We all know that this rule will never go into effect. When the rule hurts the banks too much, the rule will be changed, ignored, etc.

Even on the low end ($1.7T), the money will have to come from somewhere, and the only place I'm aware of that it could is the market. Commodities, treasuries and equities, mainly.

Pretty scary thought if you're bullish for 2013.

Only the smaller banks and dealer will have to pony up. The favorites will continue to get away with murder.

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When the rule hurts the banks too much, the rule will be changed, ignored, etc.

That's right. They will take care of it when something big blows up. A derivative series perhaps.

The whole reason for their cry of self policing. There isn't self policing and never will be.

We saw what happened with Brooksley born when she tried to rectify a future disaster. She was blackballed.

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... it's perfectly reasonable for people to have somewhere between 12 and 75 times leverage in these things.

It is self policing.

They are only going to do whatever is necessary for their survival.

Didn't you know ... they are persons!!!

/humor off
/reality off

"Oh, and if you're wondering how that compares against the actual amount of "un-cleared" swaps? That's "estimated" at $127 trillion, which means that the ISDA thinks it's perfectly reasonable for people to have somewhere between 12 and 75 times leverage in these things."

you are making the assumption they are not putting up customer funds as colateral under the table... I bet the MF global scams are pretty much systemic.

If (when) the investment markets crash once again this nation is going to be in such deep deep **** that we'll never ever ever be able to dig our way back out again. It'll change our entire political and financial systems, and not for the better. I might not see it. But the generation under me is going to get financially ass***** for sure.

I have always questioned the alleged market value of these deals for the 100's of trillions outstanding, in that someone would have to put that money up front to begin with, since risk and time value is not free, even if the banks did not have to front margin money to begin with. We are talking about the market value equal to the GDP of the US. My conclusion is it didn't happen.

It's only a matter of time now....

We all know where Corzine would get the money from. Are Dimon, Corbat, etc. any different?

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I bet the MF global scams are pretty much systemic

Excellent point. They would just swipe customer accounts to make up the losses. We have already seen this.

I'm amazed Madoff and Corzine are still alive.

If you think we're screwed now wait until Dimon becomes our next Secretary of the Treasury. heh. Man oh man. What a ride that will be. And all the oligarchs like Buffet are trying to sell him to the American public. And I have no doubt the public will take the bait. We have the most stupid educated citizens in the world.

This will NEVER go into effect.

Even at nuts leverage rates where the **** are they going to get the assets to post margin?

I'm curious to know where I can find price quotes showing the yields and Interest Rate Swap margins, particularly for long-term contracts of 10+ years in length. For example, suppose a purchaser of an Interest Rate Swap contract (a bank with a lot of long-term loans where they want to hedge on their cost of funds) on 1 billion notional agrees for 10 years to pay 300 bp fixed minus (LIBOR 3mo + 210bp) and LIBOR 3 mo averages 30bp now and all of next year. Every six months the average LIBOR 3mo is calculated and plugged into the formula with a payment of half the annual result being paid either by the purchaser (assuming LIBOR 3mo averages below 90bp) or by the counterparty (assuming LIBOR 3mo averages above 90bp). At 30bp average the counterparty is getting 3 million every six months on that 1 billion notional. If a counterparty has 5,000 such contracts or its equivalent (conceivably possible for JP Morgan Chase, Goldman Sachs, Citibank, a few Japanese banks & English banks & others, etc) then they'd be seeing approx 30 billion of annual profit on such contracts. However let's suppose that 3mo LIBOR goes to the rates we saw in the last half of 2000 at approx 650bp and the market thinks its possible that the condition could last 3-5 years on 5000 such contracts for a bank like JPM or GS. Then suddenly that 30 billion annual profit turns into a loss of 285 billion annually for the bank over the next 3-5 years. Just look at the balance sheet of any large bank and you'll see how they'd never survive such an outlook or even 10% of such an outlook. If the market starts to think that ZIRP may go away then I expect to see great dangers in the long-term interest rate swaps market lurking to blow up some pretty massive counterparties who currently are making billions of "free" money on risks they bet they'll never have to actually reckon with as they are dependent upon the system just staying the course on ZIRP.