Derivatives: The $600 Trillion Time Bomb That’s Set to Explode – Money Morning

October 12, 2011

By Keith Fitz-Gerald, Chief Investment Strategist, Money Morning

Do you want to know the real reason banks aren’t lending and the PIIGS have control of the barnyard in Europe?It’s because risk in the $600 trillion derivatives market isn’t evening out. To the contrary, it’s growing increasingly concentrated among a select few banks, especially here in the United States.In 2009, five banks held 80% of derivatives in America. Now, just four banks hold a staggering 95.9% of U.S. derivatives, according to a recent report from the Office of the Currency Comptroller.The four banks in question: JPMorgan Chase & Co. NYSE: JPM, Citigroup Inc. NYSE: C, Bank of America Corp. NYSE: BAC and Goldman Sachs Group Inc. NYSE: GS.Derivatives played a crucial role in bringing down the global economy, so you would think that the world’s top policymakers would have reined these things in by now – but they haven’t.Instead of attacking the problem, regulators have let it spiral out of control, and the result is a $600 trillion time bomb called the derivatives market.

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via Derivatives: The $600 Trillion Time Bomb That’s Set to Explode – Money Morning.

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