A touch of perspective: http://www.voltagecreative.com/blog/wp-content/uploads/2008/11/ bailout-pie.png
On 26-Nov-08, at 2:45 PM, Bruce Johnson wrote: > <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 -~----------~----~----~----~------~----~------~--~---
