JPMorgan Chase holds $91.3 trillion in derivatives (9 x 2009 GDP) , a notional value that leverages its total assets by a factor of 40. This includes $9.2 trillion credit default swaps, the most toxic form of derivatives. (Table 2 before last column). On default of a party the notional value becomes due.

JPMorgan has financed its derivatives with credit exceeding its capital by a factor of 4, inherently this implies an extremely large counterparty credit risk on default and costs exposure to roll over.

In gold $99 Billion / 3339 metric tons / 107 million paper ounces (3 x GLD) (see table 9. In other precious metals silver etc $8.6 billion / 676 million paper ounces (2.5 x SLV). What the underlying assets if any are is not clear. The Federal Reserve official reserves in comparison stand at 261 million “unencumbered” ounces if not lend, swapped or otherwise double counted e.g. with IMF holdings.

This together with the JPM and to a lesser degree HSBC obscene 72% short position on the Comex.

ETFs JPM being the custodian of SLV and HSBC of GLD. With the SLV 263 million ounces and the GLD 33 million ounces, no guarantees are provided that these inventories are completely unencumbered only time may tell as no audits are permitted, the prospectus intentionally leaves lots red alert caveats, room for interpretation, questions asked remained unanswered.

In spite of JPM being a major shareholder of the Fed and being waived of reporting obligations the market is starting to apprehend some of the risk factors and the scale beyond the scope of comprehension. When this shorting house of cards starts to feel a draught the price of Gold and Silver should go ballistic, and trading be halted, not surprising many advise to go for physical. With their exposure it is a battle of life or death, exponential leveraged bets to avoid the precious metals taking off.

Regulator. The regulator attempts to balance the interests of its three stakeholders, the American people, its banking shareholders with seats on the board and government, the American people through Congress are only allowed hearings, a masquerade with no answers, accountability, responsibility or sanctions, absolute power. LTCM was a potential meltdown, now the meltdown risks proliferation are a thousand fold. The Fed as the regulator has been instrumental in building the neutron option on behalf of its shareholder interests. Condoning gambling with leveraged bets using other people’s money and not treating this as a criminal activity is an outrage. The first bank to be nationalized should be the Fed to eliminate the massive collusion of interests to bail out its shareholders. Even in Vegas this would have been stopped short a long time ago.

http://www.occ.gov/deriv/deriv.htm