Posted on 02/11/2009 8:45:38 AM PST by pabianice
You have no clue how all this was set up do you...
You are blinded by ideology, “it’s the Democrats fault”. I’m scientifically trained, I can’t help but look at the evidence. Frankly they are all to blame. The Dems and GOP repealed the Bucket Shop laws in 2000 which allowed modern derivatives to emerge and go off like H bombs in our economy As the bankers invented this new/old form of gambling, they are to blame too-no one forced these jokers to leverage 60-1 and make bad (plenty of prime ones also) loans and other bad investments and bankrupt this country. I’d send them all to jail if I could.
Before you criticize another poster, perhaps you could educated yourself just a bit ( I am not a wench either). Here is a link from Fortune- a reputable source.
http://money.cnn.com/2008/09/30/magazines/fortune/varchaver_derivatives_short.fortune/index.htm
“The $55 trillion question
The financial crisis has put a spotlight on the obscure world of credit default swaps - which trade in a vast, unregulated market that most people haven’t heard of and even fewer understand. Will this be the next disaster?
By Nicholas Varchaver, senior editor and Katie Benner, writer-reporter
Last Updated: September 30, 2008: 12:28 PM ET
(Fortune Magazine) — As Congress wrestles with another bailout bill to try to contain the financial contagion, there’s a potential killer bug out there whose next movement can’t be predicted: the Credit Default Swap.
In just over a decade these privately traded derivatives contracts have ballooned from nothing into a $54.6 trillion market. CDS are the fastest-growing major type of financial derivatives. More important, they’ve played a critical role in the unfolding financial crisis. First, by ostensibly providing “insurance” on risky mortgage bonds, they encouraged and enabled reckless behavior during the housing bubble.
“If CDS had been taken out of play, companies would’ve said, ‘I can’t get this [risk] off my books,’” says Michael Greenberger, a University of Maryland law professor and former director of trading and markets at the Commodity Futures Trading Commission. “If they couldn’t keep passing the risk down the line, those guys would’ve been stopped in their tracks. The ultimate assurance for issuing all this stuff was, ‘It’s insured.’”
Second, terror at the potential for a financial Ebola virus radiating out from a failing institution and infecting dozens or hundreds of other companies - all linked to one another by CDS and other instruments - was a major reason that regulators stepped in to bail out Bear Stearns and buy out AIG (AIG, Fortune 500), whose calamitous descent itself was triggered by losses on its CDS contracts (see “Hank’s Last Stand”).
And the fear of a CDS catastrophe still haunts the markets. For starters, nobody knows how federal intervention might ripple through this chain of contracts. And meanwhile, as we’ll see, two fundamental aspects of the CDS market - that it is unregulated, and that almost nothing is disclosed publicly - may be about to change. That adds even more uncertainty to the equation.
“The big problem is that here are all these public companies - banks and corporations - and no one really knows what exposure they’ve got from the CDS contracts,” says Frank Partnoy, a law professor at the University of San Diego and former Morgan Stanley derivatives salesman who has been writing about the dangers of CDS and their ilk for a decade. “The really scary part is that we don’t have a clue.” Chris Wolf, a co-manager of Cogo Wolf, a hedge fund of funds, compares them to one of the great mysteries of astrophysics: “This has become essentially the dark matter of the financial universe.”
AT FIRST GLANCE, credit default swaps don’t look all that scary. A CDS is just a contract: The “buyer” plunks down something that resembles a premium, and the “seller” agrees to make a specific payment if a particular event, such as a bond default, occurs. Used soberly, CDS offer concrete benefits: If you’re holding bonds and you’re worried that the issuer won’t be able to pay, buying CDS should cover your loss. “CDS serve a very useful function of allowing financial markets to efficiently transfer credit risk,” argues Sunil Hirani, the CEO of Creditex, one of a handful of marketplaces that trade the contracts.
Because they’re contracts rather than securities or insurance, CDS are easy to create: Often deals are done in a one-minute phone conversation or an instant message. Many technical aspects of CDS, such as the typical five-year term, have been standardized by the International Swaps and Derivatives Association (ISDA). That only accelerates the process. You strike your deal, fill out some forms, and you’ve got yourself a $5 million - or a $100 million - contract.
And as long as someone is willing to take the other side of the proposition, a CDS can cover just about anything, making it the Wall Street equivalent of those notorious Lloyds of London policies covering Liberace’s hands and other esoterica. It has even become possible to purchase a CDS that would pay out if the U.S. government defaults. (Trust us when we say that if the government goes under, trying to collect will be the least of your worries.)
You can guess how Wall Street cowboys responded to the opportunity to make deals that (1) can be struck in a minute, (2) require little or no cash upfront, and (3) can cover anything. Yee-haw! You can almost picture Slim Pickens in Dr. Strangelove climbing onto the H-bomb before it’s released from the B-52. And indeed, the volume of CDS has exploded with nuclear force, nearly doubling every year since 2001 to reach a recent peak of $62 trillion at the end of 2007, before receding to $54.6 trillion as of June 30, according to ISDA. (excerpted)”
Here is another link...pretty good even if it was written for the village Voice
http://www.villagevoice.com/2009-01-28/news/what-cooked-the-world-s-economy/
Should read “Before you criticize another poster, perhaps you could educate yourself just a bit ( I am not a wench either).”
You've got no clue. Put that highly trained brain of your to work and stop showing how ignorant you are.
Did you read any of the links I posted? guess not. I know what Fannie and Freddie are...however, they revealed the problem...didn’t cause the problem. Do you know what a credit default swap is? Read the articles.
You obviously haven't been keeping up with current events. It was Fannie and Freddie writing loans to people who had ZERO chance of paying them back that cause the crisis. They did this at the behest of the likes of Barney Frank.
If you aren't honest enough to even admit that FACT, then you have no business expounding on this topic at all.
Yes, in fact the last that I heard, Ms. McKinney has even moved to California:
ATLANTA, Ga. — Former Georgia Rep. Cynthia McKinney has pulled up stakes and moved to California, where she is considering a Green Party run for president.
(From Some Georgians Want the Cynthia McKinney Parkway To Hit the Road.)
The Wikipedia page on Ms. McKinney states that she is now attending Berkeley.
How much are all the Fannie and Freddie loans-total amount? It’s not 1/10 of Tarp and fed bailout money...do you think AIG which got more than 100 billion dollars is involved with Fannie and Freddie? Think about it...this is a much larger problem and it has little to do with sub-prime. If you truly want to see a different picture (true in my opinion) then read the articles-if not then fine-believe as you choose. It’s a free country.
Well... I guess it’s just you, Barney, and Maxine then. Good luck... You are going to need it.
[Before you criticize another poster]
Where did you get I was criticizing another poster? Would you please explain why you thought that?
Thank you.
Oh, I think there are more...they just didn’t see the post.
This came after one of my posts, it it was not about me than,please accept my apologies. I’m pretty passionate about this issue as it’s quite personal-lost much money in 401K and stocks( while the CEO of the company I owned stocks in walked away with millions), and my husband will be laid off in April. This is why I spent so much time researching it. I can get a little too intense though. Have a nice evening.
‘I didn’t hear her try to explain further, maybe because she doesn’t know what the hell she’s talking about either.’
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