Pam and Russ Martens: Big banks dangerously using foreign subsidiaries to evade U.S. derivatives rules

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By Pam and Russ Martens
Wall Street on Parade
Wednesday, August 12, 2020

On May 30, with little mainstream media attention, four European academics published a report on how some of the largest Wall Street banks (all of which received massive amounts of secret Federal Reserve bailout money during the 2007-2010 financial crash) were shamelessly gaming the system again.

Rather than complying with the derivatives regulations imposed under the Dodd-Frank financial reform legislation of 2010, the Wall Street mega-banks had simply moved much of their interest-rate derivatives trading to their foreign subsidiaries that fall outside of U.S. regulatory reach.

... Dispatch continues below ...


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This is known as regulatory arbitrage: seeking the most lightly regulated jurisdiction to ply your dangerous trading activity. (Think JPMorgan's London Whale fiasco.)

The European academics are Pauline Gandré, Mike Mariathasan, Ouarda Merrouche, and Steven Ongena. The paper is titled: "Regulatory Arbitrage and the G20's Global Derivatives Market Reform."

The researchers discovered that "U.S. banks reduced their [derivative] holdings at home while increasing them in Australia, Japan, the UK, Brazil, China, Hong Kong, and Mexico.”

The poster child for becoming a financial basket case in 2008, Citigroup, was called out particularly in the report. ...

... For the remainder of the report:

https://wallstreetonparade.com/2020/08/wall-street-banks-are-dangerously...

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