Yo!
Posted on 12/25/2008 2:24:43 AM PST by dennisw
Derivatives consultant Janet Tavakoli is onto something. In a note to her clients, she says the biggest Ponzi scheme of all may be the one that brought the world financial markets to its knees. That’s the scheme that united Wall Street bankers with mortgage lenders in a bid to funnel more and more money into the market for supbrime homes loans. She says packaging of iffy home loans into securitized bonds that could be sold to insitutional investors—many of them relying on borrowed money—was a system born to fail.
“The largest Ponzi scheme in the history of capital markets is the relationship between failed mortgage lenders and investment banks that securitized the risky overpriced loans and sold these packages to other investors—a Ponzi scheme by every definition applied to Madoff,” says Tavakoli. “These and other related deeds led to the largest global credit meltdown in the history of the world.”
About a year ago, BusinessWeek made a similar point in an article about the two Bear Stearns hedge funds that collapsed in June 2007 and helped spark the credit crisis. The story focused on a novel type of collateralized debt obligation that the managers of the Bear funds used to tap funding from money-market funds. The CDOs which were widely copied on Wall Street helped fuel the market for these esoteric securities, along with the underlying housing boom.
In that article, BusinessWeek likened the new market that the Bear funds helped inspire a pyramid scheme. Or, as Tavakoli says, a Ponzi scheme.
Hallmark of Ponzi scheme is an investment vehicle that generates consistent, steady returns. This discourages investors from pulling too much money out of the fund—the event that ulimately causes a Ponzi scheme to collapse. Wealthy people showered money on Madoff because his fund generated predictable returns—rain or shine.
(Excerpt) Read more at businessweek.com ...
Largest? I disagree. The worldwide banking industry, which utilizes Fractional Reserve Banking, is the largest Ponzi.
EXACTLY!
Our automobile manufacturers make something useful
These Wall St degenerates (most are Democrats) produce nothing useful
They are not capitalists like Henry Ford was
***** Actually Wall St does serve a useful financial function when they are honest and modest. But not when they endanger America with a mountain of credit default swaps and derivatives. Lehman Brothers built CMO tranches and then vacuumed up sub prime mortgages into them. Wall St stimulated the writing of sub primes. I can just see Dick Fuld of Lehman on the phone with Angelo Mozillo demanding more sub primes and quick as possible
Yo!
Madoff scandal raises issue of Obama nominees regulating financial markets
http://www.examiner.com/x-775-Political-Issues-Examiner~y2008m12d22-Madoff-scandal-raises-issue-of-O ^ | December 22, 2008 | Judah Freed
In case you missed it earlier:
“..Maya MacGuineas, president of the Committee for a Responsible Federal Budget, is quoted in the article as saying that the “next big bubble” to affect the economy could very well be a “government debt bubble.” [long term treasuries]”
Fraudulent “Credit Crisis” Paves Way for Economic Disaster
http://www.aim.org/aim-column/fraudulent-credit-crisis-paves-way-for-economic-disaster/
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http://www.freerepublic.com/focus/news/2153626/posts?page=17#17
http://www.freerepublic.com/focus/news/2153626/posts?page=18#18
“This was not an accident; in fact Henry Paulson himself lobbied for the removal of the previous leverage limits as I have noted when he was Chairman of Goldman Sachs. “
Can you tell me what year that was? I was a Director of an IT firm that did business with Goldman Sachs. You can’t even imagine the arrogance of those people and I’m not even talking about the producers.
When I see the government in bed now with these people, it smells really bad.
And of course we don’t get to see what they are doing and who they are protecting with taxpayer money.
Hank Greenberg was on CNBC yesterday and said he wanted to know about this as well. He used a financial term that I’ve forgotten but I think his point was clear.
I think he framed it as “who are the counterparties who benefit” from the billions in taxpayer money.
And the answer underlying that question was Goldman Sachs!
No one went in to it too deeply then but you could tell it was the elephant in the room or in this case TV Studio. Those folks on CNBC are more open in journalistic discussions than anywhere I’ve seen. And they actually listen to their guests. Both are unusual in that they are not driving the discussion for political purposes.
Okay, of all days why did I bring up the odious Goldman Sachs. *()*^HKH
The defining characteristic of a Ponzi scheme is that any real investments it may make are purely window dressing, and the scheme pays out attractive-seeming "yield" by tapping into the capital. This can be sustained until the supply of newinvestorssuckers no longer is sufficient to outrun the "yield" payout.The "Social Security Trust Fund" is precisely the sort of window dressing "investment" characteristic of a Ponzi scheme; its "investments" are IOUs which the government has written to itself. You can write an IOU for a million dollars yourself - you just can't afford to let anyone else have it. And so it is with the "safe government bonds" in the SSTF. When the time comes when the cash flow of Social Security goes negative and the Social Security Administration attempts to use the bonds in the SSTF, all it will do is transfer the cash flow crunch to the Treasury, which not only doesn't have surplus in its budget but is since the Johnson Administration accustomed to counting the Social Security cash flow surplus in its "balanced" budget.
IOW, by its nature the SSTF is not an investment which can protect our grandchildren from the a crushing tax burden implied by the demographics of our nation and the silver-tongued promises of the Democrats to those who depend on Social Security. Rather, the SSTF is merely a record of "capital" which supposedly has been invested but actually has been dissipated by the government.
Except SS started with plenty of forced investors donating to the scheme. Since it was opposite of a Ponzi it was destined to fail. The only way it can last is if the government forces more people into it by bringing in illegal aliens and forcing parents to donate more for each child. And don’t think that ain’t comin’.
Merry Christmas
Your post inadvertently shows why it is so important for the commie/rats to get support from us on many of their bailout/nation bills so they can lay claim later on that everyone was involved not just them.
They are nothing but slick and politically operative.
They know what crooks they are. They just want to bring us into their web of deceit was well.
And usually we fall for it.
I am one of the last few producers in my small industry. The rest have long since gone to Japan then Korea and now China. Soon I too will have to fall suit,fall in line, or probably go under.
The US govt. through tax laws and other BS actually encourages those few of us who would dare try and make anything over here basically not to.
So when did the CRA create dervities and when did it legalize hedge funds and when did it legalize credit default swaps. Just checking your time line?? For all your wonderful information.!!!LOL The perfect conspiracy!!!
But we have about 550 trillion in dervities. It's all the fault of those CRA loans!!!!LOL!!
BINGO!!!
Most people don't know that, actually the average home loan is turned over every seven years, which makes the lenders even more money.
Whatever it is a big mess. Wonder what will happen.
Our kids and their kids will pick up the tab if the nation is still around by then.
Yes the big villain is credit default swaps cooked up by Wall St, AIG, other insurers, bankers etc. They took home billions in bonuses for doing this and making CMOs and other fantasy derivatives and put their new found wealth into TBills, gold and other solid investments
Wall St = Fantasy baseball league
There is no fix for this problem; your leverage is effectively infinite if you have no capital behind your positions. You are limited only by your testosterone level and there’s been far too much of that on Wall Street over the last decade.
This was not an accident; in fact Henry Paulson himself lobbied for the removal of the previous leverage limits as I have noted when he was Chairman of Goldman Sachs. Between that and the complete refusal to regulate anything or anyone by the SEC, OTS, OCC, The Fed or anyone else we have built what amounts to a pyramid scheme based on nothing other than debt.”
Do I ever agree with that about Paulson!
We are seeing the end of a manic era
Global Warming is also a paranoid mania and will meet more resistance during this deflation
More and more the global warming propagandists will be seen as hyperactive chatter box children
Yes these are indeed -- BON MOTS !
Not to worry it won't be...
Seems like Socialist/libs just can't do without their "change"!
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