Friday for breach of contract, saying the Wall Street firm owed it $245.4 million for protection it bought on a loan.
Citibank bought a credit default swap (CDS) from Morgan Stanley & Co International in 2006 on a $366 million revolving credit facility it provided to an issuer of collateralized debt obligations (CDO), according to the complaint filed in U.S. District Court in Manhattan.
The swap obliged Morgan Stanley to pay Citibank the money as a result of a payment default on the credit facility to the CDO, known as Capmark VI, it said in the complaint.
Liquidating the CDO collateral did not cover the entire amount, and Citibank said it exercised its right under the CDS to have Morgan Stanley make up for the shortfall, but it refused, according to the complaint.
Citibank paid Morgan Stanley about $750,000 for the CDS, according to the complaint.
Morgan Stanley could not immediately be reached for comment.
