by Washington's Blog
December 8, 2009
Architect of Credit Default
Behind the Development of
As I have previously shown, speculative derivatives (especially
credit default swaps) are a primary
the economic crisis.
And I have
pointed out that:
the giant banks will make a
killing on carbon trading
while the leading scientist
crusading against global warming says it won't work
there is a very high probability
of massive fraud and insider trading in the carbon trading
Bloomberg notes that the carbon
trading scheme will be centered around derivatives:
The banks are preparing to do with
carbon what they’ve done before: design and market derivatives
contracts that will help client companies hedge their price risk
over the long term. They’re also ready to sell carbon-related
financial products to outside investors.
[Blythe] Masters says banks must be allowed to lead the way if a
mandatory carbon-trading system is going to help save the planet
at the lowest possible cost. And derivatives related to carbon
must be part of the mix, she says. Derivatives are securities
whose value is derived from the value of an underlying commodity
-- in this case, CO2 and other greenhouse gases...
She is the
JP Morgan employee who invented
credit default swaps, and is now heading JPM's carbon trading
As Bloomberg notes (this and all
remaining quotes are from the above-linked Bloomberg article):
Masters, 40, oversees the New York
bank’s environmental businesses as the firm’s global head of
As a young London banker in the early
1990s, Masters was part of JPMorgan’s team developing ideas for
transferring risk to third parties. She went on to manage credit
risk for JPMorgan’s investment bank.
Among the credit derivatives that grew from the bank’s early efforts
was the credit-default swap.
Some in congress are fighting against carbon derivatives:
“People are going to be cutting up
carbon futures, and we’ll be in trouble,” says Maria Cantwell, a
Democratic senator from Washington state. “You can’t stay ahead
of the next tool they’re going to create.”
Cantwell, 51, proposed in November that
U.S. state governments be given the right to ban unregulated
“The derivatives market has done so
much damage to our economy and is nothing more than a
very-high-stakes casino -- except that casinos have to abide by
regulations,” she wrote in a press release...
However, Congress may cave in to
industry pressure to let carbon derivatives trade over-the-counter:
The House cap-and-trade bill bans
OTC derivatives, requiring that all carbon trading be done on
exchanges...The bankers say such a ban would be a mistake...The
banks and companies may get their way on carbon derivatives in
separate legislation now being worked out in Congress...
Financial experts are also opposed to
cap and trade:
George Soros, the billionaire
hedge fund operator, says money managers would find ways to
manipulate cap-and-trade markets.
“The system can be gamed,” Soros,
79, remarked at a London School of Economics seminar in
July. “That’s why financial types like me like it - because
there are financial opportunities”...
Hedge fund manager Michael Masters,
Masters Capital Management LLC,
based in St. Croix, U.S. Virgin Islands [and unrelated to Blythe
Masters] says speculators will end up controlling U.S. carbon
prices, and their participation could trigger the same type of
boom-and-bust cycles that have buffeted other commodities...
The hedge fund manager says that banks will attempt to inflate
the carbon market by recruiting investors from hedge funds and
“Wall Street is going to sell it
as an investment product to people that have nothing to do
with carbon,” he says. “Then suddenly investment managers
are dominating the asset class, and nothing is related to
actual supply and demand. We have seen this movie before.”
Indeed, as I have previously pointed
out, many environmentalists are opposed to cap and trade as well.
Michelle Chan, a senior
policy analyst in San Francisco for Friends of the Earth,
“Should we really create a new
$2 trillion market when we haven’t yet finished the job of
revamping and testing new financial regulation?” she asks.
Chan says that, given their recent history, the banks’
ability to turn climate change into a new commodities market
should be curbed...
“What we have just been woken up to in the credit crisis -
to a jarring and shocking degree - is what happens in the
real world,” she says...
Friends of the Earth’s Chan is working
hard to prevent the banks from adding carbon to their repertoire.
She titled a March FOE report “Subprime
In testimony on Capitol Hill, she
“Wall Street won’t just be brokering
in plain carbon derivatives - they’ll get creative.”
Yes, they'll get "creative", and we have
seen this movie before ...an inadequately-regulated carbon
derivatives boom will destabilize the economy and lead to another
What Exactly is The International Carbon Market?
November 3, 2009
from FrontLineWorld Website
In a series of short interview
investigative reporter Mark
Schapiro will be explaining some of the complexities
of this new carbon economy and
what is at stake.
Up first: What exactly is the
international carbon market?