Starting in 2013, federally insured banks would be prohibited from directly engaging in derivative transactions not specifically hedging (1) lending risks, (2) interest rate volatility, and (3) cushion against credit defaults. The “push-out rule” sought to force banks to move their speculative trading into non-federally insured subsidiaries.
The Federal Reserve and Office of the Comptroller of the Currency in 2013 allowed a two-year delay on the condition that banks take steps to move swaps to subsidiaries that don’t benefit from federal deposit insurance or borrowing directly from the Fed.
The rule would have impacted the $280 trillion in derivatives primarily held by the “too-big-to-fail (TBTF) banks that include JPMorgan Chase, Bank of America, Citigroup, and Wells Fargo. Although 95% of TBTF derivative holdings are exempt as legitimate lending hedges, leveraging cheap money from the U.S. Federal Reserve into $10 trillion of derivative speculation is one of the TBTF banks’ most profitable business activities.
For Goldman Sachs and Morgan Stanley, the rule is almost a non-event, as they already conduct derivatives activity outside of their bank subsidiaries. (Which makes sense, since neither actually had commercial banking operations of any significant substance until converting into bank holding companies during the 2008 crisis).
The impact on Bank of America, Citigroup, JPMorgan Chase, and to a lesser extent, Wells Fargo, would be greater, but still rather middling, as the size and scope of the restricted activities is but a fraction of these firms’ overall derivative operations.
The fourfold increase in oil prices triggered by the embargo on exports organised by Saudi Arabia in response to the Yom Kippur war in 1973 showed how crude could be used as a diplomatic and economic weapon.
John Kerry, the US secretary of state, allegedly struck a deal with King Abdullah in September under which the Saudis would sell crude at below the prevailing market price. That would help explain why the price has been falling at a time when, given the turmoil in Iraq and Syria caused by Islamic State, it would normally have been rising.
. . . [A]ccording to Middle East specialists, the Saudis want to put pressure on Iran and to force Moscow to weaken its support for the Assad regime in Syria.