[PEN-L:28223] RE: derivatives redux

["Devine, James" <jdevine@xxxxxxx>]

Title: RE: [PEN-L:28220] derivatives redux

>In laymen's language, that means that, with fewer and fewer big banks, a failure by
any one of them could be disastrous. That's one of the problems with globalization --
it puts everyone's eggs in the same few baskets.<

of course, most central banks would consider these institutions "too big to fail" (since they're run by friends, after all). So a failure would likely encourage interest rate cuts and even inflation.

Jim Devine jdevine@xxxxxxx &  http://bellarmine.lmu.edu/~jdevine

> -----Original Message-----
> From: Ian Murray [mailto:seamus2001@xxxxxxxxx]
> Sent: Friday, July 19, 2002 2:21 PM
> To: pen-l
> Subject: [PEN-L:28220] derivatives redux
>
>
> How could things get worse? For an answer, consult the annual
> report of the Bank for
> International Settlements, issued this month. Under a section
> entitled "Seeds of
> Concern," the BIS notes that financial consolidation has
> meant that just a few giant
> banks now control the unregulated market for financial
> derivatives. The top three
> banks controlled 89 percent of foreign-exchange derivatives
> booked by U.S. banks in
> 2001, up from 59 percent in 1995; the top three banks' share
> of U.S. interest-rate
> derivatives rose to 86 percent in 2001 from 56 percent in
> 1995; the top three's share
> of credit derivatives rose to 94 percent in 2001 from 79
> percent in 1998.
>
> In laymen's language, that means that, with fewer and fewer
> big banks, a failure by
> any one of them could be disastrous. That's one of the
> problems with globalization --
> it puts everyone's eggs in the same few baskets.
>
> http://www.washingtonpost.com/wp-dyn/articles/A28798-2002Jul18.html
>