scary talk from a Turk

[erynthered]

And yet the Bloomberg article says nothing about FDIC making the derivatives' counterparties whole because they come ahead of everyone else. It would really help if you knew what you were talking about and linking to sites where people know less than you isn't helping you.

 

Good to see that Pete has your back. That's quite the intellectual firepower on your side.

 

 

ZING...............

[Jauronimo]

more incoherent and ignorant quotes than anything from the OWS protests

Ignorant? Are you actually defending the banana patch initiative? I just conceded, the one and only concession I'm prepared to make mind you, that the May I Mommy Dog Face plan was actually reasonable and feasible, until in typical fashion the OWS crew perverted the notion by tacking on the Banana Patch for some inexplicable reason. As much as I have reservations about the implementation of the primary OWS initiative, Purple Monkey Dishwasher, there is some merit there. But clinging to the absurd and totally untenable Banana Patch undermines the whole movement and allows the political right to dismiss Purple Monkey Dishwasher in its entirety. It's like I'm telling you its a shemale and you keep shutting your eyes and coming back with "no, shes a beautiful woman." We can't have a serious discussion about this when there's still so many shemales in your gazebo, so to speak. And if you can't understand that, then I don't know what to say to you.

Edited October 22, 2011 by Jauronimo

[DC Tom]

Yeah, what is up with that? Why haven't the pro-business types chimed in and refuted this liberal hack?

 

Because he's an idiot. Really, he refutes himself with his very existence.

[....lybob]

And yet the Bloomberg article says nothing about FDIC making the derivatives' counterparties whole because they come ahead of everyone else. It would really help if you knew what you were talking about and linking to sites where people know less than you isn't helping you.

 

Good to see that Pete has your back. That's quite the intellectual firepower on your side.

I didn't feel like I had to supply that information again because I already quoted it in post #13 but here

 

Now, typically if a bank went bankrupt, all of the creditors would line up and a judge would split up whatever assets were left based on credit seniority, etc. However, in 2005 the bankruptcy code was changed so that derivatives contracts could be executed ahead of all other creditors in a bankruptcy. So currently, if Merrill Lynch goes belly up and the outstanding derivatives contracts are more than the equity available at Merrill, the coutnerparties get all of Merrill Lynch, other Merrill Lynch creditors get nothing, and then the counterparties have some options trying to get the rest of what they're owed from Bank of America the holding company (which would now be just the retail banking arm.)

However, if the contracts are transferred to BofA NA, the retail bank arm, and the contracts wipe out a large portion or all of BofA NA's equity to the extent that in bankruptcy they can't pay out what they owe depositors, the FDIC has to step in to make up the difference because the counterparties to the derivatives contracts have first dibs on all assets. This means that Bank of America could feasibly risk all of it's demand deposit accounts on a risky derivatives position knowing that if they failed, the FDIC would bail the depositors out (they have to by law up to $250,000).

 

there I bolded it so it's in pablum form for baby readers

[DC Tom]

Translation: Lybob's post don't fit my narrative and I'm too lazy to take three seconds to google a source I trust.

 

Bloomberg

 

What's a notional derivative?

 

(Without using wikipedia, please.)

[....lybob]

What's a notional derivative?

 

(Without using wikipedia, please.)

I've never heard of "notional derivatives" I've heard of the notional value of derivatives

[GG]

I didn't feel like I had to supply that information again because I already quoted it in post #13 but here

 

 

 

there I bolded it so it's in pablum form for baby readers

 

Perhaps you should read the relevant bankruptcy statute and not some reporters' interpretation of it. Derivatives counterparty has a right to offset the net position of the contract at bankruptcy filing. They do not have priority claim on the assets and FDIC is not responsible for making the counterparties whole. FDIC is rightly concerned, however, that as a bankrupt bank loses its collateral outside bankruptcy process to the other side of the derivative position, then the bank will have less assets to pay out to the depositors and then FDIC has to step in.

 

Take your lips off the baby bottle before you call somebody a baby reader, amateur.

[/dev/null]

What's a notional derivative?

 

(Without using wikipedia, please.)

 

Duh, it's something that the 1% uses to control the 99%

[DC Tom]

I've never heard of "notional derivatives" I've heard of the notional value of derivatives

 

Really? Because your links specifically mention them.

 

You don't even know what you think you're talking about.

[....lybob]

Perhaps you should read the relevant bankruptcy statute and not some reporters' interpretation of it. Derivatives counterparty has a right to offset the net position of the contract at bankruptcy filing. They do not have priority claim on the assets and FDIC is not responsible for making the counterparties whole. FDIC is rightly concerned, however, that as a bankrupt bank loses its collateral outside bankruptcy process to the other side of the derivative position, then the bank will have less assets to pay out to the depositors and then FDIC has to step in.

 

Take your lips off the baby bottle before you call somebody a baby reader, amateur.

The U.S. Bankruptcy Code does not place an automatic stay on the seizing of collateral used in complex financial instruments like credit default swaps. Normally, creditors owed money for loans or bonds are prohibited from immediately seizing collateral when a company files for bankruptcy but changes to the bankruptcy code have removed that automatic stay from counterparties to swaps and other financial derivatives, which are privately negotiated between sophisticated players

 

here maybe this will help you understand

 

The 2005 act amended the bankruptcy code by adding a new section 561 that specifically preserves the contractual right to terminate, liquidate, accelerate or offset under a “master netting agreement” and across all species of safe harbor contracts. The new category of a “master netting agreement” is defined as “an agreement providing for the exercise of rights, including rights of netting, setoff, liquidation, termination, acceleration, or close out, under or in connection with one or more contracts . . .,” including swap agreements, forward contracts and commodity contracts. The amendments under the 2005 act preserve the contractual right of a master netting agreement participant to terminate, liquidate, accelerate or set off among safe harbor transactions (i.e., swap agreements, forward contracts, commodity contracts, repurchase agreements and securities contracts) and state that these rights “shall not be stayed, avoided, or otherwise limited by operation of any provision of this title or by any order court or administrative agency in any proceeding under this title.”

 

Note that the 2005 act broadened the netting, setoff and close-out provisions with respect to each of these safe harbor transactions by also authorizing termination, liquidation and acceleration of these agreements.

[Pine Barrens Mafia]

In honor of all lybob's you tube video's I bring you........

lybob relaxing at home.

 

 

youtube.com/watch?v=KBJjq9ki5zg

 

That is one fat baby

[GG]

The U.S. Bankruptcy Code does not place an automatic stay on the seizing of collateral used in complex financial instruments like credit default swaps. Normally, creditors owed money for loans or bonds are prohibited from immediately seizing collateral when a company files for bankruptcy but changes to the bankruptcy code have removed that automatic stay from counterparties to swaps and other financial derivatives, which are privately negotiated between sophisticated players

 

here maybe this will help you understand

 

Good to see that you found the quote about the amendment in the 2005 law, which states that the amendment PRESERVED the netting rights of derivatives holders.

 

I wonder if that means that under prior bankruptcy law, derivatives were netted as well?

 

Now, please find a youtube video about that.

[....lybob]

Good to see that you found the quote about the amendment in the 2005 law, which states that the amendment PRESERVED the netting rights of derivatives holders.

 

I wonder if that means that under prior bankruptcy law, derivatives were netted as well?

 

Now, please find a youtube video about that.

This is the important part

 

and state that these rights “shall not be stayed, avoided, or otherwise limited by operation of any provision of this title or by any order court or administrative agency in any proceeding under this title.”

 

Note that the 2005 act broadened the netting, setoff and close-out provisions with respect to each of these safe harbor transactions by also authorizing termination, liquidation and acceleration of these agreements.

[Alaska Darin]

So it's like saying that Dave_In_Norfolk is more moronic than you?

Cripple FIGHT!

 

I don't know if the helmet would change hands but the PPV numbers would be legendary.

[GG]

This is the important part

 

Yes, I see the bolded part. What you're not highlighting is what changed in the law that previously allowed derivatives to be netted as part of the automatic stay since the '90s. The answer is that the 2005 law added derivatives that didn't exist at the time previous bankruptcy laws were passed. What your youtube videos also don't answer is what is the tie in between the 2005 bankruptcy law and the intramural squabble between Fed & FDIC.

 

Could you imagine that moving the swaps to BoA NA actually reduces the risk to the taxpayers? I guess not until Billy Basement's youtube video will tell you.

[Billy Basement]

Yes, I see the bolded part. What you're not highlighting is what changed in the law that previously allowed derivatives to be netted as part of the automatic stay since the '90s. The answer is that the 2005 law added derivatives that didn't exist at the time previous bankruptcy laws were passed. What your youtube videos also don't answer is what is the tie in between the 2005 bankruptcy law and the intramural squabble between Fed & FDIC.

 

Could you imagine that moving the swaps to BoA NA actually reduces the risk to the taxpayers? I guess not until Billy Basement's youtube video will tell you.

I am filming that this weekend after the dungeons and dragons tournament is over. Wish me luck because I am sitting on three alchemy spells and a contract with a stealth witch.