Who cooked the World's Economy?
This scheme that smacks of securities fraud facilitated the dreams of buyers called "counterparties" willing to ante up. Hedge fund offices sprouted in Kensington and Mayfair like mushrooms after a summer shower. Revenue from premiums for derivatives at AIGFP rose from $737 million in 1999 to $3.26 billion in 2005. Cassano reportedly hectored ever-willing counterparties to "play the power game"—in other words, gobble up all the credit derivatives backing CDOs that they could grab. As the bundled adjustable-rate mortgages ballooned, stretched home buyers defaulted, and the exciting power game became about as risky as blasting sitting ducks with a Glock.In mid-September, when it was on the ropes, AIG received an astonishing $85 billion emergency line of credit from the Fed. Soon, that was supplemented by another $67 billion. Much of that money, to use the government's euphemism, has already been "drawn down." Shamefully, neither Washington nor AIG will explain where the billions went. But the answer is increasingly clear: It went to counterparties who bought derivatives from Cassano's shop in London.
Imagine if a ring of cashiers at a local bank made thousands of bad loans, aware that they could break the bank. They would be prosecuted for fraud and racketeering under the anti-gangster RICO Act. If their counterparties—the debtors—were in on the scam and understood that they didn't have to pay off the loans, they could be charged, too. In fact, this scenario played out at subprime-pushing outlets of a host of banks, including Washington Mutual (acquired last year by JP Morgan Chase, which itself received a $25 billion bailout); IndyMac (which was seized by FDIC regulators); and Lehman Brothers (which went belly-up). About 150 prosecutions of this type of fraud are going forward.
The top of the swamp's food chain, where the muck was derivatives rather than mortgages, must also be scrutinized. Apparently, that is the case. AIGFP's Cassano has hired top white-collar litigator and former prosecutor F. Joseph Warin (profiled in the 2004 Washingtonian piece, "Who to Call When You're Under Investigation!"). Neither Cassano nor his attorney responded to interview requests.
Hedge Funds Could Get a Pass on New Executive Pay Rules
How the Crash Will Reshape America:
The crash of 2008 continues to reverberate loudly nationwide—destroying jobs, bankrupting businesses, and displacing homeowners. But already, it has damaged some places much more severely than others. On the other side of the crisis, America’s economic landscape will look very different than it does today. What fate will the coming years hold for New York, Charlotte, Detroit, Las Vegas? Will the suburbs be ineffably changed? Which cities and regions can come back strong? And which will never come back at all?
Soros sees no bottom for world collapse.
Banks can't afford to pay out the insurance policies (CDS) that were taken betting on the real estate market crashing. When most companies and people can't pay up, they go bankrupt and the people owed money to get pennies on the dollar.
Soros Says Financial Crisis Marks End of a Free-Market Model
Soros knows a thing or two about currency games.
Can talking about a depression lead to a worse depression?
Yes, we need to save money, but if no one spends any, the economy freezes.
Iran: The friendliest people in the world.
Iran's nuclear program is not weapons-capable.
Your Job
I voted for Obama and I like still like the guy. That doesn't change the fact however that his administration is wrong and even corrupt when it comes to this banking crisis. It began in the Bush administration. I like what Obama SAYS about cleaning it up, but so far the actions have not matched the rhetoric. I'm not going to pile on Obama because that simply leads to the same-old democrat versus republican swings we get which get us nowhere. We need real change and if we don't determine as a society what that change is, we will be handed the change on the dollar from a plan derived by, for the most part, the same group of people that robbed and crashed us. The world economy was trashed for profit and the criminals who did this are not being pursued as criminals -- they've been pursued as administration allies in the Treasury Department, the SEC, etc. We cannot afford this level of corruption. The banks don't need more money. More of them need to fail and default on their payments. The taxpayer can help pay the debts, but pennies on the dollar. Derivatives need to be regulated ASAP. There is no talk of any of this. There's simply been a mad rush to get the money out the door.
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these problems have existed for the past few years, yet people are blaming Obama since he can't fix them in his first month in office..give me a break..where was the outpour before??
ReplyDeleteObama deserves a bit of blame for appointing people who are continuing to throw more money at the banks than they are worth and for not pushing an agenda of regulations or letting the banks fail. Certainly he's not wholly responsible, but the actions of his administration, like the actions of the one before him, are not approaching the bank robbery appropriately in my opinion.
ReplyDeleteI agree on his appointments in this area-financial
ReplyDelete