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Posted 10/28/09 09:19 AM Andrew Ward Arlington, VA | Thanks to smashysmashy for the link! |
Posted 10/28/09 09:38 AM KlonedDKlein Frisco, TX | Okay, my student loan should only be paid back for $.05 on the dollar... the amount they 'may' have had to loan. Student loans are a scam. Same as the banking industry... there is no money to loan; it is all on paper, minus the minimal amount. I would legally like to force the 'lender' to prove they had the funds to loan--which, of course, the didn't and don't. Backed by the gov... LOL. Sure, try to get a loan and backed by someone drowning in debt and see how that turns out for you.
Banking is over. Move all your money to credit unions where you know who controls your money and who is its investor--you. |
Posted 10/28/09 11:00 AM MichaelBarry Sebring, FL | Many years ago I engaged in derivative trading on the CBOE. I engaged in complex strategies in which I would sell both puts and calls on the S&P 100 simultaneously.
Here is the current problem as I see it. First of all, the banking queen Barney Frank and his henchmen in Congress came to the idea that every American should own a house (whether or not he could afford it). This was made possible by providing tax benefits to home ownership and arm twisting banks and Government Sponsored Enterprises (Fannie and Freddie e. g.) into the sub prime market so as to provide a buyer of last resort to the originators of the sub prime mortgages. After all, no one was going to originate these loans unless they were assured they could unload them. The mortgages were all cut up into little tiny pieces and then reshuffled and packaged into Collateralized debt obligations. These CDOs were rated (some say improperly as AAA) apparently on the theory that each CDO represented small pieces of many mortgages and that it was unlikely that all the mortgages would fail simultaneously. Protection was made available to the purchasers of the CDOs in the form of Credit Default Swaps. The seller of the Credit Default Swap was basically insuring the CDO so that in the event of default the purchaser of the CDO would be made whole. The seller was engaged in very much the same activity as the seller of a 'naked put.' The risk in such a sale is 100% the value of the underlying asset less the premium paid for the put. Losses in such a transaction can be substantial but can be reduced by ownership of the asset which has lost value. Persons, institutions, banks and so forth were permitted to purchase Credit Default Swaps in the absence of any exposure to the mortgage markets and without holding any CDOs. This would be roughly equivalent to allowing the purchase of insurance without insurable interest. This was an ill advised policy inasmuch as a credit default would leave the original seller of the Swap without any asset recovery at all. When the whole house of cards failed, the federal government jumped in and saved insurance companies and banks. In effect, all of these operations had operated in an atmosphere of private risk and profit, but when losses multiplied the losses were socialized. The losses involved in this entire scam should not have been socialized. AIG should have gone bankrupt, and whatever assets could be recovered should have been applied to their contractual obligations. If such a policy had eventuated in the failure of many banks, it is just too bad. In a free market one must be prepared not merely for profits, but for losses as well. As a trader I sometimes made money and sometimes lost money. Losses were never covered by the federal government. The government becoming involved as it has creates an inevitable situation when certain persons or institutions are treated more favorably than others. Some are bailed out while others allowed to perish. There is an ugly side to this which in the end is indistinguishable from organized crime. There are several ways in which this catastrophe might have been mitigated or avoided: 1) Housing in the United States should not have been subsidized. 2) Purchase of housing should never have been permitted absent a 20% downpayment 3) Mortgages should not have been cut into small pieces and repackaged into CDOs 4) Rating agencies should not have attached AAA ratings of CDOs. 5) Credit Default Swaps should not have been sold in excess of the liquidation value of the seller. 6) Credit Default Swaps should not have been sold or bought absent an insurable interest of the buyer 7) Credit Default Swaps should have had no independent market. 8) Everybody who made a bad decision should have been allowed to go bankrupt. I am not holding my breath for any of these reforms to be implemented. That's how I see it. |
Posted 10/28/09 2:27 PM Red in Blue State Watsontown, PA | MichaelBarry, I have written and read quite a bit on the circumstances you mentioned above. I think that I have come to a simpler solution and would like to hear your thoughts.
The heart of the problem (besides the fraud) is the bank holding companies. They can essentially take 0% interest money from savings accounts and play roulette with it. This is accomplished with the FDIC backing of deposits that are then funneled into other arms of the BHC including SIV's. If the BHC's were not allowed access to the FDIC backing, that would make them get investment capital at market rates and investors would (presumably) do their own DD. It would also get the taxpayer out of the equation. |
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