Wall Street Is Writing Its Own Indictment for Derivatives Crimes

In the midst of signs of a debt collapse detonating in the Eurozone and threatening in the United States, the issue of the Wall Street crime involved in the mid-December Congressional repeal of a key derivatives regulation, cannot be allowed to drop.

Under pressure of “whipping” from both President Obama and JPMorgan Chase CEO Jamie Dimon, Congress agreed to a “poison pill” slipped into a government funding bill, which claimed to make it legal for the big banks to put their exposure to commodities derivatives and OTC credit derivatives into their commercial bank units. There, this exposure to $20-25 trillion of the riskiest derivatives exposure there is, would enjoy FDIC insurance if it implodes — ultimately a taxpayers’ bailout.

What Obama and Congress claimed to make “legal” by repealing Regulation 716 of the Dodd-Frank Act, remains illegal. For one thing, placing high-risk securities on the books of a Federally insured bank unit remains illegal under Section 23A of the Federal Reserve Act (a vestige of Glass-Steagall), which Obama and the Fed have refused to enforce.

Now two extremely damning facts have been revealed.

First, Forbes reported Jan. 3 that during the last two months of 2014 Citigroup bought the entire commodities trading operations of both Deutsche Bank (in early November) and Credit Suisse (as of Dec. 31). This makes the estimate of 7% of Citi’s assets being in oil debt (already a very high outlier) obsolete. This is while several other banks are shrinking commodities operations — Deutsche Bank and CS obviously, but also JPM Chase and Barclays). Citigroup’s global revenue from commodities speculation went from $215 million in 2013 to $485 million in 2014 (through 9/30 for both years). But now it is losing a) as much as $1 billion in China metals speculation through Hong Kong, and b) big, in the oil debt collapse.

Secondly, the website Zero Hedge’s research Jan. 5 discovered that Citigroup’s derivatives exposure increased by an astonishing $9 trillion in the third quarter of 2014 alone, and it thus became the most exposed Wall Street bank to derivatives, with $70.5 trillion in exposure. All of this exposure is on its FDIC-insured commercial bank, Citibank National Association.

The question raised by Zero Hedge: Is Citibank the “AIG” of the coming crash? A further question: Is Citibank volunteering once again to lead the crash of Wall Street — and get bailed out, based on a legal fraud? Recall that Citigroup was given an FDIC guarantee for $342 billion of its securities in October 2008.

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