May 23 (Bloomberg) -- The U.S. Treasury’s plan to regulate the over-the-counter derivatives market outlined by Secretary Timothy Geithner on May 13 contains recommendations similar to those made by Goldman Sachs Group Inc., JPMorgan Chase & Co., Credit Suisse Group AG and Barclays Plc three months earlier.
The banks sent the Treasury a plan written in February titled “Outline of Potential OTC Derivatives Legislative Proposal,” saying the Federal Reserve should extend capital and margin requirements to companies and hedge funds that trade in the $592 trillion unregulated market, according to a document obtained by Bloomberg News and confirmed by the Treasury. Energy companies, corporations and hedge funds don’t face such requirements now, while banks do under central bank oversight.
“The banks appear to wish to maintain the intra-dealer market and raise barriers to new entrants to keep the OTC business as compartmentalized as possible and to protect their profitable market conditions,” said Brad Hintz, an analyst at Sanford C. Bernstein & Co. in New York. “The Street’s lobbyists appear to be asking for a ‘club’ structure in OTC trading...”
That's so understandable. Who better to understand the delicate intricacies of these financial vehicles? After all, it's a $592 trillion unregulated market we're talking about, best leave it to the professionals.
If you had a stack of one hundred nice crisp $100 bills it might be about 1 cm high. Say, that's $10,000.
A stack of $1,000,000 worth $100 bills might be 100 cm x $10,000, or a meter high.
One billion dollars would be a stack a kilometer high.
One trillion dollars, one thousand kilometers high.
A $592 trillion unregulated market would be a stack 592 kilometers high. So don't be standing around when the whole damned thing falls over. Somebody might get hurt.
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