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Banks Bundled Bad Debt, Bet Against It and Won - 12/24/2009 12:39:10 AM   
Musicmystery


Posts: 30259
Joined: 3/14/2005
Status: offline 		"While the investigations are in the early phases, authorities appear to be looking at whether securities laws or rules of fair dealing were violated by firms that created and sold these mortgage-linked debt instruments and then bet against the clients who purchased them, people briefed on the matter say.

"One focus of the inquiry is whether the firms creating the securities purposely helped to select especially risky mortgage-linked assets that would be most likely to crater, setting their clients up to lose billions of dollars if the housing market imploded.

"Some securities packaged by Goldman and Tricadia ended up being so vulnerable that they soured within months of being created.

"Goldman and other Wall Street firms maintain there is nothing improper about synthetic C.D.O.’s, saying that they typically employ many trading techniques to hedge investments and protect against losses. They add that many prudent investors often do the same. Goldman used these securities initially to offset any potential losses stemming from its positive bets on mortgage securities.

"But Goldman and other firms eventually used the C.D.O.’s to place unusually large negative bets that were not mainly for hedging purposes, and investors and industry experts say that put the firms at odds with their own clients’ interests."

Banks Bundled Bad Debt, Bet Against It and Won
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RE: Banks Bundled Bad Debt, Bet Against It and Won - 12/24/2009 9:44:24 AM   
Musicmystery


Posts: 30259
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Status: offline 		No comments?

I see this as a text book case regarding the need for regulation. Market risk is one thing. Manipulation with intent to steal is quite another.

People should be doing jail time for this crap.

(in reply to Musicmystery)
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RE: Banks Bundled Bad Debt, Bet Against It and Won - 12/24/2009 9:50:22 AM   
LadyEllen


Posts: 10931
Joined: 6/30/2006
From: Stourport-England
Status: offline 		Perhaps the lack of responses speaks of the notion that however criminal anything might be, at this level it will always go unpunished. You claim a few dollars on insurance wrongly however........

E

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In a test against the leading brand, 9 out of 10 participants couldnt tell the difference. Dumbasses.

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RE: Banks Bundled Bad Debt, Bet Against It and Won - 12/24/2009 10:01:44 AM   
EbonyWood


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Joined: 7/8/2005
Status: offline 		Maybe no comments because it's self evident MM.
 
Usual story with risk capitalism, however they twist the facts.
 
When it goes pearshaped they still win while Joe Public takes one up the date.  And then to fight it within the current framework, you fund a bunch of lawyers' retirements.
 
Needs wholesale changes, which will get branded as socialism. If it ever happens some schmuck in the future will claim that regulation restricts growth, missing the point that it's the bottom line of loss that needs to be protected, and not that the ceiling of profit needs to be limitless.

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RE: Banks Bundled Bad Debt, Bet Against It and Won - 12/24/2009 10:11:29 AM   
Musicmystery


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Status: offline 		Losses due to market conditions are part of investing. That part's fine.

Deliberately disguising assets is not, and is at least unethical if not technically illegal. It should be, but OK, caveat emptor.

But I'm sorry--designing a toxic asset to ditch to your customers while selling it short yourself to rape the same customers for the profits cannot be permitted. This isn't market loss or caveat emptor--it's not being able to trust financial institutions to sell investments in good faith, which can only ultimately result in reluctance to invest--and that's going to hurt everyone.

Investors should be at risk. That's what justifies the reward for those who do their homework (and perhaps a few who get lucky). They should also, however, be able to accurately ascertain the nature of those investments.

Clearly, that will take regulation. NOT to regulate in such an environment will itself restrict growth.



< Message edited by Musicmystery -- 12/24/2009 10:13:57 AM >

(in reply to EbonyWood)
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RE: Banks Bundled Bad Debt, Bet Against It and Won - 12/24/2009 11:07:36 AM   
InvisibleBlack


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quote:

ORIGINAL: Musicmystery

But I'm sorry--designing a toxic asset to ditch to your customers while selling it short yourself to rape the same customers for the profits cannot be permitted. This isn't market loss or caveat emptor--it's not being able to trust financial institutions to sell investments in good faith, which can only ultimately result in reluctance to invest--and that's going to hurt everyone.

Investors should be at risk. That's what justifies the reward for those who do their homework (and perhaps a few who get lucky). They should also, however, be able to accurately ascertain the nature of those investments.

Clearly, that will take regulation. NOT to regulate in such an environment will itself restrict growth.



Agreed. My issue is ... I think the last thing we need is another regulatory agency. Had the Glass-Steagall Act been left intact, well, none of these companies could have ever created these securitized investments nor could commercial banks have sold their mortgages to be turned into CDOs.

I think that trying to create regulatory agencies who will be constantly trying to keep up with investment bankers, who will be constantly creating new investment vehicles which will be, at best, poorly understood, is a recipe for an ongoing series of disasters - and this assumes that the regulatory agencies will not end up staffed by former industry insiders or vice versa.

Don't try to fix this system. Put the old system back.

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RE: Banks Bundled Bad Debt, Bet Against It and Won - 12/24/2009 11:15:42 AM   
Silence8


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Status: offline 		Why not illegalize short selling?

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RE: Banks Bundled Bad Debt, Bet Against It and Won - 12/24/2009 11:59:14 AM   
LadyEllen


Posts: 10931
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From: Stourport-England
Status: offline 		Restore the old system

Offer a million dollar (even ten million) reward for information leading to the conviction of violators. There is after all little honour amongst thieves, and presumably this holds good for fraudsters too.

E

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In a test against the leading brand, 9 out of 10 participants couldnt tell the difference. Dumbasses.

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RE: Banks Bundled Bad Debt, Bet Against It and Won - 12/24/2009 12:22:17 PM   
Musicmystery


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quote:

ORIGINAL: Silence8

Why not illegalize short selling?


Because short selling is not in and of itself a problem.

Even without it, the ability to disguise toxic assets by hiding them in a bundle remains a problem.

(in reply to Silence8)
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RE: Banks Bundled Bad Debt, Bet Against It and Won - 12/24/2009 12:25:16 PM   
pahunkboy


Posts: 33061
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From: Central Pennsylvania
Status: offline 		I agree- no more reg agencies.   They exist for the small potatos. Not Goldman Saches.

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RE: Banks Bundled Bad Debt, Bet Against It and Won - 12/24/2009 12:30:13 PM   
Musicmystery


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Status: offline 		I do, however, agree with InvisibleBlack--deregulation simply opened the door to abuse, and that regulation should be put back in place.


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RE: Banks Bundled Bad Debt, Bet Against It and Won - 12/24/2009 12:45:07 PM   
popeye1250


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From: New Hampshire
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quote:

ORIGINAL: Musicmystery

No comments?

I see this as a text book case regarding the need for regulation. Market risk is one thing. Manipulation with intent to steal is quite another.

People should be doing jail time for this crap.



Music, aren't these some of the same people who think "working people" are "overpaid" at $70k per year?

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RE: Banks Bundled Bad Debt, Bet Against It and Won - 12/24/2009 1:00:44 PM   
Musicmystery


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Status: offline 		Amazing, isn't it?

As a long time free lancer, I work my ass off for that $70k--and it goes toward retirement, home needs, health insurance, and a safety net, with nothing left for frivolous use...and that's out in a rural area, where my costs are low.

What people are going to do who are just covering their bills, I can't imagine.

(in reply to popeye1250)
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RE: Banks Bundled Bad Debt, Bet Against It and Won - 12/24/2009 1:19:42 PM   
pahunkboy


Posts: 33061
Joined: 2/26/2006
From: Central Pennsylvania
Status: offline 		each time govt goods tho- we reward the behavior by giving them even more money.   so- I say- I do not want the govnment to solve anymore problems.


PS- 70k also doesnt buy what I used to...

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RE: Banks Bundled Bad Debt, Bet Against It and Won - 12/24/2009 2:26:08 PM   
Silence8


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Joined: 11/2/2009
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quote:

ORIGINAL: Musicmystery


quote:

ORIGINAL: Silence8

Why not illegalize short selling?


Because short selling is not in and of itself a problem.

Even without it, the ability to disguise toxic assets by hiding them in a bundle remains a problem.


It just seems that if you're betting something to fail, your 'incentivized' to make it fail. In theory, I recognize that short-selling could help readjust overpriced assets, but I suspect the reality is far less pretty, and far more dubious.

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RE: Banks Bundled Bad Debt, Bet Against It and Won - 12/24/2009 2:54:27 PM   
Louve00


Posts: 1674
Joined: 2/1/2009
Status: offline 		I can't quit thinking about derivatives as I read this thread.  Here's an interesting article.  At least I found it very interesting...

http://www.marketwatch.com/story/derivatives-are-the-new-ticking-time-bomb?pagenumber=1

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For the great majority of mankind are satisfied with appearance, as though they were realities and are often more influenced by the things that seem than by those that are. - Niccolo Machiavelli

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RE: Banks Bundled Bad Debt, Bet Against It and Won - 12/24/2009 3:53:03 PM   
Musicmystery


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Joined: 3/14/2005
Status: offline
quote:

ORIGINAL: Silence8

quote:

ORIGINAL: Musicmystery

quote:

ORIGINAL: Silence8

Why not illegalize short selling?


Because short selling is not in and of itself a problem.

Even without it, the ability to disguise toxic assets by hiding them in a bundle remains a problem.


It just seems that if you're betting something to fail, your 'incentivized' to make it fail. In theory, I recognize that short-selling could help readjust overpriced assets, but I suspect the reality is far less pretty, and far more dubious.


Hence the importance of SEC regulations.

(in reply to Silence8)
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RE: Banks Bundled Bad Debt, Bet Against It and Won - 12/24/2009 5:41:36 PM   
Brain


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It's up to Obama to provide leadership and replace Tim Geitner and Ben Bernanke but I don't think he will do it because he is also corrupt. This video is informative because it explains how Wall Street controls Washington. I think Obama needs to appoint a lawyer, special prosecutor, like Patrick Fitzgerald and give him the money to investigate everybody involved with these criminal activities.

Just over a year after economic calamity brought promises of reform from Washington, has Wall Street really changed? Former International Monetary Fund chief economist Simon Johnson and US Rep. Marcy Kaptur (D-OH) report on the state of the economy.


http://www.pbs.org/moyers/journal/10092009/watch.html

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RE: Banks Bundled Bad Debt, Bet Against It and Won - 12/24/2009 8:14:29 PM   
Termyn8or


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Joined: 11/12/2005
Status: offline 		"I see this as a text book case regarding the need for regulation. Market risk is one thing. Manipulation with intent to steal is quite another.

People should be doing jail time for this crap. "

I agree, but there is a problem. People who got away with this have accomplces in Washington, and nothing has been or is likely to be done about that. Therefore getting fair and effective regulation is tantamount to putting toothpaste back in the tube.

Even before the election, getting rid of the Bush regime was so important that even if I couldn't convince someone I could easily cap my argument with the statement "We need a different bunch of thieves".

So what do we have to do to get these scumbags to operate in our best interest ? I think nothing short of a gun to their head will work. And psychologically, the guilty do not want to die. Modern day Pharises, you have to get it now because there is no afterlife, we know it but we will not tell people because it will cut into our profits. Support the mega churches to keep them thinking about rapture while we pick their pockets.

When you deal with that kind of mentality there is no changing it. The only way I can see any popsitive effect coming along is either replacement of those individuals or a very intense and full accountability system. They effectively thwart that by writing 40,000 pages of gibberish to rule whether people in Delaware are Delawarins or Delawarites. Even the people who want to act in our best interests can't keep up with it. Read the PATRIOT act for proof.

Whether figuratively or literally, the only real solution is the gun to their head.

T

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RE: Banks Bundled Bad Debt, Bet Against It and Won - 12/24/2009 8:53:07 PM   
UncleNasty


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Status: offline 		Not only did "they" bundle bad debt "they" also intentionally created bad debt in the form of mortgages that were designed to fail. The bundles failed because the individual pieces and parts in the bundles failed en masse.

To quote Silence from above, "It just seems that if you're betting something to fail, your 'incentivized' to make it fail." That is exactly what happened.

There are many layers to this fraud and connecting the dots is no small task. I know of a number of individuals working on a "big picture connection," and also a number working on separate pieces. Eventually the picture will be completely and accurately drawn but I have doubts as to holding offending and/or guilty parties accountable in any meaningful ways.

Uncle Nasty

(in reply to Termyn8or)
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