As we reported earlier this month, heads of nine of the biggest banks in the derivatives market, including JP Morgan Chase, Goldman Sachs, Citigroup and Bank of America, secretly lobbied to keep derivatives under Federal Reserve “oversight” and away from real scrutiny.
As reported by The New York Times, they all met secretly to discuss how to use the lax regulation and institutional secrecy of the NY Fed to shield their credit-default swaps business from prying eyes and attempts at regulation.
The banks formed a lobby– the CDS Dealers Consortium– only weeks after accepting TARP funds in October 2008 to protect its interests. Heading this effort was Edward Rosen, who previously helped fend off derivatives regulation. Rosen wrote and circulated a “confidential memo” to the Treasury Department and leaders on Capital Hill, making their agenda clear, the Times reported.
Rosen and his backers propose that derivatives be “traded in privately managed clearinghouses, with less disclosure,” according to the Times. The clearinghouse of choice for the big banks in Rosen’s CDS Consortium is ICE U.S. Trust, which is in turned regulated only by the Federal Reserve system.
ICE, though juridically located in London, is headquartered in Atlanta, operating as a de jure off-shore agency. "No-action letters" between the Bank of England and the U.S. Commodity Futures Trading Commission, protect the ICE from any form of regulation or record-keeping required by American agencies. ICE is thus literally a British "offshore financial center."
Who are the major owners of ICE? The major Anglo-Dutch financial entities. According to ICE's 2006 filings with the SEC, as of Sept. 30, 2005, with percent of ICE shares owned: Morgan Stanley Capital, 11.62%; Goldman Sachs Group, 11.59%: Total Investments USA Inc., 8.12%; BP Products, 7.59%.
Others include Duke Energy, AEP, Continental Power Exchange, Societe Generale Financial Corp.