In the case of Merrill Lynch and Morgan Stanley, where Goldman had more than $600 billion exposure to each counterparty, the Fed made $2 trillion in secret, cumulative, below-market rate loans to each firm, according to an audit by the Government Accountability Office (GAO) that was released in 2011.Ĭitigroup, which also had massive exposure to derivatives, became a 99-cent stock. Its counterparties were subsequently propped up by secret revolving loans from the Federal Reserve. By June of 2008, Goldman Sachs held $5.1 trillion notional (face amount) of exposure to the most dangerous form of derivatives, credit derivatives. government had to take over the giant insurer, AIG, because it was counterparty to tens of billions of dollars in derivatives to Wall Street banks and had no money to pay them.Īnother chart from the Financial Crisis Inquiry Commission shows that Goldman Sachs had turned itself into a giant derivatives casino. The FCIC data shows that Lehman had more than 53,000 derivative contracts with JPMorgan Chase more than 40,000 with Morgan Stanley over 24,000 with Citigroup’s Citibank over 23,000 with Bank of America and almost 19,000 with Goldman Sachs.
According to documents released by the Financial Crisis Inquiry Commission (FCIC), at the time of Lehman Brothers’ bankruptcy on September 15, 2008, it had more than 900,000 derivative contracts outstanding and had used the largest banks on Wall Street as its counterparties to many of these trades. in 2008 – the worst downturn since the Great Depression. We’ll get to the specifics of the role the two men played in a moment, but first some background.Īccording to the official analysis and report from the Financial Crisis Inquiry Commission, derivatives played an outsized role in the severity of the financial and economic collapse in the U.S. These two men were effectively the handmaidens of Wall Street in getting a critical derivatives provision in the Dodd-Frank financial reform legislation repealed in 2014. Former Congressman Kevin Yoder Is Now a Registered Lobbyist
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