Fed Sends Taxpayer and Business Money to Banks Via Interest Rate Swaps

Among the many issues that won’t be discussed in the coming elections is the burden on taxpayers and businesses created by interest rate swaps. It isn’t that the issue is a secret, all kinds of people write about it. Here’s Matt Taibbi writing in April 2010; and here’s a 2010 white paper from the SEIU showing the impact on several states and local governments. The problem is that interest rate swaps are at the confluence of bank power and governmental weakness. And, of course, the too big to fail banks suck a ton of money out of the real economy using swaps.
One source of information is the OCC’s Quarterly Report on Bank Trading and Derivatives Activities. According to the report for the fourth quarter of 2011, trading revenues from cash positions and derivatives at insured commercial banks were $25.8 billion, up by $3.3 billion over 2010. Bank holding company trading revenues were $51.8 billion, down from $61 billion in 2010.
Banks are notoriously close-mouthed about their swaps business, so when JPMorgan Chase provided some data on revenues, it was regarded as a surprise. The numbers are amazing: trading revenue at JPMorgan Chase was about $20.2 billion for 2011. Trading revenue from interest rate swaps was approximately $1.44 billion. But that’s not all the money they make on derivatives.

Read more: http://my.firedoglake.com/masaccio/2012/08/24/fed-sends-taxpayer-and-business-money-to-banks-via-interest-rate-swaps/