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Derivatives - not mortgages (at least not alone) created this mess. -

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posted on Feb, 1 2009 @ 01:16 AM
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It wasn't your mortgage. It was derivatives


In the mid-'90s, though, the credit-derivatives industry was hitting its stride and argued vehemently for exclusion from all state and federal anti-bucket-shop regulations. On the side of the industry were Federal Reserve Chairman Alan Greenspan, Treasury Secretary Robert Rubin, and his deputy, Lawrence Summers. Holding the fort for the regulators was Brooksley Born, who headed the Commodity Futures Trading Commission (CFTC). The three financial titans ridiculed the virtually unknown and cloutless, but brilliant and prophetic Born, who warned that unrestricted derivatives trading would "threaten our regulated markets, or indeed, our economy, without any federal agency knowing about it." Warren Buffett also weighed in against deregulation.

Please visit the link provided for the complete story.


www.villagevoice.com...

The corruption goes deeper than I thought.
Very well written article. Quite a bit of depth.
Lots of things in here are new to me.
Worth a read.

Yes I know it is the Village Voice, give it a shot anyway.

[edit on 1-2-2009 by badgerprints]




posted on Feb, 1 2009 @ 01:23 AM
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This was not caused by imprudent mortgage lending, though that was a piece of the puzzle. Yes, Fannie Mae and Freddie Mac were put on steroids during the '90s, and some people got into mortgages who shouldn't have. But the vast majority of homeowners paid their mortgages. Only about 5 to 10 percent of these loans failed—not enough to cause systemic financial failure. (The dollar amount of defaulted mortgages in the U.S. is about $1.2 trillion, which seems like a princely sum, but it's not nearly enough to drag down the entire civilized world.)

Much more dangerous was the notorious bundling of mortgages. Investment banks gathered these loans into batches and turned them into securities called collateralized debt obligations (CDOs). Many included high-risk loans. These securities were then rated by Standard & Poor's, Fitch Ratings, or Moody's Investors Services, who were paid at premium rates and gave investment grades. This was like putting lipstick on pigs with the plague. Banks like Wachovia, National City, Washington Mutual, and Lehman Brothers loaded up on this financial trash, which soon proved to be practically worthless. Today, those banks are extinct. But even that was not enough to cause a worldwide financial crisis.

What did cause the crisis was the writing of credit derivatives. In theory, they were insurance policies for investors; in practice, they became a guarantee of global financial collapse.

Please visit the link provided for the complete story.


Much more in this article. Lots of detail and an excellent general overview of the entire mess.



posted on Feb, 1 2009 @ 01:56 AM
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reply to post by badgerprints
 


Yes, I have been yelling this for weeks.

Warren Buffett spoke out about it almost a year ago.

&print=true&dist=pr intTop]100's of trillions in derivatives set to implode

This will make everything that has come before look like a walk
in the park on a nice day.

Of course not all of it will crumble, but a large portion is about
to go over the cliff.

Their is no bailout for this monster, and any country holding our
bonds will dump them like monetary kryptonite.

Good Luck to you all !



posted on Feb, 1 2009 @ 03:00 AM
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there is only 2 ways out of this mess. one way will happen the second i think it will only happen when every country is bankrupt, if even then.

the first way is every financial institution needs to open there books so we can see just how bad off they may be and let everything come crashing down afterwards and start over.

the second way is for every government to agree to wipe everyones slate clean. clear out everyones debt from the bottom up.

no matter what happens in the aftermath the fractional reserve system needs to be abolished. no more easy credit. There should not be a sector of wall street that is not regulated. and the regulators need to be changed every few months to different sectors. and if a regulator is found to be turning a "blind eye" to something that lets a financial institution skirt the laws they should be charged right along with the financial institution.

oh and those dumb asses on capitol hill all need to be voted out of office. they are just as much to blame for this mess as the guys on wall street!

[edit on 2/1/2009 by Mercenary2007]



posted on Feb, 1 2009 @ 04:49 AM
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reply to post by badgerprints
 


The article that you have linked to in your OP is requiered reading for anyone that uses money period !

Any ATSer that claims to deny ignarance must read the entire article, we are witnessing the biggest crime in history.

This global finacial melt down is turning from conspiracy theory to conspiracy fact right before our eyes.

This is Enron on steriods.



posted on Feb, 1 2009 @ 05:00 AM
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reply to post by Mercenary2007
 


I agree with both your points. Something needs to be done and the governments throwing hundreds of $Billions at these banks and brokerages is not going to fix things. Especially as there seems to be no accountability or obligation on the part of those receiving the funds to tell us where it's going.

As you say, the whole system needs taking down so we can all start over, with proper regulation and oversight. Those in power need to stop taking the kickbacks from industry and banking and realise that they are accountable to us, the taxpayers.

Will it happen? I doubt it. Not without the people forcing the issue at the end of a gun and a couple of lynchings to drive home the point.



posted on Feb, 1 2009 @ 05:27 AM
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If derivatives are not fully reported and accurate with a transparent paper trail, they should be deemed null and void.

Let the gamblers take a fall as should be and all those betting on risky foreclosures should walk, pockets empty, to the indictment hearings, or go home and pout.

I find it ironic that the trillions of loans and tax funded props/bails is enough that all Americcans, men, women, children, would recieve 2.3+ Million if the funds were dispursed equally.

This would pay off all mortgages and leave enough to live fat. Those who gambled in the derivatives should lose any investment or any hope of a return/profit.

Instead, we see funds tossed freely by good ol' boy Paulson without disclosure, and the tent cities grow, while the crooks and foreign investors get the taxpayers to wipe their dirty asses clean. It's so wrong, I only hope Congress takes their duty to heart and investigate as the FBI has slowly developed cases in Florida over the last 4 years.

If they are going to keep playing ignorant, they should be expelled for lack of qualifications to perform the job they are sworn to do.



posted on Feb, 1 2009 @ 07:46 AM
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Indeed, the opaque, unregulated, OTC derivatives are indeed the Dog

and the sub-prime mortgages are only the Tail-of-the-Dog,
we are being duped by the big money players & the several financial houses
that the tail-is-wagging-the-dog...out right lie!


letting market forces take out a few members of the money cartel,
among them are JP Morgan Chase & Goldman Sachs,
is the only way to go...



Originally posted by Mercenary2007
there is only 2 ways out of this mess. [...]

the first way is every financial institution needs to open there books so we can see just how bad off they may be and let everything come crashing down afterwards and start over.

the second way is for every government to agree to wipe everyones slate clean. clear out everyones debt from the bottom up.

[...]




the poster has good points,
but the 'opening' of the books, would be a non-starter because there are
many, many, really profitable derivatives mixed in among the bad paper...
And that is the reason the big banks & big insurance are dragging their heels in being forthcoming on their 'Level 3' assets
[assets the 'poor' banks have not traded or swapped with the Fed,
even though the Fed has many programs to swap, buy, or hold these assets in exchange for cash...for up to 9 months... there are several
'windows' or other newly created 'facilities' created in recent months for the purpose of unclogging the big-banks balance sheets...which the banks refuse to use to the full extent !] ?Why... because it
would reveal their real financial condition...flush & swamped with potential monster pay-outs owed them !

The really big banks, insurers have multi trillions in these hidden assets/liabilities but will not have the public see & inspect this 'paper'
Or in any degree part-with this paper because of the profits they might sometime realize from this 'paper'

These same major institutions are feigning reluctance into receiving bailout
money from the Fed/Treas...but as we have already seen, they are quickly taking the cash & buying foreign banks or funding $23billion in the Pfeiser takeover of Wyeth pharmaceuticals.


the 2nd point: wiping the slate clean...
the USA is now proposing a 'bad bank' which would hold the paper &
derivatives, and the owners coulld in the future buy-back the presently toxic paper... the average Joe is not afforded this type of luxury.



In both cases, neither will work, because the banker class are intent on hiding their portfilos, because once the unwinding is done and the big banks had already went through the $4-8Trillion in bailouts handed to them....
we will all be shocked & amazed that the big banks have Trillions in
derivatives that are now worthwhile (after the crises is over) and will by law be required to be paid to the big-betting-banks.



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