<http://tinyurl.com/5s5w2b>
Excellent article about the current economic mess as told by Wall Street insiders. None of this 'blame it all on the poor folks and ACORN/CRA' stuff. It was straight-up financial fraud, mainly by the subprime lenders, the ratings agencies and the investment banks. The money quote: ( [] added by me) "That’s when Eisman finally got it. Here he’d been making these side bets [buying credit-default swaps] with Goldman Sachs and Deutsche Bank on the fate of the BBB tranche [lowest quality mortgage-backed bonds] without fully understanding why those firms were so eager to make the bets. Now he saw. There weren’t enough Americans with shitty credit taking out loans to satisfy investors’ appetite for the end product. The firms used Eisman’s bet to synthesize more of them. Here, then, was the difference between fantasy finance and fantasy football: When a fantasy player drafts Peyton Manning, he doesn’t create a second Peyton Manning to inflate the league’s stats. But when Eisman bought a credit-default swap, he enabled Deutsche Bank to create another bond identical in every respect but one to the original. The only difference was that there was no actual homebuyer or borrower. The only assets backing the bonds were the side bets Eisman and others made with firms like Goldman Sachs. Eisman, in effect, was paying to Goldman the interest on a subprime mortgage. In fact, there was no mortgage at all. “They weren’t satisfied getting lots of unqualified borrowers to borrow money to buy a house they couldn’t afford,” Eisman says. “They were creating them out of whole cloth. One hundred times over! That’s why the losses are so much greater than the loans. But that’s when I realized they needed us to keep the machine running. I was like, This is allowed?” " There's a term to describe this: "Ponzi Scheme" -- Bruce Johnson University of Arizona College of Pharmacy Information Technology Group Institutions do not have opinions, merely customs --~--~---------~--~----~------------~-------~--~----~ You received this message because you are subscribed to the Google Groups "StrataList-OT" group. To post to this group, send email to [email protected] To unsubscribe from this group, send email to [EMAIL PROTECTED] For more options, visit this group at http://groups.google.com/group/StrataList-OT?hl=en -~----------~----~----~----~------~----~------~--~---
