from The Daily Bell:
This U.S. Bank Is About to Relive the 2008 Derivatives Nightmare … Deutsche Bank AG (NYSE: DB) – with its stock now trading at a 30-year low – was recently called the world’s riskiest financial institution by the International Monetary Fun … In a last-ditch effort to save itself, DB is trying to dump a bucket load of credit derivatives … You would think no one would buy these weapons of financial mass destruction… but you’d be wrong. – Money Morning (here)
The bank in talks to buy the Deutsche Bank derivatives is Citigroup Inc. according to this article. Well written and focused, it asks why Citi would buy more derivatives when last year Citi purchased $250 billion from Deutsche Bank.
The idea is that Wall Street is simply too greedy for its own good and that this greed can rob bankers of perspective.
Citi is making deals because it can make money and damn the consequences. We’re not quite sure this interpretation is the correct one, as we’ll show in a moment.
Certainly, Citi’s actions don’t make much sense from a longer-term perspective. Most banks are trying to downsize. For instance, Credit Suisse Group AG just sold $380 billion of derivatives to … Citigroup! And this does seem strange, as Citi “nearly destroyed itself” with derivatives in 2008.
The US government had to guarantee up to $300 billion or more to ensure that Citi stayed solvent and now, given all the derivatives that Citi is buying, the US government might have to step in again if the market sours.
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