You have to look into the business model. If you sell options long enough you blow up. Every trader learns that. Yet hedge fund after hedge fund did this. Long term Capital management and Neiderhoffer are prime examples of a way to have great returns, suck out larger bonuses-- until you blow up. Wall street said lets do this with mortgages. 100 percent loans. Then they went no doc. Then they went 105%. Then they went exploding arm Then they went interest only Then neg am. All the while paying loan brokers 3 to 5%. These ridiculous loans kept the game going as long as possibile. They sold trillions. They new they were selling shit so they found ways to insure the shit. then when they blew up the whole fricken system they were worried that if AIG went bankrupt--- the bankruptcy court would make them give back the billions. Its called claw back. So they used their influence to have the taxpayers bail AIG. . and the bankers had the fed and uncle same spend 13 trillion dollars proping up assets and markets. Thats about 300 thousand per american. selling mortgages is just like selling options. Especially in CA and other states which have some non recourse loans. The borrowers put the shit right back to the put options sellers. But prior to the blow up the option sellers bank billions and billions in bonuses. You tell me if that was fraud or good business.
This is as good an explanation of the meltdown as I've heard anywhere. Don't forget the ratings agency whores.
It's neither. They supplied a demand. The fault lies in large part with the demand. If I can't afford a loan, I don't apply for it. You can't make it attractive to me unless in the end, with all its bells and whistles, caveats, perks, feel good American dream slogans and frivolous tchotchkes with imprinted bank logos, I can still afford it. The junk debt that you were referring to in your insightful post that I truncated for brevity's sake, went to service the sub-prime market. Now granted, the consumers in this segment are not the most financially savvy. But they knew how much they could afford or not. That the banks created (with gov't prodding, help and blessing ) and approved these loans is almost immaterial seeing as no one put a proverbial gun to the head of these consumers. Well, then alright, I concede that the smoking gun is this fantasy of the American dream of home ownership that's drummed into the heads of Americans as a fairy tale, replete with princesses and knight's in shining armor, is drummed in the heads of little girls. The closest most little girls get to that fantasy is a few hours in a wedding gown when they grow up. What's funny-sad, sad-funny, is that they many tried futility to hedge and insure against such a credit risk. Due diligence? Fail.
I agree fully with your analysis of how it went down, i also agree that goldman had their tentacles in the right place(as they always do) to create government policy which would benefit their own payout, however, who is really to blame? Is it goldman for buying these insurance policies/options, or the people who were selling them? Goldman bought a small fraction of the number of the puts (CDS/ short morgtage backed securities) that the market was selling. Who is the real culprit? Is it the people buying the uncovered puts (CDS/short mortgage backed securities) or the people selling them? The vast majority of the destruction wasnt caused by goldman buying puts, it was caused by the idiots selling them uncovered, (i.e. AIG, etc.) Gldman didnt take unrealistic risk, infact goldman made sure they were positioned well, it was all the other idiots who took on too much risk who took down the banking system. Goldman was always well positioned, as they should be, as a top notch IB firm.
For some reason I believe the following will be exempt: Oprah Tiger Woods Michael Jordan Steve Spielberg The owner of BET The owner of popeye's Puff daddy jay z ludicris David Geffen and of course the scum bag trial lawyers.
lmao. Esp Oprah, what a waste of that excess cash opening a school in zimbabwe. Throwing away good money overseas when we could buy sneakers for the kids in the hood.
So really we don't need laws against fraud because every buyer should be doing all the necessary research into every potential purchase to ensure that everything is in fact as it is being presented?
So, which is it? Not bregruding success or punishing it with an arbitrary cap on how successful one can become? Yes, there is a certain point when I've made enough money - when I decide I've made enough money and want to dedicate my time to something else. It is also none of his business.