Posted on 11/12/2008 11:44:53 AM PST by Lorianne
http://www.portfolio.com/news-markets/national-news/portfolio/2008/11/11/The-End-of-Wall-Streets-Boom?print=true
Killed by the criminals who work on Wall Street and are STILL pocketing billions in bonuses despite wiping out tens of trillions of people’s wealth.
I’d laugh, but I’m too busy crying.
I think this link is permissible:
Keep Zero’s aunt away from it. She’ll probably want to BBQ it.
That’s when Eisman finally got it. Here he’d been making these side bets with Goldman Sachs and Deutsche Bank on the fate of the BBB tranche 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?”
Pardon the language, that is how it is printed. Read it ... and weep.
Bump.
I desire information like this - someone actually tok the time and explained the chaos and makes sense of it - how it all came together and linked it for those of us not in that world to understand...
This was posted earlier, bu deserves a repeat.
In my mind, this is one of the most profound pieces I have read criticizing Wall Street, which has historically paid out sized salaries and bonuses for little or no real economic activity. The only caveat is that his argument applies only to mortgage related credit activities; it is possible that the firms will still manage to have control over other parts of the financial sector after having created a trillion dollar catastrophe in the mortgage sphere.
It survival by the fittest. They knew that the 700 billion would not work. Just more money to line their pocket for a smooth retirement. While the worker bees died off. It only a matter of time before everyone will know the truth and all hell will break loose. I bet Homeland Security( the new communist KGB) is working to deal with this very problem now. A lot of people will died. Good Luck
Hey, the great news is that every time the market falls 4%, it’s a smaller number.
Agreed. I read all 18 pages last night and had a horrible night’s sleep.
This guy does a good job pointing fingers and explaining the mess we’re in. The house of cards must crumble and is crumbling. In the end, it’s all been smoke and mirrors.
Get out of debt and start saving. Real tough times ahead.
:)!
Hardly comforting though!
Really. This thing is starting to feel like economic colapse, and I don’t say that lightly.
Thought you may be interested.
Agreed. I’m watching it DOW set a new daily low as I type this. Down another....4% (-343 points)!
The final results of this global charade have not hit us...yet.
bump for later
What you post is exquisitely important and germane as it could be.
The Congress et al is focused on the “housing bailout” and “housing prices” and “home foreclosures”.
The fact of the matter is that if the problem was simply the face value of all those stenchy mortgages out there, the problem would have a start and an end that could be loosely quantified. But that is not the case, and that is why this problem has morphed and oozed into so many other sectors of the economy and indeed the world.
The problem is not the face value of the securitization(s) that have fictionalized the world’s financial system; it is the value of the insurance that has been written on the default of all that fictionality. Commonly called CDS = Credit Default Swaps. And I shouldn’t have to give you a more cogent example than AIG, a profitable and well run insurance company that has been turned into a black hole of unfathomable debt from the operations and activities of a 200-employee division in London. The bailout of AIG was almost entirely for the sole purpose of bailing out Goldman Sachs, the insured party on most of these default swaps. Well, at least the part that didn’t go for spa treatments (I know, that’s a satirical cheap shot)
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