Help
Dunno but it could be right.
The Danish central bank stroke rich from "saving" the Danish krone from depreciating as a result of the 1992 referendum (bought up DKK cheap during the immediate crisis and sold them at a higher price when the panic had settled).
Governments all over the developed World have acquired stock during the credit crisis and may sell them with a profit.
Michael Lewis "The Big Short" who got the money
#41
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Posted 2010-April-15, 07:47
The world would be such a happy place, if only everyone played Acol :) --- TramTicket
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Posted 2010-April-15, 08:34
Agree with Al you have to look at the bigger picture. According to Paul Krugman, the CBO estimates the "output gap" resulting from the crisis will be around $2 trillion.
Quote
Yes, the Federal Reserve and the Obama administration have pulled us back from the brink the title of a new paper by Christina Romer, who leads the Council of Economic Advisers. She argues convincingly that expansionary policy saved us from a possible replay of the Great Depression.
But while not having another depression is a good thing, all indications are that unless the government does much more than is currently planned to help the economy recover, the job market a market in which there are currently six times as many people seeking work as there are jobs on offer will remain terrible for years to come.
Indeed, the administrations own economic projection a projection that takes into account the extra jobs the administration says its policies will create is that the unemployment rate, which was below 5 percent just two years ago, will average 9.8 percent in 2010, 8.6 percent in 2011, and 7.7 percent in 2012.
This should not be considered an acceptable outlook. For one thing, it implies an enormous amount of suffering over the next few years. Moreover, unemployment that remains that high, that long, will cast long shadows over Americas future.
Anyone who thinks that were doing enough to create jobs should read a new report from John Irons of the Economic Policy Institute, which describes the scarring thats likely to result from sustained high unemployment. Among other things, Mr. Irons points out that sustained unemployment on the scale now being predicted would lead to a huge rise in child poverty and that theres overwhelming evidence that children who grow up in poverty are alarmingly likely to lead blighted lives.
These human costs should be our main concern, but the dollars and cents implications are also dire. Projections by the Congressional Budget Office, for example, imply that over the period from 2010 to 2013 that is, not counting the losses weve already suffered the output gap, the difference between the amount the economy could have produced and the amount it actually produces, will be more than $2 trillion. Thats trillions of dollars of productive potential going to waste.
But while not having another depression is a good thing, all indications are that unless the government does much more than is currently planned to help the economy recover, the job market a market in which there are currently six times as many people seeking work as there are jobs on offer will remain terrible for years to come.
Indeed, the administrations own economic projection a projection that takes into account the extra jobs the administration says its policies will create is that the unemployment rate, which was below 5 percent just two years ago, will average 9.8 percent in 2010, 8.6 percent in 2011, and 7.7 percent in 2012.
This should not be considered an acceptable outlook. For one thing, it implies an enormous amount of suffering over the next few years. Moreover, unemployment that remains that high, that long, will cast long shadows over Americas future.
Anyone who thinks that were doing enough to create jobs should read a new report from John Irons of the Economic Policy Institute, which describes the scarring thats likely to result from sustained high unemployment. Among other things, Mr. Irons points out that sustained unemployment on the scale now being predicted would lead to a huge rise in child poverty and that theres overwhelming evidence that children who grow up in poverty are alarmingly likely to lead blighted lives.
These human costs should be our main concern, but the dollars and cents implications are also dire. Projections by the Congressional Budget Office, for example, imply that over the period from 2010 to 2013 that is, not counting the losses weve already suffered the output gap, the difference between the amount the economy could have produced and the amount it actually produces, will be more than $2 trillion. Thats trillions of dollars of productive potential going to waste.
If you lose all hope, you can always find it again -- Richard Ford in The Sportswriter
#43
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Posted 2010-April-15, 10:06
There may be a parallel to draw between the big monopolies of the last century and the monopolizing financial methods that are presently assaulting our pocketbooks.
JP Morgan and Goldman Sachs took down Bear-Stearns and Lehmann Bros. as well as parking all of the risk with AIG. When the ***** hit the fan...they walked away indemnified and AIG took the hit. (And then so did we through our future taxes.)
As long as these "instruments" of fiscal torture are not controlled and restrained, we will be in a similar state in the future.
JP Morgan and Goldman Sachs took down Bear-Stearns and Lehmann Bros. as well as parking all of the risk with AIG. When the ***** hit the fan...they walked away indemnified and AIG took the hit. (And then so did we through our future taxes.)
As long as these "instruments" of fiscal torture are not controlled and restrained, we will be in a similar state in the future.
The Grand Design, reflected in the face of Chaos...it's a fluke!
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Posted 2010-April-15, 16:01
Wait! Yes, we should all look at the big picture. Al suggests a 22 trillion dollar loss. Y only suggests 2 trillion. Still, a trillion here, a trillion there.... The Krugman article speaks of the misery caused by unemployment. Who would disagree.
Still, a year or two back the potential for total collapse was felt. Few, certainly not I, suggest the problem is past. My question is far more restricted. We elected Obama and a slew of Dems. He brought in Geithner. He reappointed Bernanke. They made some dramatic moves.
In his article (this links directly to the Post, the earlier link is more problematic) Geithner claims some aspects of their efforts are actually working well. If in fact this is so, I think it is important. I ask: Is it so?
I just saw that some of my questions are addressed in
http://www.washingtonpost.com/wp-dyn/conte...0041304332.html
Still, a year or two back the potential for total collapse was felt. Few, certainly not I, suggest the problem is past. My question is far more restricted. We elected Obama and a slew of Dems. He brought in Geithner. He reappointed Bernanke. They made some dramatic moves.
In his article (this links directly to the Post, the earlier link is more problematic) Geithner claims some aspects of their efforts are actually working well. If in fact this is so, I think it is important. I ask: Is it so?
I just saw that some of my questions are addressed in
http://www.washingtonpost.com/wp-dyn/conte...0041304332.html
Ken
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Posted 2010-April-16, 07:18
Fundamentally, a problem occurred. Can the cause be identified and can action be taken to mitigate the result, correct the cause and prevent future recurrence?
If Geithner et al successfully resolve the above, then they are to be congratulated. If not, then why not?
If Geithner et al successfully resolve the above, then they are to be congratulated. If not, then why not?
The Grand Design, reflected in the face of Chaos...it's a fluke!
#46
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Posted 2010-April-16, 07:43
By analogy: A while back I had a large kidney stone. The doc sent in a camera and a laser gun and zapped the sucker. He didn't fix the fact that I am overweight, not so young anymore, or a host of other issues. However, an earlier doc, when I complained of some pain in my kidney area, announced that I was in the grip of something called "Devil's Claw". This guy is no longer my doctor.
In a few months we get to vote on whether we think Obama and his party should continue to have a majority in the Senate and the House. We will need to assess how they are doing. Looking at the economic fears of a year or a year and a half ago, perhaps the answer is "Not so bad".
But regarding the big banks, I agree we need to stop the mothers from robbing us blind.
In a few months we get to vote on whether we think Obama and his party should continue to have a majority in the Senate and the House. We will need to assess how they are doing. Looking at the economic fears of a year or a year and a half ago, perhaps the answer is "Not so bad".
But regarding the big banks, I agree we need to stop the mothers from robbing us blind.
Ken
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Posted 2010-April-16, 09:51
kenberg, on Apr 16 2010, 08:43 AM, said:
But regarding the big banks, I agree we need to stop the mothers from robbing us blind.
Seems there's a big fight going on now about putting a stop to that. Needless to say, the crooks don't want it to happen: Krugman: The Fire Next Time
Quote
So its crucial to avoid disorderly bank collapses, just as its crucial to avoid out-of-control urban fires.
Since the 1930s, weve had a standard procedure for dealing with failing banks: the Federal Deposit Insurance Corporation has the right to seize a bank thats on the brink, protecting its depositors while cleaning out the stockholders. In the crisis of 2008, however, it became clear that this procedure wasnt up to dealing with complex modern financial institutions like Lehman or Citigroup.
So proposed reform legislation gives regulators resolution authority, which basically means giving them the ability to deal with the likes of Lehman in much the same way that the F.D.I.C. deals with conventional banks. Who could object to that?
Well, Mr. McConnell is trying. His talking points come straight out of a memo Frank Luntz, the Republican political consultant, circulated in January on how to oppose financial reform. Frankly, wrote Mr. Luntz, the single best way to kill any legislation is to link it to the Big Bank Bailout. And Mr. McConnell is following those stage directions.
Its a truly shameless performance: Mr. McConnell is pretending to stand up for taxpayers against Wall Street while in fact doing just the opposite. In recent weeks, he and other Republican leaders have held meetings with Wall Street executives and lobbyists, in which the G.O.P. and the financial industry have sought to coordinate their political strategy.
And let me assure you, Wall Street isnt lobbying to prevent future bank bailouts. If anything, its trying to ensure that there will be more bailouts. By depriving regulators of the tools they need to seize failing financial firms, financial lobbyists increase the chances that when the next crisis strikes, taxpayers will end up paying a ransom to stockholders and executives as the price of avoiding collapse.
Even more important, however, the financial industry wants to avoid serious regulation; it wants to be left free to engage in the same behavior that created this crisis. Its worth remembering that between the 1930s and the 1980s, there werent any really big financial bailouts, because strong regulation kept most banks out of trouble.
Since the 1930s, weve had a standard procedure for dealing with failing banks: the Federal Deposit Insurance Corporation has the right to seize a bank thats on the brink, protecting its depositors while cleaning out the stockholders. In the crisis of 2008, however, it became clear that this procedure wasnt up to dealing with complex modern financial institutions like Lehman or Citigroup.
So proposed reform legislation gives regulators resolution authority, which basically means giving them the ability to deal with the likes of Lehman in much the same way that the F.D.I.C. deals with conventional banks. Who could object to that?
Well, Mr. McConnell is trying. His talking points come straight out of a memo Frank Luntz, the Republican political consultant, circulated in January on how to oppose financial reform. Frankly, wrote Mr. Luntz, the single best way to kill any legislation is to link it to the Big Bank Bailout. And Mr. McConnell is following those stage directions.
Its a truly shameless performance: Mr. McConnell is pretending to stand up for taxpayers against Wall Street while in fact doing just the opposite. In recent weeks, he and other Republican leaders have held meetings with Wall Street executives and lobbyists, in which the G.O.P. and the financial industry have sought to coordinate their political strategy.
And let me assure you, Wall Street isnt lobbying to prevent future bank bailouts. If anything, its trying to ensure that there will be more bailouts. By depriving regulators of the tools they need to seize failing financial firms, financial lobbyists increase the chances that when the next crisis strikes, taxpayers will end up paying a ransom to stockholders and executives as the price of avoiding collapse.
Even more important, however, the financial industry wants to avoid serious regulation; it wants to be left free to engage in the same behavior that created this crisis. Its worth remembering that between the 1930s and the 1980s, there werent any really big financial bailouts, because strong regulation kept most banks out of trouble.
A huge amount of money (ill-gotten gains, in large part) is behind the effort to allow big bankers to evade regulation. It is sobering to see that quite a few voters actually fall for the anti-regulation propaganda that those con artists spew.
The growth of wisdom may be gauged exactly by the diminution of ill temper. Friedrich Nietzsche
The infliction of cruelty with a good conscience is a delight to moralists that is why they invented hell. Bertrand Russell
The infliction of cruelty with a good conscience is a delight to moralists that is why they invented hell. Bertrand Russell
#48
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Posted 2010-April-16, 10:44
Seems appropriate to post the following
http://www.dailykos.com/story/2010/4/16/85...uding-Investors
Couple interesting quotes
first, from the SEC indictment
Second from the WSJ financial blog
http://www.dailykos.com/story/2010/4/16/85...uding-Investors
Couple interesting quotes
first, from the SEC indictment
Quote
"Goldman wrongly permitted a client that was betting against the mortgage market to heavily influence which mortgage securities to include in an investment portfolio, while telling other investors that the securities were selected by an independent, objective third party."
Second from the WSJ financial blog
Quote
The crux of the charges against Goldman Sachs relate to a financial instrument the firm developed through discussions with hedge fund Paulson & Co. (Paulson & Co. was not named as a defendant in the SEC charges.)
According to the complaint, Paulson paid Goldman Sachs approximately $15 million for structuring and marketing this security called ABACUS 2007-AC1 in early 2007. The security let Paulson & Co. make bets against the residential real estate market, which the hedge fund believed was going to tank....
In other words, Paulson had an incentive to pick securities that would have tanked, since he was then going to bet that the value of these securities would fall. While that may sound strange to people, in and of itself it isnt a problem. The problem, according to the SEC, comes in the form of Goldman not telling the guys that invested in ABACUS 2007-AC1 the role that Paulson had played in its construction.
According to the complaint, Paulson paid Goldman Sachs approximately $15 million for structuring and marketing this security called ABACUS 2007-AC1 in early 2007. The security let Paulson & Co. make bets against the residential real estate market, which the hedge fund believed was going to tank....
In other words, Paulson had an incentive to pick securities that would have tanked, since he was then going to bet that the value of these securities would fall. While that may sound strange to people, in and of itself it isnt a problem. The problem, according to the SEC, comes in the form of Goldman not telling the guys that invested in ABACUS 2007-AC1 the role that Paulson had played in its construction.
Alderaan delenda est
#49
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Posted 2010-April-16, 14:29
The real problem is the guys insured a bunch of bad loans..and they knew the loans and had all the info. They did not just invest, they insured, they bet.
They did not have to insure the loans, they wanted to, no one forced them to insure these exact loans.
They wanted this risk, they choose it. How do you regulate insanity.
They did not have to insure the loans, they wanted to, no one forced them to insure these exact loans.
They wanted this risk, they choose it. How do you regulate insanity.
#50
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Posted 2010-April-16, 14:33
mike777, on Apr 16 2010, 11:29 PM, said:
The real problem is the guys insured a bunch of bad loans..and they knew the loans and had all the info. They did not just invest, they insured, they bet.
They did not have to insure the loans, they wanted to, no one forced them to insure these exact loans.
They did not have to insure the loans, they wanted to, no one forced them to insure these exact loans.
The specific charges in this case relate to disclosure of information.
Goldman Sachs did not disclose the information necessary to allow investors to understand the nature of the financial instruments that they were purchasing.
Alderaan delenda est
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Posted 2010-April-16, 14:35
ACtually they did, they just did not know per the article, who put the package together. but they did know the loans.
If they did not know the loans, whose fault is that?
the article just said they did not know who picked the loans(constructed the security).
They must know they were insuring the stuff, they got paid to insure it.
If they dont know why the guy wants to buy insurance against default, again whose fault is that.
Again of course Goldman should not lie about who constructed the security, but really........these are grown ups.
If they did not know the loans, whose fault is that?
the article just said they did not know who picked the loans(constructed the security).
They must know they were insuring the stuff, they got paid to insure it.
If they dont know why the guy wants to buy insurance against default, again whose fault is that.
Again of course Goldman should not lie about who constructed the security, but really........these are grown ups.
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Posted 2010-April-16, 14:57
mike777, on Apr 16 2010, 11:35 PM, said:
ACtually they did, they just did not know per the article, who put the package together. but they did know the loans.
If they did not know the loans, whose fault is that?
the article just said they did not know who picked the loans(constructed the security).
If they did not know the loans, whose fault is that?
the article just said they did not know who picked the loans(constructed the security).
I am continually amazed that you have the gall to charge people for financial advice.
I'd like refer people back to some of my earlier posts regarding the covariance of the assets that made up a CDO...
More specifically, recall that the CDOs only work when the underlying securities are independent of one another.
Guess what happens to a CDO when someone is cherry picking all of the underlying assets to have the same set of characteristics?
Do you understand why this type of information might have a material impact on the value of the asset?
With this said and done, CDOs are constructed from hundreds (sometimes thousands) of mortgages...
I can guarantee you that the entities buying these CDOs had neither time nor the information required to inspect all of the loans that made up an individual CDO. Rather, these entities trusted that the companies selling the CDOs would provide appropriate disclosure regarding the nature of the products being sold.
It is alleged that Goldman Sachs did not provide appropriate disclosure.
If the statements being made are true - Goldman Sachs sold a structured product without describing all material information about the nature of said instrument - then I suspect that a number of folks are headed off to jail...
Richard (who actually spent a fair amount of time using random forests to value CDOs)
Alderaan delenda est
#53
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Posted 2010-April-16, 15:01
Stop, you again do not read what I write sigh
Read the book about the doctor of medicine who did this........in fact.
Read about the other 3 buddies who did this in the book.
these guys knew the loans, they knew the loans.....read the article
If you cherry pick all the loans, I still know the loans, I know the characterics..sigh
If you do not take the time to know them....that is your fault. Grow up.
In fact if you read the book there is a link where you can pay 100$ bucks and get all of this information. Not hard. That was the whole point of the book.....these guys paid about 100 bucks and studied the loans. In fact one guy did this, see the book. And he was a Doctor of medicine, not finance.
If you are in the insurance bus and do not know basic covariance and check it out....your fault...
Do not rely on the seller, do not rely on someone doing your due diligence on 200 billion or whatever loans....
Again of course if Goldman lied sue them. If the prospectus is a lie.....send them to jail, agree. If Paulson knew the prospectus was a lie....send him to jail, but the article does not say that.
But imo a bunch of sour grapes because they were lazy.
Read the book about the doctor of medicine who did this........in fact.
Read about the other 3 buddies who did this in the book.
these guys knew the loans, they knew the loans.....read the article
If you cherry pick all the loans, I still know the loans, I know the characterics..sigh
If you do not take the time to know them....that is your fault. Grow up.
In fact if you read the book there is a link where you can pay 100$ bucks and get all of this information. Not hard. That was the whole point of the book.....these guys paid about 100 bucks and studied the loans. In fact one guy did this, see the book. And he was a Doctor of medicine, not finance.
If you are in the insurance bus and do not know basic covariance and check it out....your fault...
Do not rely on the seller, do not rely on someone doing your due diligence on 200 billion or whatever loans....
Again of course if Goldman lied sue them. If the prospectus is a lie.....send them to jail, agree. If Paulson knew the prospectus was a lie....send him to jail, but the article does not say that.
But imo a bunch of sour grapes because they were lazy.
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Posted 2010-April-16, 15:13
mike777, on Apr 17 2010, 12:01 AM, said:
Stop, you again do not read what I write sigh
these guys knew the loans, the knew the loans.....read the article
If you cherry pick all the loans, I still know the loans, I know the characterics..sigh
If you do not take the time to know them....that is your fault. Grow up.
In fact if you read the book there is a link where you can pay 100$ bucks and get all of this information. Not hard.
Again of course if Goldman lied sue them.
these guys knew the loans, the knew the loans.....read the article
If you cherry pick all the loans, I still know the loans, I know the characterics..sigh
If you do not take the time to know them....that is your fault. Grow up.
In fact if you read the book there is a link where you can pay 100$ bucks and get all of this information. Not hard.
Again of course if Goldman lied sue them.
Interesting theory, which has absolutely nothing to do with jurisprudence in the US.
I recommend spending a bit of time looking at the requirements for the identification and disclosure of material information for 10-Ks and the like...
caveat emptor went out the window a LONG LONG time ago...
Alderaan delenda est
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Posted 2010-April-16, 15:17
mike777, on Apr 17 2010, 12:01 AM, said:
If you do not take the time to know them....that is your fault. Grow up.
In fact if you read the book there is a link where you can pay 100$ bucks and get all of this information. Not hard. That was the whole point of the book.....these guys paid about 100 bucks and studied the loans. In fact one guy did this, see the book. And he was a Doctor of medicine, not finance.
If you are in the insurance bus and do not know basic covariance and check it out....your fault...
In fact if you read the book there is a link where you can pay 100$ bucks and get all of this information. Not hard. That was the whole point of the book.....these guys paid about 100 bucks and studied the loans. In fact one guy did this, see the book. And he was a Doctor of medicine, not finance.
If you are in the insurance bus and do not know basic covariance and check it out....your fault...
So, every time anyone buys and sells a structured product, they need to research all of the underlying assets and try to determine whether or not someone deliberately built a time bomb into the asset?
Alderaan delenda est
#56
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Posted 2010-April-16, 15:21
mike777, on Apr 17 2010, 12:01 AM, said:
Again of course if Goldman lied sue them. If the prospectus is a lie.....send them to jail, agree. If Paulson knew the prospectus was a lie....send him to jail, but the article does not say that.
Would one of the lawyers on this list care to explain how failure to disclose a material fact differs from a lie?
Alderaan delenda est
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Posted 2010-April-16, 15:21
btw just to remind people.....this book is about basically selling insurance on home mortgages.
They all went to zero,per the book. Basically pick any pool, they are all worthless. Not one, not two...not only this one!
When basically all of the pools are worth zero......or going to zero as the book says..
Per the book, basically one guy a doc of medicine had Goldman create these securities. He then bought default insurance on them. He got to pick the worst pools, Goldman did not care and the insurance sellers did not care. All of this stuff was rated AAA. That was all they cared about.
His hedge fun clients hated him for taking this risk with their money and screamed at him for a year. He made them all rich........and then quit the business because he hated his clients.
Paulson was more well known on the street and roughly came to the game a bit later after hearing about this stuff. Paulson was able to raise alot more money, when no one trusted the doc. So Paulson made billions, the doc millions....andmillions....
They did not make the mortgages or service them. These companies insured them in roughly 10 or 100 million chunks...
What is important to remember is that only about 8-16% of these mortgages have to fail. If they do you owe the whole ten or 100 million. So in an extreme case 92% or so of the mortgages could be fine and not cherry picked lousy and you still pay out 100 million bucks..
In fact in many cases 40 -55% of the pool, failed
What happened was almost all of these pools failed, pick anyone as the book said they are all going to zero!!!
They all went to zero,per the book. Basically pick any pool, they are all worthless. Not one, not two...not only this one!
When basically all of the pools are worth zero......or going to zero as the book says..
Per the book, basically one guy a doc of medicine had Goldman create these securities. He then bought default insurance on them. He got to pick the worst pools, Goldman did not care and the insurance sellers did not care. All of this stuff was rated AAA. That was all they cared about.
His hedge fun clients hated him for taking this risk with their money and screamed at him for a year. He made them all rich........and then quit the business because he hated his clients.
Paulson was more well known on the street and roughly came to the game a bit later after hearing about this stuff. Paulson was able to raise alot more money, when no one trusted the doc. So Paulson made billions, the doc millions....andmillions....
They did not make the mortgages or service them. These companies insured them in roughly 10 or 100 million chunks...
What is important to remember is that only about 8-16% of these mortgages have to fail. If they do you owe the whole ten or 100 million. So in an extreme case 92% or so of the mortgages could be fine and not cherry picked lousy and you still pay out 100 million bucks..
In fact in many cases 40 -55% of the pool, failed
What happened was almost all of these pools failed, pick anyone as the book said they are all going to zero!!!
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Posted 2010-April-16, 16:41
BTW just saw this Fraud case against Goldman on the news.
It was unclear in the report what the claim is. Something about not full disclosure.
I have long argued for full disclosure on wallstreet in these forums.
Glad to see if Fraud, that means we dont need even more regulations. Just enforce the ones we got.
------------
Just to make clear this book is not about buying or selling mortgages. It was not about making good or bad loans.
It was about 2 parties making a bet. Neither side needed to actually own or make the home mortgages.
Example, I dont own your home but I bet your mortgage will default within ten years or so. Person2 bets it wont. Neither of us own your home or make the loan.
Now take a group of 1000 of these and if any 8-16% fail you owe me 100 million bucks....I pay you say 1m or 2m a year in insurance premiums.
In the book all of these pools are rated AAA.
In the book one guy, a doc, pays 100 bucks online reads up on these pools and talks Goldman into finding a seller of the insurance, if not Goldman themselves.
----------------
Unclear to me if this Goldman thing is about buying and selling of these mortgages and lack of full disclosure or if it is about the insurance bet on the mortgages.
It was unclear in the report what the claim is. Something about not full disclosure.
I have long argued for full disclosure on wallstreet in these forums.
Glad to see if Fraud, that means we dont need even more regulations. Just enforce the ones we got.
------------
Just to make clear this book is not about buying or selling mortgages. It was not about making good or bad loans.
It was about 2 parties making a bet. Neither side needed to actually own or make the home mortgages.
Example, I dont own your home but I bet your mortgage will default within ten years or so. Person2 bets it wont. Neither of us own your home or make the loan.
Now take a group of 1000 of these and if any 8-16% fail you owe me 100 million bucks....I pay you say 1m or 2m a year in insurance premiums.
In the book all of these pools are rated AAA.
In the book one guy, a doc, pays 100 bucks online reads up on these pools and talks Goldman into finding a seller of the insurance, if not Goldman themselves.
----------------
Unclear to me if this Goldman thing is about buying and selling of these mortgages and lack of full disclosure or if it is about the insurance bet on the mortgages.
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Posted 2010-April-16, 18:01
Quote
More specifically, recall that the CDOs only work when the underlying securities are independent of one another.
This is the entire crux of the matter - the variation within the tranches can only be meaningfully priced if the loan make-up of each tranch acts independently from each other. In other words, if loan A defaults loan B is neither more or less likely to default.
What occurred in the later stages of the housing boom was the demand for the yield of securitized loans increased to a speculative frenzy and led to the non-bank business model of loaning-to-securitize, and as these non-bank entities were not regulated by the Federal Reserve as is supposed to happen - misfeasance of Alan Greenspan to refuse to do his duty - the loans being made were so bad that virtually all of them had to default unless home prices continued to rise so that the loans could be rolled over to a bigger fool at a higher price.
The fiasco had many villains - Alan Greenspan #1 for misfeasance. The ratings agencies for fraud. GS is slimy enough on its own - but they are way down the list of people who need to be sued over the shitstorm that hit us.
The basic perp were all those guys and gals who sold us on the idea that markets self regulate and we no longer needed Glass-Steagall, etc.
The free-mareketeers fucked us - thank you Phil Gramm.
"Injustice anywhere is a threat to justice everywhere."
#60
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Posted 2010-April-16, 20:05
Not sure how Glass Steagall figures in all of this.
http://en.wikipedia....%93Steagall_Act
If we assume banks cannot buy certain finance companies ok.....but they can still make bad loans and hold worthless mortgages.
Making 30 year fixed rate home loans are risky. IF the banks hold them, risky. If someone else buys them risky. That is why banks securitized them and sold them to FNMA. Let it hold them.
btw check out how many 30 year home loans fixed rate there are in Canada, not many.
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As for the GS story still not clear what was sold to whom. Some say a billion bucks worth of subprime mortgages were sold to pension funds, but they knew they were subprime. In other words the pension funds knew what the loans were in detail and that they were lousy loans. I assume they were allowed to know what they were spending a billion bucks on. In a liquidity crises covar. always goes to one in a subprime mkt. As the book said they all are going to fail They are not grandma and grandpa investor.
I would not be surprised if GS settles out of court. It is hard to fight the usa government and may be cheaper to just settle.
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btw it was announced that the SEC knew about the ponzi scheme of Stanford back in 1997. So much for govt regulation. That one is 7 billion.
http://www.kwtx.com/...s/91071919.html
http://en.wikipedia....%93Steagall_Act
If we assume banks cannot buy certain finance companies ok.....but they can still make bad loans and hold worthless mortgages.
Making 30 year fixed rate home loans are risky. IF the banks hold them, risky. If someone else buys them risky. That is why banks securitized them and sold them to FNMA. Let it hold them.
btw check out how many 30 year home loans fixed rate there are in Canada, not many.
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As for the GS story still not clear what was sold to whom. Some say a billion bucks worth of subprime mortgages were sold to pension funds, but they knew they were subprime. In other words the pension funds knew what the loans were in detail and that they were lousy loans. I assume they were allowed to know what they were spending a billion bucks on. In a liquidity crises covar. always goes to one in a subprime mkt. As the book said they all are going to fail
They are not grandma and grandpa investor.I would not be surprised if GS settles out of court. It is hard to fight the usa government and may be cheaper to just settle.
---------
btw it was announced that the SEC knew about the ponzi scheme of Stanford back in 1997. So much for govt regulation. That one is 7 billion.
http://www.kwtx.com/...s/91071919.html