Could Cap and Trade Cause Another Market Meltdown?

Goldman and Sachs has been implicated in a Rolling Stones Magazine feature article as being one of many of the "BIG" Wall Street that has "helped" cause the US markets to crash since the 1920's, ...

Rolling Stone Expose: Goldman Sachs Behind Every Market Crash Since 1920s

Goldman Sachs has played a crucial role in creating every market bubble since the 1920s -- and has profited from not only the bubbles, but from the crash that followed as well, says a new expose in Rolling Stone magazine.
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Taibbi writes that Goldman Sachs has traditionally been a late arrival to market bubbles, getting in once others have started the trend, but, once in, the company quickly ramps up the bubble, predicts its bursting, and then hedges its bets so as to make money from the bubble crash.

And guess who's wanting in on this new way for people to make money that's called "Cap & Trade" and is LOBBYING for it?

The article, which is not yet officially available online, adds one more bubble to the list: the "global warming bubble," or specifically, the proposed cap-and-trade legislation that would allow companies to trade pollution credits on an open market.

Taibbi's argument suggests the Wall Street bank may well want to turn climate change policy into yet another Wall Street casino game.

Because emissions caps will continually be reduced, Taibbi argues, pollution credits will constantly be growing in value, and Goldman Sachs wants in on the ground floor.

Taibbi writes: "The plan is (1) to get in on the ground floor of paradigm-shifting legislation, (2) make sure that they're the profit-making slice of that paradigm and (3) make sure the slice is -- a big slice. Goldman started pushing hard for cap-and-trade long ago, but things really ramped up last year when the firm spent $3.5 million to lobby climate issues."

So, could this new market cause another global meltdown in the future if these "players" are allowed to dig their greedy fingers into this new market?

Could Cap and Trade Cause Another Market Meltdown?

The same Wall Street players that upended the economy are clamoring to open up a massive market to swap, chop, and bundle carbon derivatives. Sound familiar?
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Banks like JPMorgan Chase, Morgan Stanley, and Goldman Sachs already have active carbon trading desks that deal in instruments connected to Europe's cap-and-trade system and voluntary markets here. But business will explode if a cap-and-trade system becomes law. So it's no surprise that the financial industry has taken an intense interest in the fine print of the Waxman-Markey bill.
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Michelle Chan, the investment program manager for Friends of the Earth, believes that if offset derivatives aren't properly regulated, they could become "subprime carbon"—futures contracts that promise emissions reductions but fail to deliver and then collapse in value. Already, she points out, some banks are bundling credits from multiple offset projects and splitting them into tranches to sell to investors. This kind of activity is "hauntingly close" to mortgage-backed securities, Chan told the House ways and means committee in March, arguing that it has the potential to spread risk throughout the financial system. At a CFTC hearing earlier this year, Skip Hovarth, president of the Natural Gas Supply Association, questioned whether the agency had the tools and the manpower to keep track of such an incredibly complex market, adding, "If this market fails, and all the derivatives and all the markets that attach to it that grow over time fail, it will make this last recession look like nothing.

And of course, what are these future "PLAYERS pushing for in this "new" market?

Meanwhile, industry groups like the International Swaps and Derivatives Association pushed for a system in which a "broad suite" of financial products can be traded, and that's what Waxman-Markey delivers.

In an especially audacious move, the industry also argued that cap and trade should allow the very same types of unregulated instruments that helped spread risk throughout the financial system like a cancer, contributing to the economic meltdown. In particular, it lobbied for "over the counter" carbon derivatives—deals conducted directly between two parties with no one monitoring the risk. (Perhaps the most notorious form of OTC derivative is the credit default swap, which crippled AIG when it issued too many high-risk swaps while lacking the money to cover them.)

So, unless properly regulated, which would be very, VERY hard to do, it looks like all these big Wall Street players are gathering and waiting to make a killing in this future new market, that they want unregulated, which is exactly what contributed to our current economic collapsed!

I hope our elected officials think this one through VERY VERY carefully and don't just rush this through and end up leaving gaping loopholes in this new market.

Personally, I think they should just scrap this whole "Cap & Trade" idea!

[edit on 7/2/2009 by Keyhole]

Yes, the banksters love the Cap and Trade...to them it is another means to strap people with impossibly huge taxes.

We are literally going to be taxed into oblivian if this passes. I urge eveyone who opposes this to call your senator today!
www.dailypaul.com...
It might be the last day we have to stop this killing behemoth.

Pollutution credits...toxic assets...special drawing rights..
Get the big picture....

It was only a matter of time, and it is a huge "I told you so" moment for many of us. You had to recognize that the big money people would only sit by and watch the Chicken Littles like Al Gore make fortunes off the farcical pseudo-science of man caused climate change for so long before stepping in and applying regulations to ensure they got their cut of pie.

The sickening thing is that there are still people out there so unlearned, ignornat, and sheeplike to continue to support such regulations and continue to believe in such a flawed, idiotic theory. It is those sheep who are to be blamed and even despised for permitting and supporting these regulations and policies which will bankrupt us all.

Well things has been lining up for another crash for some time now

July 1 (Bloomberg) -- Declines of more than 20 percent in regional banks and home builders and the failure of transportation companies to erase their annual loss may be signs the rally in the Standard & Poor’s 500 Index is about to fizzle.

Smaller lenders in the gauge have lost 24 percent since climbing to a four-month peak on May 8, while builders have tumbled 26 percent from May 4, when they reached the highest level since October. Concern that mortgage rates, credit losses and foreclosures are increasing spurred retreats in the companies forecast to be among the biggest beneficiaries of $12.8 trillion in government stimulus spending.

Slumps in bank stocks foreshadowed previous declines in the S&P 500 as investors focused on real-estate losses that curbed lending. Regional banks’ 51 percent plunge over 28 days starting Dec. 8 came a month before the S&P 500 began a 28 percent slump to a 12-year low of 676.53. The lenders’ all-time high in February 2007 occurred seven months before the S&P 500’s record.

so if that's true then its all the fault of the housing market and we have to look at how that's working...
Prime mortgages 60 days or more past due climbed to 2.9 percent of such loans through March 31 from 1.1 percent at the same point in 2008

Serious delinquencies on prime loans, which account for two-thirds of all U.S. mortgages, rose to 661,914 in the first quarter from 250,986 a year earlier, according to the report. Overall, mortgages 60 days or more past due rose 88 percent from last year

Mortgages modified to help struggling borrowers stay in their homes fail within nine months more than half the time, a report said. About 53 percent of mortgages modified in the first quarter of 2008 were 30 or more days delinquent after six months; 63 percent were in default after a year.

New mortgage app were down 7% last month and that has everything to do with rising interest rates.

Unemployment is blamed for that and today's numbers were U-3 official 9.5% while the u-6 unofficial rate was up to 16.5% pretty high and not going to go down anytime soon...

So the press, mostly AP, keeps reporting all these so called green shoots but they show only the equity markets and relied on companies with the worst finances to report, as always their creativity with fuzzy math, to fuel its rebound press releases.

Let me tell you there is a lot of half informed people about to get a rude awaking!
light reading
more light reading
Yet another confusing table issued by the government

What they want is all of us huddled on one room with an air blower for that room because we can not afford to heat or cool the entire home. This is what will happen!

I am hearing estimates that this will double bills. My home is energy efficient , and yet in August here in Arizona my bill is still $295. So that means it will now be $600. Sheees, that's almost as much as my mortgage!!!

I agree with OP. Call your senator and let the phones ring off the hook. Do not know if it will help, but at least they will know we spoke!!

Those who have money it will not matter. This will further divide the haves and do not haves.