s skippy the bush kangaroo: weapons of mass financial destruction

skippy the bush kangaroo



Monday, September 29, 2008

weapons of mass financial destruction

credit default swaps. haven't heard of them, bueller? bueller? let ben stein explain, a little, since your bank lost it's money, perhaps you can "win ben steins". (or at least pick his brain.)

....the crisis occurred (to greatly oversimplify) because the financial system allowed entities to place bets on whether or not those mortgages would ever be paid. you didn't have to own a mortgage to make the bets. these bets, called credit default swaps, are complex. but in a nutshell, they allow someone to profit immensely - staggeringly - if large numbers of subprime mortgages are not paid off and go into default.

the profit can be wildly out of proportion to the real amount of defaults, because speculators can push down the price of instruments tied to the subprime mortgages far beyond what the real rates of loss have been. as i said, the profits here can be beyond imagining. (in fact, they can be so large that one might well wonder if the whole subprime fiasco was not set up just to allow speculators to profit wildly on its collapse...)

these credit default wwaps have been written (as insurance is written) as private contracts. there is nil government regulation of them. who writes these policies? banks. investment banks. insurance companies. they now owe the buyers of these credit default wwaps on junk mortgage debt trillions of dollars. it is this liability that is the bottomless pit of liability for the financial institutions of america.- ben stein at finance.yahoo.

betting on america defaulting. wow. how "patriotic" is that? i say follow the money. who is making oodles off of america's destruction? then concentrate on creating a bill that works from bottom up...not top pisses down variety.

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posted by SantaBarbarian at 8:30 PM |

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