HISTORIAN: Hello Everyone!
Following is the article and infographic I was discussing on tonight’s GET Team Round Table. This is an example of the organizing that must take place behind the scenes to prepare for global changes in the financial system.
A shift from the current fiat system to an asset-backed system would render the type of investments known as “derivatives” essentially worthless. Institutions with vast holdings of derivatives would lose significant wealth on paper. If they used their derivatives as collateral for other debt, they could become insolvent.
“Living Wills” are a plan that lays out how such organizations would go bankrupt or be dismantled in an organized way that would not impact the rest of the global financial world or economy.
Read More Link On Right
The article explains “Living Wills”. Nine of the banks with the biggest holdings of derivatives worldwide were required to submit their “Living Wills” to regulators by July 1, 2012.
The infographic shows the amount of derivatives held by these banks.
EXCERPTS FROM ARTICLE ON “LIVING WILLS”
Reuters | Wednesday, June 27, 2012 | Big Banks Craft 'Living Wills' In Case They Fail
Five of the biggest banks in the United States are putting finishing touches on plans for going out of business as part of government-mandated contingency planning that could push them to untangle their complex operations…. JPMorgan Chase … Bank of America … Citigroup … Goldman Sachs … Morgan Stanley are among the first five submitting the first liquidation scenarios to regulators …
The five firms … have some of the biggest … derivatives portfolios of financial institutions in the United States…. Great Britain and other major countries are imposing similar requirements for "resolution" plans on their big banks ...
Banks and regulators must imagine liquidations in two different ways.
The first is through bankruptcy courts with banks negotiating with their creditors.
This is the going-out-of-business method planned in the living wills due July 1. The living wills must include how subsidiaries in foreign jurisdictions will be liquidated…..
The second way is through a new kind of liquidation process in which the FDIC takes control of putting a financial giant down. This method has more flexibility than is allowed in bankruptcy courts, but still uses critical information collected in the banks' living wills, such as where exactly to find collateral.
Nine banks will file first, including five based in the United States and four owned abroad….. Eventually about 124 banks are expected to submit plans.
This infographic illustrates the 9 banks with the largest holdings of derivatives.
Definition of a derivative (investopedia): A security whose price is dependent upon or derived from one or more underlying assets….. Its value is determined by fluctuations in the underlying asset…. Futures contracts, forward contracts, options and swaps are the most common types of derivatives.
The 9 banks in order of holdings of derivatives are:
$1.375 Trillion - Bank of New York Mellon
$1.390 Trillion - State Street Financial
$1.722 Trillion - Morgan Stanley
$3.332 Trillion - Wells Fargo
$4.321 Trillion - HSBC
$44.192 Trillion - Goldman Sachs
$50.135 Trillion - Bank of America
$52.102 Trillion - Citibank
$70.151 Trillion - JP Morgan Chase
$228.72 Trillion TOTAL
The above infographic on derivatives illustrates just one of the flaws of the current financial model and system – that it is completely unsustainable.
I believe that this model and system is going to be substantially replaced, and that significant work - such as preparation of the “living wills” – has been taking place behind the scenes to prepare for that day.
In my opinion, we will see the RV when sufficient preparation of this kind has been completed . . . and the above article on “living wills” suggests that the preparations are well advanced.
Have a good day! And GO RV!!! :) Historian