DTCC: financial Death Star

Our Sunday sermon will be on the DTCC, the Depository Trust & Clearing Corp. Never heard of it? You should. “Last year DTCC settled $1.88 quadrillion in securities transactions across multiple asset classes. We essentially turnover the equivalent of the U.S. GDP every three days.”

Per ZeroHedge.com here:”Below I present DTCC’s full testimony before the House Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises titled “Effective Regulation of the Over-the-Counter Derivatives Markets.”

Also if you have never heard of DTCC before you are excused. Taken from the testimony:

Now, many of you may not have heard of DTCC before. That’s purposeful. We have traditionally kept a low profile, given the critical nature of the role we play in U.S. financial markets.

DTCC’s depository is the largest securities depository in the world, providing custody and asset servicing for 3.5 million securities issues from the United States and 110 other countries and territories valued at $30 trillion.

Additionally if you care as to who, if anyone, has insight into the dealings of the DTCC:

We are regulated by the SEC, the Federal Reserve Board of Governors and the New York State Banking Department for many of our activities.

Oh, the same Federal Reserve that is a dead end in terms of accountability? How convenient. (We won’t even touch on the SEC’s effectiveness as a regulator, and have never even heard of the last guys). Wouldn’t make sense to have someone actually transparent regulating this most critical of financial enterprises, would it.

So what does the DTCC do:

At its core, DTCC is a huge data processing business, involving the safe transfer of securities ownership and settlement of trillions of dollars in trade obligations, under tight deadlines every day. At the same time, DTCC’s primary mission is to protect and mitigate risk for its members and to safeguard the integrity of the U.S. financial system. Mitigating risk means we not only have the capacity to handle unpredictable spikes in trading volume, but that we have the business continuity and resiliency to withstand both the “unthinkable” –and even the “unknowable.”

But according to Obama, Bernanke and Geithner the unthinkable, and even the unknowable, will never show their faces again? Am I wrong? But, I guess the DTCC is clutch – here is why:

I’d submit to you Mr. Chairman, and Members of the Subcommittee, that had DTCC not had the foresight to create this Trade Information Warehouse and load the Warehouse with all these records of CDS trades in 2007, we might still be sitting here today in 2009 trying to sort out the total exposure of trading obligations following the Lehman bankruptcy, i.e., who traded with whom, at what point in time and at what price?

As mentioned here at DeepCapture.com: “We have a system that is shielded from scrutiny of every type. State regulators cannot successfully subpoena it (as various state regulators have told me) because the DTCC argues it is shielded by federal regulation. Yet when Feds try to look inside it they are simply rebuffed, and are helpless to assert themselves (as a high-level SEC official told some colleagues of mine). The Feds do not understand it (as a former DTCC employee and various Feds have told me). On those occasions that the Feds do get to look inside the system, they get shined-on (as a former DTCC official tells me and a former SEC official confirms). In fact, four years ago when I began this quest, the first thing I tried to do was to find out who regulated the DTCC, and quickly discovered that, other than a brief mention in an obscure GAO report, even the Feds are not sure if they regulate it. And yet, through this opaque system the treasure of the ages passes every week. Such system-design is a recipe for disaster.”

More from ZeroHedge: “If you think you own a security – think again. The DTCC is the Registered Owner – holder – of your stock or bond. The DTCC is the legal property-holder, share-holder, stock-holder, owner and purchaser. This means that your lawful Rights in that stock or bond (by default) are confined to that of a successor or heir of DTCC subsidiary Cede & Company”

As I have been fond of saying, the crooks steal everything nice and legally. Rules structured as such is equivalent to waking up not in your suburban dream home, but finding that you are in the holodeck of a galactic slave trading cruiser.

So my friends, does this mean we’re really medieval serfs with a nicer facade? Nonsense, the serfs (when they had a bit of money) had silver or gold. Now we only have pieces of paper issued by a private corporation that have no intrinsic value–and a rather tenuous hold on “intangible” or confidence-only value. As for the trading, I’m not saying to quit trading and hide silver bars in your mattress. But if you’re not staying in your trades for the day (or hours or minutes), closing out your positions and seeing the cash in your account at the end of the day, you (if I’m reading the rules above correctly) may not have a darn thing, really. I would also be so bold as to suggest pulling out extra winnings from your trading accounts from time to time, putting those funds in a credit union or some other non-Fed member bank with FDIC insurance.

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