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  • Lessons From The Brain-Damaged Investor
    They don t react emotionally to things Good investors can learn to control their emotions in certain ways to become like those people The study demonstrates how neuroeconomics can offer insight into a question that has become a growing focus of economic inquiry Why don t people always act in their own self interest when they make economic decisions Though the field is still in its infancy researchers hope neuroeconomics could someday have dozens of real world applications like explaining how brain chemistry influences market phenomena such as bubble manias and investor panics Wall Street executives already are paying attention to the findings since it offers insight into what motivates investors This branch of inquiry and economic investigation is really fortifying and buttressing our understanding of investor behavior says David Darst chief investment strategist in the Individual Investor Group at Morgan Stanley It s beginning to inform our tactical decisions Using sophisticated brain imaging technology such as magnetic resonance imaging or MRI tests and other tools neuroeconomists peek inside people s brains to see which regions are activated when we engage in behaviors such as evaluating risks and rewards making choices and cooperating with other people Neuroeconomic researchers also tap into brain activity by measuring brain chemicals and exploring how damage to specific brain regions impacts economic decision making Neuroeconomics grew out of a related field called behavioral economics Behavioral economists use insights from psychology and other social sciences to explore why humans don t always behave as predictably as standard economic models suggest they should In the late 1990s when the links between psychology and neurobiology were firmly established behavioral economists began turning to neuroscientists in addition to psychologists for help explaining human behavior The idea was that if brain chemistry could explain phenomena such as depression or attention deficit disorder it might also help explain more mundane psychological functions such as how people reach financial decisions Behavioral economists like Princeton s Daniel Kahneman who won the Nobel Prize for Economics in 2002 began teaming up with neuroscientists like Peter Shizgal at Concordia University in Montreal In one study the pair used gambling games and neuroimaging techniques to look what part of the brain is triggered when people anticipate winning money They found that monetary rewards trigger the same brain activity as good tastes pleasant music or addictive drugs The 41 participants in the new study included people with and without brain damage including a control group of participants with brain damage that didn t affect their emotional processing Players were given 20 and asked to play a simple gambling game that involved 20 rounds of coin tosses If they won a coin toss they earned 2 50 If they lost the toss they had to give up a dollar They could choose not to play in any given round in which case they kept their dollar Logic indicates that the best strategy was to take the gamble in every round of the game since the return on a

    Original URL path: http://www.911omissionreport.com/brain-damaged_investor.html (2016-02-14)
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  • Financial terrorism suspected in 2008 economic crash
    Commission blame the crash on such economic factors as high risk mortgage lending practices and poor federal regulation and supervision the Pentagon contractor adds a new element outside forces a factor the commission did not examine There is sufficient justification to question whether outside forces triggered capitalized upon or magnified the economic difficulties of 2008 the report says explaining that those domestic economic factors would have caused a normal downturn but not the near collapse of the global economic system that took place Suspects include financial enemies in Middle Eastern states Islamic terrorists hostile members of the Chinese military or government and organized crime groups in Russia Venezuela or Iran Chinese military officials publicly have suggested using economic warfare against the U S Michael G Vickers assistant secretary of defense for special operations said the Pentagon was not the appropriate agency to assess economic warfare and financial terrorism risks In an interview with The Times Mr Freeman said his report provided enough theoretical evidence for an economic warfare attack that further forensic study was warranted The new battle space is the economy he said We spend hundreds of billions of dollars on weapons systems each year But a relatively small

    Original URL path: http://www.911omissionreport.com/financial_terrorism.html (2016-02-14)
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  • Global recession - where did all the money go?
    Global recession where did all the money go The Guardian January 29 2009 By Paddy Allen

    Original URL path: http://www.911omissionreport.com/money_supply_pryamid.html (2016-02-14)
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  • Robert G. Wilmers - Bank Crisis Was Born on Wall Street, Not at Your Main Street Bank - washingtonpost.com
    by securitized debt for the first time By the end of 2007 Wall Street accounted for two thirds of all private U S debt This growing market for synthetic mortgage backed securities inundated the country with credit that combined with historically low interest rates and exotic new mortgage products fueled the housing bubble and turned our financial markets into a virtual casino In the collapse that followed billions of dollars worth of mortgage backed securities were written off But the public continues to think of banks as the primary source of credit and to blame banks for the credit crunch Public officials contribute to the confusion by criticizing banks while allowing Wall Street to operate this shadow banking industry which exists outside the standards for safety and soundness that apply to banks and without obligation to make clear the extent of such firms debt leverage capital or reserves Many Wall Street firms played significant and contributory roles in the evolution of this crisis Wall Street s most prominent investment bank Goldman Sachs historically the industry leader was at the forefront of the creation origination and sales of derivative securities and also spent 40 6 million on lobbying and campaign contributions from 1998 to 2008 In 2008 alone Goldman spent 8 97 million in this way almost 11 percent more than the Financial Services Roundtable a trade organization that represents 150 top financial institutions The conversion of this investment bank into a giant hedge fund went unchecked by legislators and regulators despite constituting a radical change to our financial system And it has received billions upon billions in taxpayer bailout funding to keep it alive By contrast consider how regulators treat Main Street banks compared with the way they deal with this highly connected investment bank When M T Bank applied

    Original URL path: http://www.911omissionreport.com/where_crisis_came_from.html (2016-02-14)
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  • The $700 trillion elephant
    that s valued at less than 15 trillion And we hope to keep the entire U S economy from collapsing yet gross domestic product stands at 14 2 trillion Compare any of these to the derivatives market and you can easily see that we are just closing the windows as a tsunami crashes to shore The total value of all the stock markets in the world amounts to less than 50 trillion according to the World Federation of Exchanges To be sure the derivatives market is international But much of the trouble we re in began with contracts derived from the values associated with U S residential real estate market These contracts were engineered based on the various assumptions tied to those values Few know what derivatives are worth I spoke with one derivatives trader who manages billions of dollars and she said she couldn t even value her portfolio because no one knows anymore who is on the other side of the trade Derivatives pricing simply put is determined by what someone else is willing to pay for the contract The value is based on an artificial scenario that X will be worth Y if Z happens Strip away the fantasy however and the reality of the situation is akin to a game of musical chairs without any chairs So now the music has finally stopped That s why stabilizing the housing market will do little to take the sting out of the snapback we are going through on Wall Street Once people s mortgages were sold off to secondary buyers and then all sorts of crazy types of derivative securities were devised based on those and those securities were in turn traded on down the line there is now little if any relevance to the real estate values

    Original URL path: http://www.911omissionreport.com/700_trillion.html (2016-02-14)
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  • Banks may need more cash to clear derivatives
    would have enough capital to handle the anticipated surge in trades that will have to be cleared BIS concluded in a paper published on Sunday that it seems unlikely that G14 dealers would have much difficulty finding sufficient collateral to post as initial margin By contrast dealers may need to increase the liquidity of their assets as central clearing is extended BIS said Central clearing covers about half of 400 trillion in interest rate swaps 20 30 percent of the 2 5 trillion commodities derivatives and about 10 percent of 30 trillion in credit default swaps The G14 dealers comprise Bank of America Merrill Lynch Barclays Capital BNP Paribas Citi Credit Suisse Deutsche Bank Goldman Sachs HSBC JP Morgan Morgan Stanley RBS Societe Generale UBS and Wells Fargo Bank BIS said they could face a cash shortfall in very volatile markets when daily margins are increased triggering demands for several billions of dollars to be paid within a day These margin calls could represent as much as 13 percent of a G14 dealer s current holdings of cash and cash equivalents in the case of interest rate swaps BIS said Clearing operators like ICE CME LCH Clearnet and Eurex are

    Original URL path: http://www.911omissionreport.com/cash_derivatives.html (2016-02-14)
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  • BofA Said to Split Regulators Over Moving Merrill Derivatives to Bank Unit
    bank two notches apiece The holding company fell to Baa1 the third lowest investment grade rank from A2 while the retail bank declined to A2 from Aa3 Moody s Downgrade The Moody s downgrade spurred some of Merrill s partners to ask that contracts be moved to the retail unit which has a higher credit rating according to people familiar with the transactions Transferring derivatives also can help the parent company minimize the collateral it must post on contracts and the potential costs to terminate trades after Moody s decision said a person familiar with the matter Bank of America estimated in an August regulatory filing that a two level downgrade by all ratings companies would have required that it post 3 3 billion in additional collateral and termination payments based on over the counter derivatives and other trading agreements as of June 30 The figure doesn t include possible collateral payments due to variable interest entities which the firm is evaluating it said in the filing Dubrowski declined to comment on collateral or termination payments after the downgrade Be Prepared Bank of America s rating is now four grades below the one Moody s assigned to JPMorgan Chase Co the biggest U S bank by deposits at midyear and a level below the rating given to Citigroup Inc the third biggest Bank of America is the only U S lender that lacks a rating of A3 or higher among the five firms listed by the Office of the Comptroller of the Currency as having the biggest derivatives books We had worked very hard over the course of the last nine months to be prepared to the extent that we did receive a downgrade and feel very good about the way that we ve minimized the potential impact Bank of America Chief Financial Officer Bruce Thompson said in a conference call today with analysts Since the downgrade we have not seen any change in our global excess liquidity sources Derivatives are financial instruments used to hedge risks or for speculation They re derived from stocks bonds loans currencies and commodities or linked to specific events such as changes in the weather or interest rates Dodd Frank Rules Keeping such deals separate from FDIC insured savings has been a cornerstone of U S regulation for decades including last year s Dodd Frank overhaul of Wall Street regulation The legislation gave the FDIC which liquidates failing banks expanded powers to dismantle large financial institutions in danger of failing The agency can borrow from the Treasury Department to finance the biggest lenders operations to stem bank runs It s required to recoup taxpayer money used during the resolution process through fees on the largest firms Bank of America benefited from two injections of U S bailout funds during the financial crisis The first in 2008 included 15 billion for the bank and 10 billion for Merrill which the bank had agreed to buy The second round of 20 billion came in January 2009

    Original URL path: http://www.911omissionreport.com/derivatives_to_bank.html (2016-02-14)
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  • A Secretive Banking Elite Rules Trading in Derivatives
    come to have such influence that they can decide who can compete with them Ironically this development grew in part out of worries during the height of the financial crisis in 2008 A major concern during the meltdown was that no one not even government regulators fully understood the size and interconnections of the derivatives market especially the market in credit default swaps which insure against defaults of companies or mortgages bonds The panic led to the need to bail out the American International Group for instance which had C D S contracts with many large banks In the midst of the turmoil regulators ordered banks to speed up plans long in the making to set up a clearinghouse to handle derivatives trading The intent was to reduce risk and increase stability in the market Two established exchanges that trade commodities and futures the InterContinentalExchange or ICE and the Chicago Mercantile Exchange set up clearinghouses and so did Nasdaq Each of these new clearinghouses had to persuade big banks to join their efforts and they doled out membership on their risk committees which is where trading rules are written as an incentive None of the three clearinghouses would divulge the members of their risk committees when asked by a reporter But two people with direct knowledge of ICE s committee said the bank members are Thomas J Benison of JPMorgan Chase Company James J Hill of Morgan Stanley Athanassios Diplas of Deutsche Bank Paul Hamill of UBS Paul Mitrokostas of Barclays Andy Hubbard of Credit Suisse Oliver Frankel of Goldman Sachs Ali Balali of Bank of America and Biswarup Chatterjee of Citigroup Through representatives these bankers declined to discuss the committee or the derivatives market Some of the spokesmen noted that the bankers have expertise that helps the clearinghouse Many of these same people hold influential positions at other clearinghouses or on committees at the powerful International Swaps and Derivatives Association which helps govern the market Critics have called these banks the derivatives dealers club and they warn that the club is unlikely to give up ground easily The revenue these dealers make on derivatives is very large and so the incentive they have to protect those revenues is extremely large said Darrell Duffie a professor at the Graduate School of Business at Stanford University who studied the derivatives market earlier this year with Federal Reserve researchers It will be hard for the dealers to keep their market share if everybody who can prove their creditworthiness is allowed into the clearinghouses So they are making arguments that others shouldn t be allowed in Perhaps no business in finance is as profitable today as derivatives Not making loans Not offering credit cards Not advising on mergers and acquisitions Not managing money for the wealthy The precise amount that banks make trading derivatives isn t known but there is anecdotal evidence of their profitability Former bank traders who spoke on condition of anonymity because of confidentiality agreements with their former employers said their banks typically earned 25 000 for providing 25 million of insurance against the risk that a corporation might default on its debt via the swaps market These traders turn over millions of dollars in these trades every day and credit default swaps are just one of many kinds of derivatives The secrecy surrounding derivatives trading is a key factor enabling banks to make such large profits If an investor trades shares of Google or any other company on a stock exchange the price and the commission or fee are known Electronic trading has made this information available to anyone with a computer while also increasing competition and sharply lowering the cost of trading Even corporate bonds have become more transparent recently Trading costs dropped there almost immediately after prices became more visible in 2002 Not so with derivatives For many there is no central exchange like the New York Stock Exchange or Nasdaq where the prices of derivatives are listed Instead when a company or an investor wants to buy a derivative contract for say oil or wheat or securitized mortgages an order is placed with a trader at a bank The trader matches that order with someone selling the same type of derivative Banks explain that many derivatives trades have to work this way because they are often customized unlike shares of stock One share of Google is the same as any other But the terms of an oil derivatives contract can vary greatly And the profits on most derivatives are masked In most cases buyers are told only what they have to pay for the derivative contract say 25 million That amount is more than the seller gets but how much more 5 000 25 000 or 50 000 more is unknown That s because the seller also is told only the amount he will receive The difference between the two is the bank s fee and profit So the bigger the difference the better for the bank and the worse for the customers It would be like a real estate agent selling a house but the buyer knowing only what he paid and the seller knowing only what he received The agent would pocket the difference as his fee rather than disclose it Moreover only the real estate agent and neither buyer nor seller would have easy access to the prices paid recently for other homes on the same block An Electronic Exchange Two years ago Kenneth C Griffin owner of the giant hedge fund Citadel Group which is based in Chicago proposed open pricing for commonly traded derivatives by quoting their prices electronically Citadel oversees 11 billion in assets so saving even a few percentage points in costs on each trade could add up to tens or even hundreds of millions of dollars a year But Mr Griffin s proposal for an electronic exchange quickly ran into opposition and what happened is a window into how banks have fiercely fought competition and open pricing To

    Original URL path: http://www.911omissionreport.com/secretive_derivatives.html (2016-02-14)
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