Goldman, JPMorgan, and Citigroup hold $258 billion in derivatives liabilities


When, for whatever reason, the Federal Reserve allowed banks to hold trillions of dollars in derivatives trades "off the books," they created the monster that took our financial system down.

Banks still hold trillions of dollars in derivatives off the books and the Fed is doing nothing about it. All the Fed wants to do is to demand that banks trade derivatives though a clearinghouse. That's a first step, but it doesn't remove the bag of losses that banks are still holding.

It is estimated that the derivatives market is a $195 trillion market, according to the Wall Street Journal (subscription required). What this means is that banks and financial are holding $195 trillion of derivatives. I don't think anyone can comprehend what the number 195 trillion means. We know that JPMorgan Chase is holding about $80 trillion dollars worth of derivatives. I don't think anyone can comprehend the $80 trillion being held by just one bank, nor do we know what the implications of such a number is on the condition of our economy. The depth of the market is so deep that no one really knows what condition it's in. We do know that some of our big banks are still holding substantial losses in derivatives.

Some holding big liabilities include Goldman Sachs Group (NYSE GS) with $91 billion, JPMorgan Chase & Co. (NYSE JPM) with $86 billion, and Citigroup Inc. (NYSE C) with $81 billion.

Again, and I've mentioned this many times, until the Fed requires banks to put all of their trades on the books, we will never have complete trust in our banking system. We cannot know the true value of a bank's stock price because there is just too much "hidden information" to make a rational judgment.

Do you believe that the Fed should force banks to put all their trades on the books?
As soon as possible81 (72.3%)
It won't make any difference18 (16.1%)
Not sure13 (11.6%)

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Last updated: February 13, 2012: 03:26 AM

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