Mr. Yoder and Mr. Hultgren Go to Washington

Editor's note: Here is another example of two hard working US congressmen who went to Washington to work hard for their constituents back in Kansas and Illinois. These two congressmen working hard for the American people remind us of the Jimmy Stewart movie Mr. Smith Goes to Washington. To the Pentagon on derivatives: To the Pentagon.

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Source: Wall Street on Parade

Meet the Two Congressmen Who Facilitated Today's Derivatives Nightmare at Wall Street's Mega Banks

By Pam Martens and Russ Martens: August 19, 2021 ~

Former Congressman Randy Hultgren Is Now President and CEO of Illinois Bankers Association 

When high risk derivatives start blowing up again at Wall Street's mega banks and tanking the U.S. economy, be sure to send your thoughts along to these two men: former Congressman Randy Hultgren (R-IL) and former Congressman Kevin Yoder (R-KS). You can reach Hultgren at the Illinois Bankers Association where he now sits as President and CEO after losing his seat in Congress in the 2018 election. Yoder…wait for it…is a registered lobbyist at Hobart Hallaway & Quayle Ventures after also losing his seat in the general election of 2018. 

Former Congressman Kevin Yoder Is Now a Registered Lobbyist 

These two men were effectively the handmaidens of Wall Street in getting a critical derivatives provision in the Dodd-Frank financial reform legislation repealed in 2014. We'll get to the specifics of the role the two men played in a moment, but first some background.

According to the official analysis and report from the Financial Crisis Inquiry Commission, derivatives played an outsized role in the severity of the financial and economic collapse in the U.S. in 2008 – the worst downturn since the Great Depression. According to documents released by the Financial Crisis Inquiry Commission (FCIC), at the time of Lehman Brothers' bankruptcy on September 15, 2008, it had more than 900,000 derivative contracts outstanding and had used the largest banks on Wall Street as its counter-parties to many of these trades. The FCIC data shows that Lehman had more than 53,000 derivative contracts with JPMorgan Chase; more than 40,000 with Morgan Stanley; over 24,000 with Citigroup’s Citibank; over 23,000 with Bank of America; and almost 19,000 with Goldman Sachs.

The U.S. government had to take over the giant insurer, AIG, because it was counter-party to tens of billions of dollars in derivatives to Wall Street banks and had no money to pay them.

Another chart from the Financial Crisis Inquiry Commission shows that Goldman Sachs had turned itself into a giant derivatives casino. By June of 2008, Goldman Sachs held $5.1 trillion notional (face amount) of exposure to the most dangerous form of derivatives, credit derivatives. Its counter-parties were subsequently propped up by secret revolving loans from the Federal Reserve. In the case of Merrill Lynch and Morgan Stanley, where Goldman had more than $600 billion exposure to each counter-party, the Fed made $2 trillion in secret, cumulative, below-market rate loans to each firm, according to an audit by the Government Accountability Office (GAO) that was released in 2011.

Citigroup, which also had massive exposure to derivatives, became a 99-cent stock. But because its Citibank unit was one of the largest federally-insured banks in the U.S., it received the largest bailout in global banking history. The U.S. Treasury injected $45 billion in capital into Citigroup; there was a government guarantee of over $300 billion on certain of its assets; the FDIC provided a guarantee of $5.75 billion on its senior unsecured debt and $26 billion on its commercial paper and interbank deposits; secret revolving loan facilities from the Federal Reserve sluiced a cumulative $2.5 trillion in below-market-rate loans to Citigroup from December 2007 through the middle of 2010.

Congress promised the American people that its Dodd-Frank reform legislation of 2010 would rein in these dangerous derivative practices at the Wall Street mega banks. One key derivatives reform measure in Dodd-Frank was known as the "push out rule," meaning derivatives would be pushed out of the insured bank to a different part of the bank holding company that could be wound down without taxpayer support if the bank became insolvent. 

Less than three years after Dodd-Frank was passed and signed into law by President Obama, the U.S. Senate’s Permanent Subcommittee on Investigations released a 300-page report showing that in 2012 the largest federally-insured bank in the United States, JPMorgan Chase, had engaged in high-risk derivative trades in London using depositors money from its federally-insured bank in the United States. JPMorgan Chase gambled in derivatives and lost $6.2 billion of depositors' money. This became known as the "London Whale" scandal. If ever there was compelling evidence of the need for the push out rule, this was it. The Wall Street mega banks had learned nothing from the 2008 financial collapse and were up to their old tricks again.

Please go to Wall Street on Parade to read more.

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Here is our way out, something Mr. Yoder and Mr. Hultgren didn't do when they went to Washington:

Stop Financing Your Enemy (This Is War)

Deploy this...