Welcome to the thread Bonnie and thanks for your contribution. We need more west coast informants and contributors.
B of A's involvement in Brazil is currently $33 billion: will they be able to roll over the short term notes in the next 45 days? Wonder what that exposure is?.
In the meantime I suggest you try and finds a copy of A. Gary Schillings book "Deflation". Very readable. The only book on the subject currently in print after looking through "Books in Print" and nine inches of four columns. Weird that with an effect that threatens to munch the world economy... is currently eating the world economy there is one book.
From Yahoo:
c Reuters, For Private Use Only
Key U.S. lawmakers seek ban on new derivatives rules
(Adds SEC comment, paras 10-12, background)
By Joanne Morrison
WASHINGTON, Sept 16 (Reuters) - Congress may soon block one U.S. regulator from setting new rules for the multi-trillion dollar over-the-counter derivatives market, according to letters released on Wednesday.
The Republican chairmen of the House and Senate Agriculture Committees asked lawmakers to pass legislation that would ban the Commodity Futures Trading Commission from imposing new regulations on the powerful global markets.
In letters sent on Tuesday to the chairmen of the Senate and House agriculture appropriations panels, Sen. Richard Lugar of Indiana and Rep. Robert Smith of Oregon asked that the legislative language be included in a pending agriculture appropriations bill.
''We reluctantly must pursue a legislative course of action with the aim of providing legal and market certainty to the OTC derivatives market,'' the lawmakers wrote.
Derivatives are investments whose value is derived from, or linked to, swings in interest rates, currency rates, commodity prices and stock prices. They are used by big investors to guard against volatility in the various markets.
The CFTC this spring began a controversial study of the derivatives markets, raising fears among market participants and other regulators of new CFTC rules and causing uncertainty that could shift the vibrant trade offshore.
The U.S. agency's derivatives project is of particular concern as the global economy has become shaky, resulting in sizable derivatives losses by some of the nation's largest banks.
Under Lugar's and Smith's proposal, the CFTC would be banned from issuing any new derivatives regulations for at least a year.
The Treasury Department, Federal Reserve Board and others have repeatedly expressed strong opposition to the CFTC's push to regulate derivatives, maintaining that the agency has no authority to do so.
The Securities and Exchange Commission, in a Sept. 11 letter to the CFTC, questioned the futures trading agency's ability to adequately regulate these complex financial products.
''The CFTC's action may actually increase the legal uncertainty concerning swaps and other OTC derivative instruments and, thus, destabilize what has become a significant global financial market,'' the securities regulator warned.
Lugar and Smith faulted the CFTC for not addressing the controversy created with the derivatives regulation project.
''Despite several opportunities during July and August to resolve this issue ... the CFTC has failed to provide us with proper assurances that it will not regulate in this area,'' the lawmakers wrote.
There has even been disagreement among top officials at the CFTC, as several commissioners have sought to delay work on the derivatives study.
Last week, the CFTC rejected an internal proposal that would have delayed the agency from imposing for more than one year new regulations on the over-the-counter derivatives market. That plan would also have curbed lawmakers from intervening in the matter.
The CFTC had no comment on the lawmakers' move, but the derivatives industry welcomed it.
''Now the rules won't change until Congress has had an opportunity to conduct its own review,'' said Mark Brickell, a board member at the International Swaps and Derivatives Association.
Another..
WASHINGTON, Sept 16 (Reuters) - U.S. bank derivative activity rose to a record $28 trillion in the second quarter of 1998, the Office of the Comptroller of the Currency said Wednesday.
It was a $2 trillion jump over the first quarter amount and a 21 percent gain from a year ago.
''Bank corporate customers have continued to show strong interest in various risk management products, including derivatives as a way of dealing with recent market volatility,'' said Mike Brosnan, the OCC's deputy comptroller for risk evaluation.
Revenue from trading activities at commercial banks was $2.6 billion, just off the record $2.7 billion set in the first quarter. Brosnan said that, despite the latest decline, trading
revenue remained strong.
Revenue from foreign exchange contracts continued its steady growth, while revenues from interest rate, equity, commodity and other trading positions declined slightly during the quarter.
Holdings of off-balance sheet derivatives continued to be concentrated in the largest banks, with eight accounting for 95 percent of the total notional amount of derivatives in the banking system.
During the second quarter, banks charged off $94 million due to credit losses from off-balance sheet derivatives, or 0.03 percent of total credit exposure. By comparison, net loan charge-offs relative to total loans for the quarter were 0.16 percent.
Brosnan predicted that with continued market volatility there could continue to be credit losses.
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