At recent Congressional hearings on federal bank regulators’ newly proposed rules to force the largest banks in the U.S. to hold more capital against their riskiest trading positions (so that taxpayers aren’t on the hook for more bailouts), the banks and their sycophants holding Senate and House seats made it sound like it’s the American farmers who will be hurt because the derivatives they use to hedge against crop failures or price swings in their crops will become more expensive..
We knew this was a completely bogus argument because the latest data from the U.S. Department of Agriculture indicates that “agriculture, food, and related industries contributed roughly $1.264 trillion to U.S. gross domestic product (GDP) in 2021….”
In other words, U.S. farmers need to hedge less than $2 trillion while just three mega banks on Wall Street were holding $157.3 trillion in derivatives as of September 30 of this year – which is $56.74 trillion more than the GDP of the entire world last year. (See chart above.)
If the bulk of these derivatives aren’t being used by farmers and business owners to hedge against losses, what are they being used for? According to the Office of the Comptroller of the Currency (OCC), the federal regulator of national banks, the trillions of dollars in derivatives at the mega banks on Wall Street are being used for trading – likely for the benefit of the banks themselves or their billionaire speculator clients, such as hedge funds and family offices.