understanding credit default swaps, complex derivatives, and why our economy sucks

[Tashtego]

no, that wasn't my point.

so you're arguing that we should continue with a completely deregulated shadow market? the one that is directly linked to the subprime mortgage blowup and the bear stearns collapse?

[SeventhSon]

no, that wasn't my point.

ok, from what little i can gather from your post (not meant as an insult), i just figured you equated "regulation" with "liberalism".

while i agree that sometimes it's an accurate stereotype, it is also a truism that irregardless of politics, corporations want as little regulation as possible because pesky little things like OSHA and not dumping radioactive wastes into public drinking water cost money. but, yes, those concerns are typically associated with tree huggers.

i think conservative values should not cause one to automatically be a cheerleader for corporate interests. it's really dragged this country into where it's at today. it amuses me that sometimes the largest cheerleading for corporate interests are from blue collar workers about to lose their job to china because in their minds:

corporate interests == conservatism == family values.

[yard dawg]

Conservative , liberal blah blahblah they are all the same.

Im sorry but alot of this crap canbe blamed on the Al Sharptons of the world. They were crying racism in loaning to blacks. The blacks wanted to be home owners too and he played the race card and these lenders lowered there standards so blacks could be home owners and to satisfy Al Sharpton.


Another thing is we dont need more govt ... WE NEED SMARTER PEOPLE. We need people to get overthemselves and make smart economic choices. These people were so stupid thinking the ARM payment wouldnt go up. Why do you need a $300000 house when you can only afford a $100000 home??? Most of these borrowers made BAD economic choices and so did the lenders. Let them eat what they made I say. The govt needs to stay out of it all!!!!!

[åron]

The NPR link is very informative.



I may not agree with your politics, but I gotta admit you're on a roll!

You might think I'm some sort of liberal, but you'd be dead wrong. I'm just tired of bullshit, but I do enjoy a good laugh.

[SeventhSon]

Im sorry but alot of this crap canbe blamed on the Al Sharptons of the world. They were crying racism in loaning to blacks. The blacks wanted to be home owners too and he played the race card and these lenders lowered there standards so blacks could be home owners and to satisfy Al Sharpton.

Nope. if you listen to the link, what happened was banks wrote loans as fast as they could write them, because they sold them to investment banks as mortgage backed securities. and the investment banks purchased them by "insuring" them with credit default swaps. it was a house of cards waiting to be blown down. since the banks could sell the loans immediately, they didn't care who qualified...black, white, yellow, red...they just wrote them as fast as possible. had nothing to do with lending practices. had everything to do with the fact that loans could be flipped easily and the risk transferred to investment banks.

because of brilliant legislation in 2001(?). these mortgage backed securities and credit default swaps have been completely unregulated.

[åron]

no, that wasn't my point.

The sarcastic quip without anything constructive is very familiar. I don't think it counts as a "point".

Take on life and its troubles, issue by issue, and make the best choice for the yourself and country. That's all I'm saying. I'm not a big fish, but I'll be damned if I sit around in silence and let my country get destroyed by evil pigs.

[åron]

...
because of brilliant legislation in 2001(?). these mortgage backed securities and credit default swaps have been completely unregulated.

Not only unregulated, but largely traded off the books, mostly unaccounted for. So the PUBLICLY TRADED firms had a gigantic portions of their business completely hidden from market scrutiny.

Fuggem all, short and tall. Whosoever thinks this is a liberal v conservative issue, IS A GODAMN IDIOT. This is a common sense issue.

[Tashtego]

Well, a liberal market would have less regulation. This case certainly looks from outside like something was exploited to the detriment of the overall economy. It is a demonstrated fact that markets that are more free generally perform better than those that are less free. The trick is finding the balance and resisting the urge to allow the gov to assume too much power. What is interesting to me at the moment is why some banks participated in this and others did not.

[SeventhSon]

Whosoever thinks this is a liberal v conservative issue, IS A GODAMN IDIOT.

The corporate overlords have truly won when their slaves defend them publicly.

Dude, if you want to see the rest of the iceberg, put "The Corporation" on your netflix queue.

[SeventhSon]

Well, a liberal market would have less regulation. This case certainly looks from outside like something was exploited to the detriment of the overall economy. It is a demonstrated fact that markets that are more free generally perform better than those that are less free. The trick is finding the balance and resisting the urge to allow the gov to assume too much power. What is interesting to me at the moment is why some banks participated in this and others did not.

The trick for free markets to work is *transparency*. Full disclosure and reporting. None of which applies to the shadow market of complex derivatives.

[Tashtego]

My point is I don't share your faith in the government.

The sarcastic quip without anything constructive is very familiar. I don't think it counts as a "point".

Take on life and its troubles, issue by issue, and make the best choice for the yourself and country. That's all I'm saying. I'm not a big fish, but I'll be damned if I sit around in silence and let my country get destroyed by evil pigs.

[Soap]

The trick for free markets to work is *transparency*. Full disclosure and reporting. None of which applies to the shadow market of complex derivatives.

In other words, they are untouchable, there aren't any existing law or laws that can create accountability or restrain or curb their investing/betting.

What the Shadow Market sounds like to me is type of, sophisticated modern day Mafia, or sophisticated modern day communism.
The Shadow Market is "BETTING" for the U.S. economy to collapse.

In conclusion, without reservation, due to the Shadow Markets activity a recession is inevitable. It will take a real recession to wake up these dead head politicians as well as the average citizen. Theres nothing we can do to stop it. There are no laws, sanctions to reprimand, fine and imprison them for conspiracy to collapse the U.S. economy.

Basically, or it seems anyways, because if one goes down they ALL (Presidents, Senators as well the investors themselves) go down and you know thats not gonna happen. So, they can do what they want freely.
As I said or it seems to be that way.

Thus, if an investigation was to happen, leadership as we know it would fall, in the sense of house hold name politicians, former Presidents, Senators, Doctors, as well as the system that allowed the Shadow Market to exist. In part, that sounds like a good thing but I'm not so sure.
We have a generation an era that doesn't understand the impact and significance of a full blown recession. Maybe a sacrifice has to be made to wake many up, and a real full blown recession would do just that.

One thing is certain, we (U.S. economy, spending, policy, trade, investing, lobbying, the system, the whole deal) cannot continue on the road we are on and not have serious major economical problems.

[dg]

I don't think they conspired to collapse the economy. I think the derivatives & other complex instruments were created as a way to spread risk & create hedges. This does mean that someone is there taking an opposite position (ie. betting that losses will happen), but that's how it works with stocks & commodities as well. The problem is that there can be huge unintended consequences like we're seeing now, with things getting amplified & collapsing banks. That's where oversight is needed. How to implement the oversight is the big question.

[Soap]

In part, this is what happens or makes things like this happen, when the government, investors, bankers and etc, tries to remove the working class out of the equation.
They want only a rich and poor society. From their view as would be obvious, such society would be easier to manage, manipulate and control. Thus easily allowing these large fly by night investors alot options and control. When the working/middle class is involved in the equation the economy balances itself out along with the right investors.

Ex.
You surely don't think the American automotive industry suffered in sales and production and large scale cut backs, because no Americans weren't interested in the vehicles, do you? Cmon, surely were not that gullible or stupid? Or are we? Let common sense lead you. Investing groups own the American automotive industry and have for awhile now.
GM, Ford, Chrysler and their suppliers as well. When talking about GM, Ford, Chrysler thats noticeable evidence on the economy.
These investors through very strategic deliberate Corporate buy outs caused the American Automotive sales to decline horrendously. These investors never put nothing back into the company. They are ruthless evil hearted insensitive people.
They buy them out and within a 2-4yr time frame the company belly ups. Why? There aren't any existing laws to stop them. If there was, who would enforce?
Our politicians? Not hardly!
They have made their money and a whole lot more and leave and shut it down on the way out and many families struggle and file bankrupt, take out loans they can't afford just to survive.
Saying the same thing or very similar to, from a portion discussed in the link provided above.
I hope you see the bigger unseen picture. You bet, the Shadow market and their derivatives if you will, dictating and calling the shots. They have been for some time. Their roots are deep, real deep.

[SeventhSon]

UBS (bank of switzerland) just lost an 80 billion dollar bet from their position in mortgage backed securities. UBS shareholders are none too pleased as UBS stock has lost 1/2 its value...

http://www.nytimes.com/2008/04/06/business/06ubs.html?pagewanted=1&_r=1