Subject: Fed: $4.4 trillion

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Tavakoli Structured Finance, Inc.

Fed Releases Quarterly Balance Sheet Report (Aug 22)

The Federal Reserve released it's quarterly balance sheet report showing assets of $4.4 trillion as of July 30, 2014, up $835B year-over-year. The balance sheet is unaudited.Unaudited. You can read more here: http://go.usa.gov/mg84

Asset buys have slowed to $10 billion per month for MBS and $15 billion per month for treasuries. The previous sentence shows how far into Wonderland the Fed has run since jumping through the looking glass.

You may have noticed I sent my first tweet at Twitter on Thursday. I won't be there frequently, and already I see that many people use it as a stream of consciousness medium.

I thought it might be an easier way to monitor chatter from the BIS, central bank,s and the IMF, all of which I follow, including the Bundesbank, auf Deutsche. It turns out it is.

The chatter is the absence of anything on derivatives, forex trading, interest rate swaps, repos. It's mostly softball rhetoric and links to research reports. Simply astonishing. It's like watching someone with a visible melanoma pick lint off his suit...because that's the priority.

In case you missed it

The Exchange with Amanda Lang (CBC.ca) interviewed me this week about derivatives and the lack of financial reform in the USA. If you are in a country that allows you to view Canadian video, you can see it by clicking this link.

Here's a frequently asked question not covered by the video or the article linked below: Why is there a problem, if the trades are collateralized?

I remind people that AIG collateralized its trades, until it couldn't meet margin calls for more collateral. MFGlobal collateralized its trades, and when it couldn't meet margin calls, it looted customer accounts and went bankrupt when it couldn't cover its losses compounded by malfeasance. Those are just two examples, and we have massive systemic problems today.


Investors dine on fresh menu of credit derivatives

Financial Times
– August 19, 2014
By Tracy Alloway and Micahel Mackenzie

Some market participants say the rise of these derivatives raises questions about the effectiveness of financial reform undertaken since 2008. While standardised derivatives such as interest rate swaps are now transacted in exchange-type venues and centrally cleared, the flourishing area of opaque products are not, and moreover there are few records of activity that regulators can monitor.

“We’ve reformed nothing,” says Janet Tavakoli, president of Tavakoli Structured Finance. “We have more leverage and more derivatives risk than we’ve ever had.”

That leaves the possibility that in fighting the vanguard of the last financial crisis, regulators have missed new areas of danger in the system.

Says Ms Tavakoli: “There’s always a blind spot in terms of risk when an activity is not attracting much [regulatory] capital.”

End of Excerpt

See also: "Hidden Bank Risks Drive Investors to Productive Assets, U.S. Treasuries, and Gold," The Financial Report by Janet Tavakoli - December 16, 2013


Janet Tavakoli
President, Tavakoli Structured Finance, Inc.

Structured Finance & Collateralized Debt Obligations

Tavakoli gives real-time coverage of “the big short,” the shorting of the ABX index, and the fraud-riddled reference obligations that made this trade the windfall it was.

State-of-the-art look at the CDO and structured credit products market.

Tackles key issues in valuing structured financial products: fraud, phony ratings, misleading structures, poor underwriting standards, and more.


Anthology of Tavakoli’s web articles from the September 2008 financial crisis through February 2012. Commentaries are unrevised so that readers experience the real-time thought process. Some background is repeated in commentaries so that they could read as stand-alone web articles as events unfolded.

Example after stunning example of no-strings-attached socialization of losses and privatization of gains and exposes the criminogenic environment that enabled international oligarchs to solidify power.
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