4 ms·

Someone trading derivatives that would be affected by the US govt defaulting would likely have standing

Kon-Peki 3y ago
Interesting thought. It raises a bunch of other questions though. In what other circumstance would a derivatives trader say “I would have profited but for your (possibly illegal) actions”? And are we seeing such lawsuits?
- vivegi 3y ago
  Not sure if the following cases offer precedents. Obviously, the Federal Govt enjoys additional legal powers, but these cases offer the circumstances where a party sued their derivatives trader (the opposite of the questions you raise). Procter & Gamble v. Bankers Trust [1] P&G sued BT for losses incurred in derivatives contracts that should not have been sold by BT. This article [2] provides some more detail: > In another high-profile case, Procter & Gamble Co. is suing Bankers Trust, its derivatives dealer, blaming it for a loss of dollars 195 million on two interest-rate contracts the company claims it should not have been sold. > Procter & Gamble recently upped the stakes dramatically, claiming triple damages under U.S. civil racketeering legislation. In a related development, a shareholder has sued Procter & Gamble for financial irresponsibility. The outcome of the case is that Bankers Trust settled with P&G as per this article [3]. The same article [2] also mentions the Orange County bankruptcy where OC sued its derivatives broker. At the time, this was one of the largest financial failures. > Orange County is suing both its main derivatives broker, Merrill Lynch, and the accounting firm Peat Marwick Merrill Lynch paid OC $437 M to settle as per this article [4]. [1]: https://casetext.com/case/procter-gamble-v-bankers-trust/case-details https://casetext.com/case/procter-gamble-v-bankers-trust/cas... [2]: https://www.nytimes.com/1996/01/13/your-money/IHT-moneylosers-demand-a-day-in-court.html https://www.nytimes.com/1996/01/13/your-money/IHT-moneyloser... [3]: https://www.nytimes.com/1996/05/10/business/bankers-trust-settles-suit-with-p-g.html https://www.nytimes.com/1996/05/10/business/bankers-trust-se... [4]: https://www.nytimes.com/1998/06/03/business/ending-suit-merrill-lynch-to-pay-california-county-400-million.html https://www.nytimes.com/1998/06/03/business/ending-suit-merr...

Interesting thought. It raises a bunch of other questions though. In what other circumstance would a derivatives trader say “I would have profited but for your (possibly illegal) actions”? And are we seeing such lawsuits?

vivegi 3y ago
Not sure if the following cases offer precedents. Obviously, the Federal Govt enjoys additional legal powers, but these cases offer the circumstances where a party sued their derivatives trader (the opposite of the questions you raise). Procter & Gamble v. Bankers Trust [1] P&G sued BT for losses incurred in derivatives contracts that should not have been sold by BT. This article [2] provides some more detail: > In another high-profile case, Procter & Gamble Co. is suing Bankers Trust, its derivatives dealer, blaming it for a loss of dollars 195 million on two interest-rate contracts the company claims it should not have been sold. > Procter & Gamble recently upped the stakes dramatically, claiming triple damages under U.S. civil racketeering legislation. In a related development, a shareholder has sued Procter & Gamble for financial irresponsibility. The outcome of the case is that Bankers Trust settled with P&G as per this article [3]. The same article [2] also mentions the Orange County bankruptcy where OC sued its derivatives broker. At the time, this was one of the largest financial failures. > Orange County is suing both its main derivatives broker, Merrill Lynch, and the accounting firm Peat Marwick Merrill Lynch paid OC $437 M to settle as per this article [4]. [1]: https://casetext.com/case/procter-gamble-v-bankers-trust/case-details https://casetext.com/case/procter-gamble-v-bankers-trust/cas... [2]: https://www.nytimes.com/1996/01/13/your-money/IHT-moneylosers-demand-a-day-in-court.html https://www.nytimes.com/1996/01/13/your-money/IHT-moneyloser... [3]: https://www.nytimes.com/1996/05/10/business/bankers-trust-settles-suit-with-p-g.html https://www.nytimes.com/1996/05/10/business/bankers-trust-se... [4]: https://www.nytimes.com/1998/06/03/business/ending-suit-merrill-lynch-to-pay-california-county-400-million.html https://www.nytimes.com/1998/06/03/business/ending-suit-merr...