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Qtec
01-31-2011, 06:07 AM
<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">The Financial Crisis Inquiry Commission set up by Congress released more than its final report last week. It also posted online a trove of investigative documents:

Lawyers for companies at the center of the crisis have wondered what might become of the documents, given that, as The National Law Journal reported in August, they had been internal to the companies and could be of interest to the plaintiffs’ bar.

Many of those companies have already been battling proposed securities class actions.The archive appears on the Web site of the Financial Crisis Inquiry Commission, and hundreds of documents are already up, including testimony and court filings.

[...] Phil Angelides, the commission’s chairman and a former California state treasurer, said the commission would be posting more, including “research and investigative documents, audio and transcripts.”

Lisa Rickard, president of the U.S. Chamber’s Institute for Legal Reform, criticized that plan. “The commission’s final report and its pledge to post raw materials — apparently including information obtained from companies as well as other government agencies — is an astounding abuse of process that would effectively create a government-sanctioned Wikileaks,” Rickard said in a formal statement today.

The Institute for Legal Reform was founded to protect corporations from getting sued, and that's really all you need to know.
</div></div>
link (http://crooksandliars.com/susie-madrak/fcic-posts-investigative-documents-on)

Check out the graphics page link (http://www.fcic.gov/img/resource-graphics/full/fig5.2_subprimeshare.jpg)

I don't pretend that I undersand it all but I do know that Joe Six-Pack didn't cause the crash.

Q

Gayle in MD
01-31-2011, 09:59 AM
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Qtec</div><div class="ubbcode-body"> <div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">The Financial Crisis Inquiry Commission set up by Congress released more than its final report last week. It also posted online a trove of investigative documents:

Lawyers for companies at the center of the crisis have wondered what might become of the documents, given that, as The National Law Journal reported in August, they had been internal to the companies and could be of interest to the plaintiffs’ bar.

Many of those companies have already been battling proposed securities class actions.The archive appears on the Web site of the Financial Crisis Inquiry Commission, and hundreds of documents are already up, including testimony and court filings.

[...] Phil Angelides, the commission’s chairman and a former California state treasurer, said the commission would be posting more, including “research and investigative documents, audio and transcripts.”

Lisa Rickard, president of the U.S. Chamber’s Institute for Legal Reform, criticized that plan. “The commission’s final report and its pledge to post raw materials — apparently including information obtained from companies as well as other government agencies — is an astounding abuse of process that would effectively create a government-sanctioned Wikileaks,” Rickard said in a formal statement today.

The Institute for Legal Reform was founded to protect corporations from getting sued, and that's really all you need to know.
</div></div>
link (http://crooksandliars.com/susie-madrak/fcic-posts-investigative-documents-on)

Check out the graphics page link (http://www.fcic.gov/img/resource-graphics/full/fig5.2_subprimeshare.jpg)

I don't pretend that I undersand it all but I do know that Joe Six-Pack didn't cause the crash.

Q
</div></div>

Shame on you! How will the "Christian" right survive if they cannot blame and demonize the powerless, for the fraud and greed of the powerful wealthy? /forums/images/%%GRAEMLIN_URL%%/laugh.gif

We should all be focused on Olive Pits! /forums/images/%%GRAEMLIN_URL%%/grin.gif

Chopstick
01-31-2011, 10:48 AM
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Qtec</div><div class="ubbcode-body">

I don't pretend that I undersand it all but I do know that Joe Six-Pack didn't cause the crash.

Q
</div></div>

<span style="color: #000099">That is essentially correct. The US government did.

PS: I read the report. It is mostly old news and partisan crap on both sides. The dissenting statements that were filed are interesting. Bottom line, they are never going to let anyone know what really happened. Everyone is dirty.

That is the reason we need to fire them all and start over with a new crew and keep firing them at every opportunity until they get the message. The lunatic fringe has been running this country for the last 100 years because they yelled the loudest. The American people are fed up with their crap and are starting to yell back. </span>

Gayle in MD
01-31-2011, 11:15 AM
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Chopstick</div><div class="ubbcode-body"><div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Qtec</div><div class="ubbcode-body">

I don't pretend that I undersand it all but I do know that Joe Six-Pack didn't cause the crash.

Q
</div></div>

<span style="color: #000099">That is essentially correct. The US government did.

PS: I read the report. It is mostly old news and partisan crap on both sides. The dissenting statements that were filed are interesting. Bottom line, they are never going to let anyone know what really happened. Everyone is dirty.

That is the reason we need to fire them all and start over with a new crew and keep firing them at every opportunity until they get the message. The lunatic fringe has been running this country for the last 100 years because they yelled the loudest. The American people are fed up with their crap and are starting to yell back. </span> </div></div>


The Democratic Process is corrupted. Even if we fire everyone, what do you purpose to do about the Supreme Court, which has delivered our elections into the hands of corrupted Corporate Interests.

Seems to me the bulk of your blame, was never against Wall Street corruption.

Do you still deny that Wall Street, (banks, financial Institutions, Rating Agencies, Mortgage Lenders, predatory practices, born of greed and corruption, were the major cause, by and large, and NOT Fannie and Freddie? NOT the CRA. Do you agree that Republican Alan Greenspan, and George Bush's "Ownership Society" opened the door, sent the message, led the way, for this moost recent crash????

Also, which political Party, has been the major Party
For DEREGULATION!

WHICH political Party, has been the party of BAILOUTS for CROOKS, who SWINDLED middloe class Americans.

cushioncrawler
01-31-2011, 04:35 PM
The fcic haz missed the main problem.
With a bit of time i kood deskribe/invent an obviously ridikulous (short) example of goings'ons on (praps) a small island where the natives start uzing a usofa financial system brort in by some shipwrecked usofa financial bigknobs, and the natives suffer a financial usofa type of krisis.
I havnt worked it all out yet, but i think it will be very funny -- i am giggling allready -- karnt wait to read what i will write.

Aktually, someone else here might hav a go at inventing a (short)financial komedy/analogy of their own.
mac.

LWW
01-31-2011, 05:23 PM
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Gayle in MD</div><div class="ubbcode-body">WHICH political Party, has been the party of BAILOUTS for CROOKS, who SWINDLED middloe class Americans.[/b] </div></div>

That's easy ... but you would gouge your eyes out if you had to read the answer.

LWW

Qtec
02-01-2011, 02:33 AM
http://www.fcic.gov/img/resource-graphics/full/fig8.1_howcdo.jpg

<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">The US government did. </div></div>

What does that diagram show to you? To me its looks like they take most risky securities and somehow change them into good investments!
This is what Paulson did. He made a pool of mortgages that were doomed to fail and got GS to sell them off to investors.
If that's not fraud I don't know what is.

Q

cushioncrawler
02-01-2011, 04:13 AM
Ok i will hav a quick stab at a funny analogy that illustrates my statement that the fcic got it wrong.
The bigknobs introduced a usofa type financial system on the island. A few months after being found and saved the bigknobs returned to the island to see how things were going.
They found all of the natives just sitting around. The fishermen had been sacked. The coconut pickers had been sacked. Everyone, just sitting around.

The bigknobs asked what had happened.
A dejekted native told him that a thief had robbed the (new) bank and taken all of the island's (new) money.
There were plenty of fish in the sea -- there were lots of coconuts in the palms -- but the island woz in a fullblown depression.

Moral -- If a system kan be brort to a standstill by a simple robbery (or by anything at all), then the problem aint the thief (nor iz it anyone else), the problem iz the system.
mac.

Qtec
02-01-2011, 04:28 AM
<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">Moral -- If a system kan be brort to a standstill by a simple robbery (or by anything at all), then the problem aint the thief </div></div>

So, if you leave the car door open and someone steals your lab top, don't blame the thief, blame yourself because you left the door open. ?

Interesting.

The CDO scam was anything but simple. It was smoke and mirrors and investors bought these damaged goods in good faith. Especially in the Paulson case they got conned.

Q

cushioncrawler
02-01-2011, 04:47 AM
OR.
A dejekted native told him that he had got a big loan to buy a bigger boat to catch more fish. But then he found that all the other fishermen had dunn likewize, and the bottom fell out of the fish market, and the bank sold their boats at a big loss -- and the bank went under too -- and the coconut bizness went down the gurgler too koz fewer and fewer bort coconuts, and more and more climbers were layed off -- a financial vortex "black hole" -- untill everyone woz out of work.

Moral -- If a system kan be brort to a standstill by anything at all then the problem iz the system.
mac.

LWW
02-01-2011, 04:48 AM
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Qtec</div><div class="ubbcode-body"> What does that diagram show to you? To me its looks like they take most risky securities and somehow change them into good investments!

Q </div></div>

Very good. Here's how they did it.

Prior to the repeal of Glass Stegall we had the FDIC insuring deposit banks but not investment banks. This meant that the investment houses were free to dabble in these very high risk securities if they wanted to, but they were the sole guarantor of the securities. For that reason they seldom would have anything to do with such poor paper.

Under the new law, Graham-Leach-Bliley, FDIC insurance was extended to investment banks as well. This key change gave the investment houses free reign to take insane risks. Under the new rules, if the securities panned out the investment houses made money ... if they didn't, they simply passed the losses off to the taxpayer.

A proper analogy would be this. Most people don't bet the rent money at the casino because the risk is too large. Now, if the feds suddenly said "Keep all of your winnings, and your losses will be reimbursed by the taxpayer!" the gamblers would be fools to not bet everything on every opportunity.

LWW

cushioncrawler
02-01-2011, 04:55 AM
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Qtec</div><div class="ubbcode-body">.....So, if you leave the car door open and someone steals your lab top, don't blame the thief, blame yourself because you left the door open. ? Interesting. The CDO scam was anything but simple. It was smoke and mirrors and investors bought these damaged goods in good faith. Especially in the Paulson case they got conned. Q</div></div>Q -- It duznt matter what who did to who -- no financial system should be vulnerable to any sort of financial dizaster.

Its similar to say designing a fission reactor that will suffer a meltdown whenever anything bad happens -- ie say once a year.
The fcic will of course point out that some of the employees were crooks, and some were inkompetent, and some didnt follow orders.
But then lil'ol'mac stands up at the back and asks why woznt the reactor designed such that crooks and inkompetants koodnt cause a meltdown once a year.
mac.

cushioncrawler
02-01-2011, 05:18 AM
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: LWW</div><div class="ubbcode-body"><div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Qtec</div><div class="ubbcode-body"> What does that diagram show to you? To me its looks like they take most risky securities and somehow change them into good investments! Q </div></div>Very good. Here's how they did it. Prior to the repeal of Glass Stegall we had the FDIC insuring deposit banks but not investment banks. This meant that the investment houses were free to dabble in these very high risk securities if they wanted to, but they were the sole guarantor of the securities. For that reason they seldom would have anything to do with such poor paper. Under the new law, Graham-Leach-Bliley, FDIC insurance was extended to investment banks as well. This key change gave the investment houses free reign to take insane risks. Under the new rules, if the securities panned out the investment houses made money ... if they didn't, they simply passed the losses off to the taxpayer.

A proper analogy would be this. Most people don't bet the rent money at the casino because the risk is too large. Now, if the feds suddenly said "Keep all of your winnings, and your losses will be reimbursed by the taxpayer!" the gamblers would be fools to not bet everything on every opportunity. LWW</div></div>Dubb -- Its got little to do with losses or risks or anything. Its the financial sytem that stinx.

Losses -- there are no losses. A loss iz someone else's gain. There are no losses. So, the usofa financial system suffers a meltdown koz some money changes hands. Great system.

Losses -- real losses -- theze should and do knock a country off balance -- but there twernt many real losses in the usofa -- just money changing hands.
Great system.
mac.

LWW
02-01-2011, 05:20 AM
The real question should be why was a system designed which had a 100.0% chance of failure.

That's what the repeal of G-s and implementation of GLB did.

LWW

LWW
02-01-2011, 05:21 AM
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Chopstick</div><div class="ubbcode-body"><div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Qtec</div><div class="ubbcode-body">

I don't pretend that I undersand it all but I do know that Joe Six-Pack didn't cause the crash.

Q
</div></div>

<span style="color: #000099">That is essentially correct. The US government did.

PS: I read the report. It is mostly old news and partisan crap on both sides. The dissenting statements that were filed are interesting. Bottom line, they are never going to let anyone know what really happened. Everyone is dirty.

That is the reason we need to fire them all and start over with a new crew and keep firing them at every opportunity until they get the message. The lunatic fringe has been running this country for the last 100 years because they yelled the loudest. The American people are fed up with their crap and are starting to yell back. </span> </div></div>

Excellent post.

LWW

Qtec
02-01-2011, 05:42 AM
<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">The real question should be why was a system designed which had a 100.0% chance of failure. </div></div>

Capitalism?

Q?

Qtec
02-01-2011, 05:50 AM
<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">Q -- It duznt matter what who did to who - </div></div>

I think it does to those who have lost their house and are now living in a tent.

The Free Market is not designed, that would be Socialism.

What we have here is unregulated, unbridled Capitalism and we can all see the result.

You may say the system is at fault, and you would be right, but don't give the crooks a free pass.

Q

LWW
02-01-2011, 06:41 AM
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Qtec</div><div class="ubbcode-body"> <div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">The real question should be why was a system designed which had a 100.0% chance of failure. </div></div>

Capitalism?

Q? </div></div>

No.

Fascism.

Capitalism, or something close to it, is what we had before GLB.

LWW

LWW
02-01-2011, 06:42 AM
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Qtec</div><div class="ubbcode-body">

You may say the system is at fault, and you would be right, but don't give the crooks a free pass.

Q </div></div>

So you now support prosecuting the regime?

LWW

Sev
02-01-2011, 07:04 AM
Once again we see the onus is on the government through their meddling.

LWW
02-01-2011, 09:26 AM
Excellent post.

LWW

LWW
02-01-2011, 09:27 AM
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Sev</div><div class="ubbcode-body">Once again we see the onus is on the government through their meddling. </div></div>

And yet the left blames those who tried to avoid the mess and demands that only the solution is ever more of what caused the mess.

LWW

Gayle in MD
02-01-2011, 09:37 AM
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Qtec</div><div class="ubbcode-body"> <div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">Q -- It duznt matter what who did to who - </div></div>

I think it does to those who have lost their house and are now living in a tent.

The Free Market is not designed, that would be Socialism.

What we have here is unregulated, unbridled Capitalism and we can all see the result.

You may say the system is at fault, and you would be right, but don't give the crooks a free pass.

Q </div></div>

Tap Tap Tap.

GREED AND CORRUPTION AT THE TOP. LINKED TO FAILED OVERSIGHT. INTENTIONAL FRAUD, IGNORED, AND EXPANDED, BY FREE MARKET DEREGULATORY REPUBLICAN POLICIES.

We had an era, of "Free Market - Deregulation Happy, Zealots" a Republican, Fed Chairman, who was warned, and who refused to take heed, and allowed the exotic financial instruments, designed to hide the corruption.

Corrupt ratings agencies AND a "Free Market, Deregulation Happy, former Wall St. CEO, at Treasury, and in NY, Fed pawns of both, who were afraid to go against the Administration's "Ownership Society" policies, according to the statements THEY made, along with GREEDY CORRUPT crooks on Wall Street, and corrupt Predatory Mortgage companies, both huge, and small, fly-by night, corrupt, predatory mortgage operatives, and often neglected, in the bloame laying, Real Estate Agents, who failed their fiduciary DUTY, BY LAW, all in the quest for fast money, regardless of who was going to go down as a result.

I had my R.E. License, and there is no way I would EVER have pushed, or agreed to write, contracts, for people, whom I knew would likely default.

Above all, the message was sent, BY Greenspan, and in his statements, he wasn't concerned about FRAUD, in the market.

Bush, AND Greenspan, WERE WARNED.

THEY HAD THE POWER.

THEY FAILED TO HEED THE WARNINGS.

THE INSIDER, WEALTHY CEO'S AT THE TOP, STOLE FROM ALL OF THE REST.

End of story.

None of it could have happened, without the FREE MARKET-DEREGLATORY ZEALOTS, DEREGULATORY REPUBLICAN POLICIES, which were in place. The filthy rich, stealing from the Middle Clas, AND the world.

CORRUPTION AND GREED, OVERLOOKED, REDISTRIBUTION OF WEALTH, BY REPUBLICANS. WARNINGS IGNORED, JUST LIKE KATRINA, JUST LIKE IRAQ, AND JUST LIKE 9/11.

"Corporations cannot be trusted to regulate themselves."
Gayle in Md.

pooltchr
02-01-2011, 10:10 AM
Thanks, Galye. Your posts are usually good for a laugh.

Steve

LWW
02-01-2011, 10:14 AM
You know what, in a bizarre sort of way they are.

It's like watching a violent clown riot ... in spite of the carnage, one can't help snickering at it.

LWW

pooltchr
02-01-2011, 10:17 AM
Or like watching the Three Stooges!

Steve

Stretch
02-01-2011, 10:18 AM
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Gayle in MD</div><div class="ubbcode-body"><div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Qtec</div><div class="ubbcode-body"> <div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">Q -- It duznt matter what who did to who - </div></div>

I think it does to those who have lost their house and are now living in a tent.

The Free Market is not designed, that would be Socialism.

What we have here is unregulated, unbridled Capitalism and we can all see the result.

You may say the system is at fault, and you would be right, but don't give the crooks a free pass.

Q </div></div>

Tap Tap Tap.

GREED AND CORRUPTION AT THE TOP. LINKED TO FAILED OVERSIGHT. INTENTIONAL FRAUD, IGNORED, AND EXPANDED, BY FREE MARKET DEREGULATORY REPUBLICAN POLICIES.

We had an era, of "Free Market - Deregulation Happy, Zealots" a Republican, Fed Chairman, who was warned, and who refused to take heed, and allowed the exotic financial instruments, designed to hide the corruption.

Corrupt ratings agencies AND a "Free Market, Deregulation Happy, former Wall St. CEO, at Treasury, and in NY, Fed pawns of both, who were afraid to go against the Administration's "Ownership Society" policies, according to the statements THEY made, along with GREEDY CORRUPT crooks on Wall Street, and corrupt Predatory Mortgage companies, both huge, and small, fly-by night, corrupt, predatory mortgage operatives, and often neglected, in the bloame laying, Real Estate Agents, who failed their fiduciary DUTY, BY LAW, all in the quest for fast money, regardless of who was going to go down as a result.

I had my R.E. License, and there is no way I would EVER have pushed, or agreed to write, contracts, for people, whom I knew would likely default.

Above all, the message was sent, BY Greenspan, and in his statements, he wasn't concerned about FRAUD, in the market.

Bush, AND Greenspan, WERE WARNED.

THEY HAD THE POWER.

THEY FAILED TO HEED THE WARNINGS.

THE INSIDER, WEALTHY CEO'S AT THE TOP, STOLE FROM ALL OF THE REST.

End of story.

None of it could have happened, without the FREE MARKET-DEREGLATORY ZEALOTS, DEREGULATORY REPUBLICAN POLICIES, which were in place. The filthy rich, stealing from the Middle Clas, AND the world.

CORRUPTION AND GREED, OVERLOOKED, REDISTRIBUTION OF WEALTH, BY REPUBLICANS. WARNINGS IGNORED, JUST LIKE KATRINA, JUST LIKE IRAQ, AND JUST LIKE 9/11.

"Corporations cannot be trusted to regulate themselves."
Gayle in Md.
</div></div>

Excellent post! St.

Chopstick
02-01-2011, 11:58 AM
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Qtec</div><div class="ubbcode-body"> http://www.fcic.gov/img/resource-graphics/full/fig8.1_howcdo.jpg

<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">The US government did. </div></div>

What does that diagram show to you? To me its looks like they take most risky securities and somehow change them into good investments!

<span style="color: #000099">That is not actually what it shows. A CDO can be best understood as a collection of bond issues. To understand bond yield structures, consider the following. You have two bonds. Each costs $1000. One is a German government bond and the other is a Greece government bond. Both bonds yield 5% interest payments. Which bond would you buy? The German bond of course because the default risk of the Greece bond is ten times higher than the German bond. So how can Greece get anyone to buy their bonds? By offering a higher yield. What if the Greece bond offered a 20% yield? If you were a young investor who was looking for aggressive growth you might select the higher yielding bond and accept the risk.

You can think of CDO tranches as bond issues the lowest risk and lowest yield in the senior AAA rated tranche. As the tranches step down, the risk goes up and so does the yield. If you have 10 mortgages in the senior tranche you can still have one that is a default risk. You have 9 more to cover the cash flow requirements plus income from the other tranches.

There is no deception involved. A securities representative is required by law to explain all of this to you. There is nothing inherently good or evil in the instrument.</span>

This is what Paulson did. He made a pool of mortgages that were doomed to fail and got GS to sell them off to investors.

<span style="color: #000099">Henry Paulson was Secretary of the Treasury. The Treasury Department does not issue CDOs. They issue US treasury Bonds in various forms. He had nothing to do with it.</span>

If that's not fraud I don't know what is.

<span style="color: #000099">Meaning no disrespect, you do not understand what the fraud actually was. When Fannie and Freddy started stuffing AAA CDO tranches with seventy percent sub-prime paper and passing them over to Moody's and S&P and they did not do due diligence to research the issue and stamped them AAA because hey, it's Fannie and Freddie. That's fraud on Fannie and Freddie's part and at a minimum gross incompetence on the part of Moody's and S&P.

Clinton's modification of CRA and the Gramm–Leach–Bliley Act were cited in the FCIC report as the key turning points enabling the fast and loose environment to exist.

So, what did Wall St. do? They saw the cash cow that the government had created in Fannie and Freddie and jumped on board big time. Not their best move. The Europeans started doing the same things. Wall St. did create the conditions that led to the collapse. The world governments did. Wall St. did what Wall St. does. Take advantage of any condition that leads to money.

</span>
Q </div></div>

Soflasnapper
02-01-2011, 02:26 PM
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: LWW</div><div class="ubbcode-body"><div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Qtec</div><div class="ubbcode-body"> What does that diagram show to you? To me its looks like they take most risky securities and somehow change them into good investments!

Q </div></div>

Very good. Here's how they did it.

Prior to the repeal of Glass Stegall we had the FDIC insuring deposit banks but not investment banks. This meant that the investment houses were free to dabble in these very high risk securities if they wanted to, but they were the sole guarantor of the securities. For that reason they seldom would have anything to do with such poor paper.

Under the new law, Graham-Leach-Bliley, FDIC insurance was extended to investment banks as well. This key change gave the investment houses free reign to take insane risks. Under the new rules, if the securities panned out the investment houses made money ... if they didn't, they simply passed the losses off to the taxpayer.

A proper analogy would be this. Most people don't bet the rent money at the casino because the risk is too large. Now, if the feds suddenly said "Keep all of your winnings, and your losses will be reimbursed by the taxpayer!" the gamblers would be fools to not bet everything on every opportunity.

LWW </div></div>

Prior to the repeal of Glass Stegall we had the FDIC insuring deposit banks but not investment banks. This meant that the investment houses were free to dabble in these very high risk securities if they wanted to, but they were the sole guarantor of the securities. For that reason they seldom would have anything to do with such poor paper.

Under the new law, Graham-Leach-Bliley, FDIC insurance was extended to investment banks as well. This key change gave the investment houses free reign to take insane risks. Under the new rules, if the securities panned out the investment houses made money ... if they didn't, they simply passed the losses off to the taxpayer.

That's not true, nor is the rest of it.

The investment banks only became commercial banks, with insured deposits, after the crisis broke, so that they could line up for the government bail out money they'd otherwise not have been entitled to get. Amex for one, Morgan Stanley for another, all said they were NOW commercial banks, as of when the money was already voted for and available, NOT before the crisis occurred.

PRIOR to GLB's passage, commercial banks were already doing most of the 'investing' kinds of things, including having the ability to hold the toxic instruments that got them into so much trouble. GLB was really to regularize what had only been a temporary waiver of GS, in the case of Citi and Traveller's Insurance. (Few commercial banks followed suit into insurance, and that wasn't a part of the problem.)

This is why neither Clinton nor Gramm, nor any supporter of GLB, have been shamed into admissions of error. They have a fullsome argument explaining why that wasn't the problem, as a National Review piece agreed, calling those claims 'folk economics.'

Soflasnapper
02-01-2011, 02:30 PM
Here's the defense of GLB, that it wasn't the factor:

Critics of the legislation feared that, with the allowance for mergers between investment and commercial banks, GLB allowed the newly-merged banks to take on riskier investments while at the same time removing any requirements to maintain enough equity, exposing the assets of its banking customers.[30] Yet, prior to the passage of GLB in 1999, investment banks were already capable of holding and trading the very financial assets claimed to be the cause of the mortgage crisis, and were also already able to keep their books as they had.[30] Also, greater access to investment capital as many investment banks went public on the market explains the shift in their holdings to trading portfolios.[30] After GLB passed, most investment banks did not merge with depository commercial banks. In fact, the few banks that did merge weathered the crisis better than those that did not.[30]

In response to criticism of his signing the bill when President, Bill Clinton said in 2008:

"I don't see that signing that bill had anything to do with the current crisis. Indeed, one of the things that has helped stabilize the current situation as much as it has is the purchase of Merrill Lynch by Bank of America, which was much smoother than it would have been if I hadn't signed that bill.... On the Glass-Steagall thing, like I said, if you could demonstrate to me that it was a mistake, I'd be glad to look at the evidence." [31]

In February 2009, one of the act's co-authors, former Senator Phil Gramm, wrote in its defense that:

"...if GLB was the problem, the crisis would have been expected to have originated in Europe where they never had Glass-Steagall requirements to begin with. Also, the financial firms that failed in this crisis, like Lehman, were the least diversified and the ones that survived, like J.P. Morgan, were the most diversified.
" Moreover, GLB didn't deregulate anything. It established the Federal Reserve as a superregulator, overseeing all Financial Services Holding Companies. All activities of financial institutions continued to be regulated on a functional basis by the regulators that had regulated those activities prior to GLB." [32]

The economists Brad DeLong (of the University of California, Berkeley) and Tyler Cowen (of George Mason University in Virginia) have both argued that the Gramm–Leach–Bliley Act softened the impact of the crisis.[33] Atlantic Monthly columnist Megan McArdle has argued that if the act was "part of the problem, it would be the commercial banks, not the investment banks, that were in trouble" and repeal would not have helped the situation.[34] An article in National Review has made the same argument, calling liberal allegations about the Act “folk economics.”[35]

cushioncrawler
02-01-2011, 03:27 PM
<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">Q -- It duznt matter what who did to who</div></div><div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Qtec</div><div class="ubbcode-body">I think it does to those who have lost their house and are now living in a tent. The Free Market is not designed, that would be Socialism. What we have here is unregulated, unbridled Capitalism and we can all see the result. You may say the system is at fault, and you would be right, but don't give the crooks a free pass. Q</div></div>Q.
Faux Losses -- money only changes hands (nearnuff).
Realty Losses -- are a form of Faux Losses.
Real Losses -- real losses, ie everybody loozes (nearnuff).

The usofa housing mortgage system stinx too.
Uzually u would think that Realty Losses were a Faux Loss -- but not in the usofa.
The usofa haz a mortgage system where whole streets can bekum derelikt. Whole neighbourhoods even. And with the help of the general financial system whole towns and citys even.
The rezulting mess stinx so much that the houses dont just go down in Faux Value, they allso go down in Real Value (= Real Loss) -- natural damage etc, vandalizm etc take a toll.

I aint saying that Faux Loss iznt important -- loozing "your" house iz a giant worry for the familys.

The usofa financial system stinx -- and most of the financial subsystems stinx.

But if u fixed thems -- u would still hav the stinky usofa politikal system.
And if u fixed that -- u would still hav the stinky usofa people (not inklooding athiests and greenys and tree huggers and cueists etc).
mac.

Qtec
02-01-2011, 09:29 PM
<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">Henry Paulson was Secretary of the Treasury. The Treasury Department does not issue CDOs. They issue US treasury Bonds in various forms. He had nothing to do with it. </div></div>

Not that Paulson. <div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">Still, the details unearthed by the S.E.C. in its investigation show a deep involvement by Mr. Paulson in the creation of the investment, known as <u>Abacus 2007-AC1.</u> For example, he approached Goldman about constructing and marketing the debt security.

After analyzing risky mortgages made on homes in Arizona, California, Florida and Nevada, where the housing markets had overheated, Mr. Paulson went to Goldman to talk about how he could bet against those loans. He focused his analysis on adjustable-rate loans taken out by borrowers with relatively low credit scores <u>and turned up more than 100 loan pools that he considered vulnerable, the S.E.C. said.

Mr. Paulson then asked Goldman to put together a portfolio of these pools, or others like them that he could wager against. He paid $15 million to Goldman for creating and marketing the Abacus deal, the complaint says.</u> </div></div>


<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">That is not actually what it shows. A CDO can be best understood as a collection of bond issues. To understand bond yield structures, consider the following. You have two bonds. Each costs $1000. One is a German government bond and the other is a Greece government bond. Both bonds yield 5% interest payments. Which bond would you buy? The German bond of course because the default risk of the Greece bond is ten times higher than the German bond. So how can Greece get anyone to buy their bonds? By offering a higher yield. What if the Greece bond offered a 20% yield? If you were a young investor who was looking for aggressive growth you might select the higher yielding bond and accept the risk. </div></div>

I get that but here is the point.;

" Abacus 2007-AC1 had been created in February 2007 at the request of John Paulson.

Abacus 2007-AC1, in short, was designed to fail. Paulson selected the pieces of toxic subprime which he wanted to short. These were then packaged together and sold on to Goldman clients."

Just to blame the govt is to give these crooks a free pass.

Q

LWW
02-02-2011, 04:17 AM
And here is where that argument becomes intellectually bankrupt:

1 - Prior to GLB investment banks took risks, yes that was their line of work, and charged much higher rates. They also accepted all risk if the investment went south ... this caused their boards to limit how far out on the branch they would go as losses depress share prices.

2 - Post GLB they could take on all the risk they desired, and do it at quite reasonable rates, as the taxpayer was on the hook ... via FDIC coverage ... for all losses while they kept all profits.

If you cannot see the causation here it is because you have blinded yourself.

Your argument is analogous to saying that crossing the street with a blindfold and earplugs on isn't what caused you get ran over because you had crossed the street before with your eyes open.

LWW

Chopstick
02-02-2011, 11:44 AM
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Qtec</div><div class="ubbcode-body">

I get that but here is the point.;

" Abacus 2007-AC1 had been created in February 2007 at the request of John Paulson.

Abacus 2007-AC1, in short, was designed to fail. Paulson selected the pieces of toxic subprime which he wanted to short. These were then packaged together and sold on to Goldman clients."

Just to blame the govt is to give these crooks a free pass.

Q </div></div>

<span style="color: #000099">I am not giving anyone a free pass. I took a look at the SEC complaint.</span>

SEC Abacus complaint. (http://www.sec.gov/litigation/complaints/2010/comp21489.pdf)

<span style="color: #000099">Paulson is not included as a defendant. I did see this in the complaint:</span>

<span style="color: #006600"><span style='font-family: Comic Sans MS'>In late 2006 and early 2007, Paulson performed an analysis of recent-vintage Triple B RMBS and identified over 100 bonds it expected to experience credit events in the near future. Paulson's selection criteria favored RMBS that included a high percentage of adjustable rate mortgages, relatively low borrower FICO scores, and a high concentration of mortgages in states like Arizona, California, Florida and Nevada that had recently experienced high rates of home price appreciation.</span></span>

<span style="color: #000099">That is an absolutely massive amount of work. His research identified a weakness in the market that was not generally known at the time and identified a specific high probability trade. Now how he went about utilizing that information is questionable from an ethical standpoint but not illegal. Goldman appears to be the one with the regulatory violations. The violations were for failure to fully disclose the positions of the principals.

For example, if I sell you a stock, I am required by SEC regulations to tell you if I or my firm have a position in that stock. If I tell you I am long a stock and I am actually short, that is also a violation.

It isn't illegal to sell a used car that has something wrong with it. It is only illegal to lie about the condition of the car. In this case, we are talking about shark vs shark. Capone selling something to Luciano. If you are going to spend $840 million on a securities issue, you had better to your research the same as Paulson did.

Sharks in the market have been with us for over 2000 years and they will always be there. They do what they do. Sometimes they go to far. To blame all societies ills on these guys alone is in my opinion an incomplete view.

The Financial Crisis snowball started on top of capital hill and had already gained significant size before the sharks got involved.


</span>

cushioncrawler
02-02-2011, 02:45 PM
Chops -- Exaktly. Shark versus Shark iz ok. And outsmarting iz the game.
But any crooks shood go to jail.
mac.