WALL STREET CASINO
coldr...@gmail.com
www.mantra.com/jai (Dr. Jai Maharaj) wrote:
>Forwarded message from S. Kalyanaraman
>
>Wall Street Casino
>
>April 28, 2010 EDITORIAL, NY Times
>
>Congressional Republicans have concluded that screaming foul about
>the banking bailout and blocking financial reform is a clever
>strategy for the fall elections.
>
>This approach ignores some pretty basic history: that the banks
>imploded while Republicans held Congress and the White House; that
>President George W. Bush started the rescue; that many Republicans
>voted for the bailouts; and that they stabilized a financial system
>that was perilously close to collapse.
>
>More important, it�s a distraction from the very real reasons the
>nation needs to tighten the rules governing finance. They were on
>vivid display on Tuesday in a hearing room just down the hall from
>the Senate floor where Republicans voted the day before to block
>debate on a Democratic financial reform bill.
>
>Current and former Goldman Sachs officials tried to defend their
>practice of trading incomprehensible mortgage-based investments of
>little demonstrable economic value and enormous destructive capacity.
>Instead, they underscored why much of this work should be curtailed.
>
>The Securities and Exchange Commission has accused Goldman of
>defrauding clients by selling them a complex instrument without
>telling them it was designed so another client could bet against it.
>Testifying before the Senate subcommittee on investigations, Goldman
>executives denied withholding information. They insisted there was
>nothing wrong with selling mortgage-backed products while placing
>bets against them.
>
>They called it �risk management.� Most people call it stacking the
>deck.
>
>We do not know whether Goldman broke the law, but we know this
>gambling is too dangerous. Banks like Goldman turned the financial
>system into a casino. Like gambling, the transactions mostly just
>shifted money around. Unlike gambling, they packed an enormous
>capacity for economic destruction -- hobbling banks that made bad
>bets, freezing credit and economic activity. Society -- not the
>bankers -- bore the cost.
>
>That�s why objecting to financial regulation overhaul on the grounds
>that it might allow future bailouts is such a specious argument.
>
>The bailouts, which many Republicans acknowledged were necessary at
>the time, cost taxpayers about $87 billion, or 1 percent of gross
>domestic product. The crisis cost more. Falling tax revenues,
>unemployment insurance for millions of jobless workers and a fiscal
>stimulus to stop the economy�s slide is projected to boost the
>federal debt to more than 65 percent of G.D.P. next year.
>
>Financial reform is needed to try to ensure such a crisis never
>happens again, and the bill cobbled together by Senate Democrats is
>reasonably tough. It would ban many -- unfortunately not all -- of
>the private, custom-made derivatives at the center of the financial
>meltdown and force most derivative trading onto open exchanges. Banks
>trading in custom-made products would have to build larger cushions
>of capital to protect themselves.
>
>The bill would establish a consumer protection agency to stop
>predatory lending, impose new oversight on hedge funds and make it
>possible for regulators to dismantle big banks that were deemed to
>pose an imminent risk of failure. And it would create a $50 billion
>fund, by the nation�s largest banks, to cover commitments of a
>failing institution that was being wound down.
>
>Whatever Republican campaign mailings may say, the fund was designed
>to avoid bailouts. The bill�s failing is not that it�s too weak. It�s
>that it could be stronger.
>
>http://www.nytimes.com/2010/04/28/opinion/28wed1.html?hpw
>
>April 28, 2010 10:25 AM
>
>Goldman Sachs: Bloodied, Bruised but Still Profitable
>
>Posted by Daniel Carty Leave Comment
>
>Goldman Sachs emerged bloodied and bruised from Tuesday's grueling
>day -- nearly 11 hours -- of testimony on Capitol Hill. Lawmakers
>relentlessly pushed their narrative of the firm's actions leading up
>to the financial crisis: they were gamblers, unscrupulous street
>bookies who rigged the market for their own benefit, selling "sh**ty"
>deals to clients only to bet against those same investments
>themselves.
>
>And yet.
>
>And yet Wall Street didn't bat an eye at the sight of Goldman
>executives serving as congressional whipping boys. Goldman's
>shareholders, arguably the company's true clients, saw the firm's
>stock price rise around $1 a share, good for a $549 million gain in
>market value, according to Bloomberg.
>
>CBSNews.com Special Section: Wall Street Under Fire
>
>In fact, among the 79 financial firms on the Standard & Poor's 500,
>Goldman was the only one that made gains on a day when the market as
>a whole took a hit, with the Dow Jones industrials falling 213
>points.
>
>That underscores just how wide a chasm exists between how Wall Street
>sees itself as opposed to the rest of the country.
>
>"The cultural realities of what you all do is jarring to most
>Americans," Sen. Claire McCaskill, D-Mo., told Goldman CEO Lloyd
>Blankfein at the Senate Permanent Subcommittee on Investigations
>hearing Tuesday. "This notion of selling a product that you're
>betting against is hard for people to understand."
>
>In her opening statement, McCaskill compared Goldman's behavior to
>"raw gambling."
>
>"You are the bookie, you are the house. ... you have less oversight
>than a pit boss in Las Vegas," she said.
>
>Watch CBS News Videos Online
>
>The anger was largely bipartisan, but no one exhibited it more than
>subcommittee Chairman Sen. Carl Levin, D-Mich., who repeatedly cited
>an email from a Goldman employee characterizing a security they were
>peddling as "one sh**ty deal."
>
>When Levin pressed Daniel Sparks, the former head of Goldman's
>mortgage department, about how the firm could sell securities that
>they held in such low regard, he got mostly evasive answers and delay
>tactics.
>
>Goldman's position became clearer as the day went on -- they were
>merely market makers who brought buyers and sellers together.
>Goldman's opinion of the transaction was irrelevant.
>
>"I don't think our clients care or they should care" what Goldman's
>position on a security is, Blankfein told the panel.
>
>Blankfein Uses Don't Ask, Don't Tell Defense
>
>In the end, both sides got what they wanted. Congress got the chance
>to continue the populist drumbeat for reform and beat up on people as
>unpopular as themselves. But Goldman, no matter how many public
>relations body blows they absorbed, defended its actions as nothing
>more than normal Wall Street behavior and survived to do what it does
>best -- make money.
>
>Both sides could go to sleep last night satisfied at a job well done.
>
>http://www.cbsnews.com/8301-503983_162-20003639-503983.html
>
>Revealed: Goldman Sachs 'made fortune betting against clients'
>
>Chairman of Senate's Wall Street investigations committee accuses
>beleaguered bank on website
>
>Terry Macalister
>
>The Observer, Sunday 25 April 2010
>
>The beleaguered Wall Street bank Goldman Sachs boasted that it was
>making tens of millions of dollars of profits daily by betting
>against its own clients' investments, according to internal emails
>released yesterday by a US senator.
>
>The annual report of the bank, which is currently facing fraud
>charges in the US, denied that it had generated enormous revenues by
>wagering on the US housing crisis. Yet an email apparently from chief
>executive Lloyd Blankfein to his colleagues says: "Of course we
>didn't dodge the mortgage mess. We lost money, then we made more than
>we lost because of 'shorts' [bets that the market would get even
>worse]."
>
>The damning material from the senate's permanent subcommittee on
>investigations, which is reviewing the role of Wall Street banks in
>the financial crisis, was posted on the website of its chairman,
>Senator Carl Levin. It will be used in what promises to be an
>incendiary public hearing on Tuesday when Blankfein is scheduled to
>testify in front of the subcommittee.
>
>In a statement, Goldman stood by earlier claims that it never made
>significant profits out of the housing market and said that the
>emails proved nothing.
>
>http://www.guardian.co.uk/world/2010/apr/25/goldman-sachs-senator-carl-levin
>
>End of forwarded message from S. Kalyanaraman
>
>Jai Maharaj, Jyotishi
>Om Shanti
>
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This weeks hearings:
A wilderness of big fucking noses!
cole
Speeders & Drunk Drivers are MURDERERS
>
> - Show quoted text -
Wall street is worse than a casino since a casino is at least legal.
It's more like the Mafia. Wall Street execs bribe all our
congresscrooks and literally murder anyone who defies them.
F. Kurgan Gringioni
"Speeders & Drunk Drivers are MURDERERS" <bet...@earthlink.net> wrote in
message
news:0d304a88-4d55-4b05...@s4g2000prh.googlegroups.com...
> Wall street is worse than a casino since a casino is at least legal.
The big problem is that most of what they did WAS legal.
That's why Congress needs to reregulate the deriviatives market.
Les Cargill
>
> "Speeders & Drunk Drivers are MURDERERS" <bet...@earthlink.net> wrote
> in message
> news:0d304a88-4d55-4b05...@s4g2000prh.googlegroups.com...
>
>> Wall street is worse than a casino since a casino is at least legal.
>
>
>
>
> The big problem is that most of what they did WAS legal.
>
That is actually a really good question, not a statement
per se :) Derivatives themselevs are fairly old-school;
they were invented by a member of the Chicago Board
of Trade, where offsetting futures contracts were commonplace
forever.
> That's why Congress needs to reregulate the deriviatives market.
This is much harder than it looks. I believe ( but could
easily be wrong )that derivatives are fixing to be put on
exchanges as part of the Dodd bill.
Stocks crashed when on exchanges, so it won't be perfect by
any stretch. IMO, counterparty risk works like any
model of a network failure - like blackouts in electric
power. There is only so much instrumentation you can
add, and only so much control you have once a failure mode
begins.
--
Les Cargill
F. Kurgan Gringioni
"Les Cargill" <lcarg...@comcast.net> wrote in message
news:hrcu1j$jno$1...@news.eternal-september.org...
That's not what the problem was.
In the "Commodities Futures Modernization Act", which in the 11th hour was
inserted into an omnibus spending bill by then Senator Phil Gramm in 2000,
the trading of mortagage credit default swaps was suddenly legal again. They
were not legal since 1934 since the passing of the Glass-Steagal Act.
After Gramm's little sleight of hand, the investment banks could suddenly
sell "insurance" against a mortgage default. That's not a problem, but they
were allowed to do so WITHOUT COLLATERAL. They didn't have to show that they
had assets in reserve to back up the mortage defaults in the event that they
did fail.
It was almost like a license to print money. The higher ups in those
companies made huge bonuses by selling the credit default swaps in a
positive housing market because none of the loans were defaulting. It was
pure profit. The problem came when the housing market declined, the policies
came due and there were no assets to back up the policies. The banks were so
big that the financial system would grind to a halt if they failed, so the
government was forced to step in and bail them out. In the meantime, the
people who sold those deriviatives got to keep their bonuses.
The system is incentivized in such a way that it's bound to happen again if
it's not regulated.
Les Cargill
I did not know that. Thanks! This point is
very seldom brought up. There it is, too:
http://en.wikipedia.org/wiki/Gramm�Leach�Bliley_Act
"
Contrary to Phil Gramm's claim that "GLB didn't deregulate anything"
(see Defense), the GLB Act that he co-authored explicitly exempted
security-based swap agreements (a derivative financial product based on
another security's value or performance) from regulation by the SEC by
amending the Securities Act of 1933, Section 2A, and similarly the
Securities Exchange Act of 1934, Section 3A, to read, in part:[28] [29]
1. The definition of "security" in section 2(a)(1) does not include
any security-based swap agreement (as defined in section 206B of the
Gramm-Leach-Bliley Act [15 USCS � 78c note]).
2. The Commission is prohibited from registering, or requiring,
recommending, or suggesting, the registration under this title of any
security-based swap agreement[.] ...
"
> After Gramm's little sleight of hand, the investment banks could
> suddenly sell "insurance" against a mortgage default. That's not a
> problem, but they were allowed to do so WITHOUT COLLATERAL. They didn't
> have to show that they had assets in reserve to back up the mortage
> defaults in the event that they did fail.
>
> It was almost like a license to print money.
Almost? This sounds a lot like the old pre-central-bank version
of fractional reserve banking. That *is* a license to print money,
literally when they were "bank notes."
> The higher ups in those
> companies made huge bonuses by selling the credit default swaps in a
> positive housing market because none of the loans were defaulting. It
> was pure profit. The problem came when the housing market declined, the
> policies came due and there were no assets to back up the policies. The
> banks were so big that the financial system would grind to a halt if
> they failed, so the government was forced to step in and bail them out.
> In the meantime, the people who sold those deriviatives got to keep
> their bonuses.
>
> The system is incentivized in such a way that it's bound to happen again
> if it's not regulated.
Agreed. Although slapping reserve requirements on derivatives
will probably slow the economy down, and nobody seems to
have a handle on how much. I'm beginning to think
the Fed just needs to sell insurance on the insurance, and
in a manner that will generate revenue for the government.
Obviously, that's an unsettling prospect, but it might be
the lesser of the evils. That could be considered a "leased"
version of a demand-based capital reserve requirement. If
a claim would negatively affect the counter party's rating,
then there's a feedback leg.
And thanks again - I had previously missed the tie to GLB.
--
Les Cargill
Rod Speed
> "
> Contrary to Phil Gramm's claim that "GLB didn't deregulate anything"
> (see Defense), the GLB Act that he co-authored explicitly exempted
> security-based swap agreements (a derivative financial product based
> on another security's value or performance) from regulation by the
> SEC by amending the Securities Act of 1933, Section 2A, and similarly
> the Securities Exchange Act of 1934, Section 3A, to read, in
> part:[28] [29]
> 1. The definition of "security" in section 2(a)(1) does not
> include any security-based swap agreement (as defined in section 206B
> 2. The Commission is prohibited from registering, or requiring,
> recommending, or suggesting, the registration under this title of any
> security-based swap agreement[.] ...
> "
Trouble with that line is that even if the Gramm exemption had not applied,
it would have happened outside the country, in Britain where it was allowed.
F. Kurgan Gringioni
"Rod Speed" <rod.sp...@gmail.com> wrote in message
news:83uiqa...@mid.individual.net...
>
> Trouble with that line is that even if the Gramm exemption had not
> applied,
> it would have happened outside the country, in Britain where it was
> allowed.
I kinda doubt it.
Selling credit default swaps in the UK on mortgages in the US?
If it were to happen that readily, why didn't it happen before Gramm's
legislative sleight of hand?
F. Kurgan Gringioni
>
> I did not know that. Thanks!
No, thank YOU.
I've had discussions on this topic before with some other people on usenet
and usually they won't even consider the information I present.
It's a complicated topic and to have any sort of reasonable discourse takes
smart and open minded individuals.
Les Cargill
>
> "Rod Speed" <rod.sp...@gmail.com> wrote in message
> news:83uiqa...@mid.individual.net...
>>
>> Trouble with that line is that even if the Gramm exemption had not
>> applied,
>> it would have happened outside the country, in Britain where it was
>> allowed.
>
>
> I kinda doubt it.
>
> Selling credit default swaps in the UK on mortgages in the US?
>
As I understand it, this absolutely happened. The story is that Lehman
sent a pallet of (electronic) money to the UK desk daily, and
the day they went under, that didn't happen.
This has been presented as a constraint on certain classes of
regulation.
I absolutely take your meaning though - how can US deregulation
cause that level of change in Britain, unless there was
parallel change in Britain? And I simply don't know.
> If it were to happen that readily, why didn't it happen before Gramm's
> legislative sleight of hand?
Good question.
--
Les Cargill
Les Cargill
>
> "Les Cargill" <lcarg...@comcast.net> wrote in message
> news:hrd47e$rur$1...@news.eternal-september.org...
>>
>> I did not know that. Thanks!
>
>
>
> No, thank YOU.
>
> I've had discussions on this topic before with some other people on
> usenet and usually they won't even consider the information I present.
>
> It's a complicated topic
Blindingly. It's a real challenge to stay out of our normal
tendency to ideology. Macroeconomics has a severe and profound
dualism right now, and that doesn't make it any easier.
I read Eugene Fama saying "I used to think I knew what a bubble
was" and despair :)
> and to have any sort of reasonable discourse
> takes smart and open minded individuals.
Oh, you're talking to somebody else then :)
--
Les Cargill
Rod Speed
> Rod Speed <rod.sp...@gmail.com> wrote
>> Trouble with that line is that even if the Gramm exemption had not applied,
>> it would have happened outside the country, in Britain where it was allowed.
> I kinda doubt it.
It happened with other stuff that the SEC did not allow.
> Selling credit default swaps in the UK on mortgages in the US?
Yep, just like CDOs on mortgages in the US were sold all over the entire world.
> If it were to happen that readily, why didn't it happen before Gramm's legislative sleight of hand?
Essentially because that sort of thing never got up a head of steam.
Rod Speed
>>> Trouble with that line is that even if the Gramm exemption had not applied,
>>> it would have happened outside the country, in Britain where it was allowed.
>> I kinda doubt it.
>> Selling credit default swaps in the UK on mortgages in the US?
> As I understand it, this absolutely happened. The story is that Lehman sent a pallet of (electronic) money to the UK
> desk daily,
Precisely, and that was done because those transactions werent allowed in the US.
> and the day they went under, that didn't happen.
> This has been presented as a constraint on certain classes of regulation.
And that is precisely what it is, and why Brown has been going on about
joint action on increased regulation right across all the economys that matter.
> I absolutely take your meaning though - how can US deregulation cause that level of change in Britain, unless there
> was parallel change in Britain?
Didnt need to, there was no equivalent of Glass-Steagal
in Britain that needed any parallel change there.
> And I simply don't know.
>> If it were to happen that readily, why didn't it happen before Gramm's legislative sleight of hand?
> Good question.
It wasnt the fashion before that. Even in Britain where it was always legal.
Billy
Nice concise explanation. Thank you.
--
- Billy
"Fascism should more properly be called corporatism because it is the
merger of state and corporate power." - Benito Mussolini.
http://www.youtube.com/watch?v=Arn3lF5XSUg
http://www.thirdworldtraveler.com/Zinn/HZinn_page.html
Dave Lee
"F. Kurgan Gringioni" <kgrin...@hotmail.com> wrote in message
news:hrd1t5$g20$1...@news.eternal-september.org...
Is this really correct? CDS'es weren't regulated before GLB and weren't
regulated after GLB. All GLB did was expand the range of institutions that
could sell CDS'es (for example). The concept at the time was widely
supported and it wasn't all that controversial (Greenspan supported it as
did Clinton).
CDS'es were legal before GLB and after GLB.
God knows that there was collateral all over the place in CDS'es (required
collateral increases as the market tanked was the biggest single AIG problem
going into the bailout). Collateral was simply not regulated by the
government but was 'part of the contract' and proper levels were a decision
made by the parties involved.
dave
dave
Michael Coburn
> "F. Kurgan Gringioni" <kgrin...@hotmail.com> wrote in message
> news:hrd1t5$g20$1...@news.eternal-september.org...
>>
>> "Les Cargill" <lcarg...@comcast.net> wrote in message
>> news:hrcu1j$jno$1...@news.eternal-september.org...
>>> F. Kurgan Gringioni wrote:
>>>>
>>>> "Speeders & Drunk Drivers are MURDERERS" <bet...@earthlink.net>
>>>> wrote in message
>>>> news:0d304a88-4d55-4b05-b2dd-
e4c017...@s4g2000prh.googlegroups.com...
The "Commodity Futures Modernization Act" Is what deregulated the swaps.
> All GLB did was expand the range of institutions
> that could sell CDS'es (for example). The concept at the time was widely
> supported and it wasn't all that controversial (Greenspan supported it
> as did Clinton).
I don't care if Jesus supported it. It was a terrible mistake.
> CDS'es were legal before GLB and after GLB.
The regulation of CDS's was "repealed" by the CFMA, not the GLB. Stop
being a moron.
> God knows that there was collateral all over the place in CDS'es
> (required collateral increases as the market tanked was the biggest
> single AIG problem going into the bailout). Collateral was simply not
> regulated by the government but was 'part of the contract' and proper
> levels were a decision made by the parties involved.
>
> dave
It should be obvious that the "parties involved" were creating credit
where credit should no have existed. And this is what happens when you
combine separate entities into one entity. Prior to GLB _AND_ CFMA we
had different profit seeking companies balancing financial power one
against the other and SEC regulations concerning transparency in each
organization. The CFMA went even further, repealing the prohibition
against "single stock futures" and creating legal certainty that the CFTC
would not control CDS's. The result was a greed based rip off of the
monetary system.
--
"Senate rules don't trump the Constitution" -- http://GreaterVoice.org/60
Dave Lee
"Michael Coburn" <mik...@verizon.net> wrote in message
news:hreud...@news2.newsguy.com...
Most of the above is opinion (but not poorly formed opinion, IMHO although I
would not view derivatives as creating credit, but maybe my marginally
informed view of 'credit' is too narrow).
But I have no idea where the name calling came from. Are you claiming that
prior to GLB and CFMA (I admit to confusing them at times) that CDS's were
well-regulated? If so who were the regulating authorities and what was the
nature of those regulations and how do they compare to the proposed
regulations now being debated in the senate?
I have always been under the impression that CFMA and/or GLB resulted from
the food-fight between the SEC and the Commodities Futures folks over who
was the controlling authority - hence, the fact that these acts ultimately
'gave legal certainty where none existed before' and is the demonstration
that these finanacial devices were hardly well-regulated (I would not even
call them barely regulated, but maybe others would disagree).
Do you have additional facts that would be helpful? It would be better if
you simply shared these facts (vs. name calling) if you have them.
dave
Michael Coburn
A CDS BECOMES a "single stock future". It is a "bet" on a single stock,
say "ABC bank" becoming insolvent. Prior to CFMA there was a prohibition
against such "futures" trading. It was not the CDS that was the
problem. It was the derivative of it (a contract for the sale or
purchase of the CDS at a given price). Such derivatives are FUTURES
CONTRACTS and should have been regulated y the CFTC.
> If so who were the regulating authorities and
> what was the nature of those regulations and how do they compare to the
> proposed regulations now being debated in the senate?
The derivatives were outlawed until the CFMA. The CDS's were there all
along but the "FUTURES" contracts were not.
> I have always been under the impression that CFMA and/or GLB resulted
> from the food-fight between the SEC and the Commodities Futures folks
> over who was the controlling authority - hence, the fact that these acts
> ultimately 'gave legal certainty where none existed before' and is the
> demonstration that these finanacial devices were hardly well-regulated
> (I would not even call them barely regulated, but maybe others would
> disagree).
The FUTURES CONTRACTS on single stocks (single companies such as "Puke
Financial") were not allowed. The CFMA legalized these and prohibited
the CFTC any jurisdiction.
> Do you have additional facts that would be helpful? It would be better
> if you simply shared these facts (vs. name calling) if you have them.
I have given the "facts" as I see them in the stuff I have read:
http://en.wikipedia.org/wiki/CFMA
Rod Speed
One form of future, anyway.
> It is a "bet" on a single stock, say "ABC bank" becoming insolvent.
Nope, that the particular security wont be defaulted on, a different matter entirely.
> Prior to CFMA there was a prohibition against such "futures" trading.
Wrong, as always.
> It was not the CDS that was the problem. It was the derivative of
> it (a contract for the sale or purchase of the CDS at a given price).
Utterly mangled all over again.
> Such derivatives are FUTURES CONTRACTS
> and should have been regulated y the CFTC.
But Congress chose not to require that.
>> If so who were the regulating authorities and what was the
>> nature of those regulations and how do they compare to
>> the proposed regulations now being debated in the senate?
> The derivatives were outlawed until the CFMA.
Pig ignorant lie.
> The CDS's were there all along but the "FUTURES" contracts were not.
Another pig ignorant lie.
>> I have always been under the impression that CFMA and/or GLB resulted
>> from the food-fight between the SEC and the Commodities Futures folks
>> over who was the controlling authority - hence, the fact that these
>> acts ultimately 'gave legal certainty where none existed before' and
>> is the demonstration that these finanacial devices were hardly
>> well-regulated (I would not even call them barely regulated, but
>> maybe others would disagree).
> The FUTURES CONTRACTS on single stocks (single
> companies such as "Puke Financial") were not allowed.
Another pig ignorant lie.
> The CFMA legalized these and prohibited the CFTC any jurisdiction.
Another pig ignorant lie.
>> Do you have additional facts that would be helpful? It would be
>> better if you simply shared these facts (vs. name calling) if you
>> have them.
> I have given the "facts" as I see them in the stuff I have read:
> http://en.wikipedia.org/wiki/CFMA
It doesnt say what you just said.
Dave Lee
"Michael Coburn" <mik...@verizon.net> wrote in message
news:hrg4f...@news6.newsguy.com...
I never addressed futures contracts on CDS'es and they never came up in this
thread till now.
So I guess this means that my retirement strategy based on shorting futures
contracts on naked put options on a couple of small biotech firms won't work
anymore :-)
dave
F. Kurgan Gringioni
>
>> If it were to happen that readily, why didn't it happen before Gramm's
>> legislative sleight of hand?
>
> Good question.
I'm going to guess that before Gramm's repeal of part of the Glass Steagal
Act any entity which was large enough to engage in those transactions were
afraid to do it in the UK (even if it was legal) if it involved mortgages
based in the US.
The US Justice Department has a long, long arm. If your firm does business
in the US (any entity that size would have a US division), you don't want to
fuck with the USDoJ.
That's just a guess on my part, but IMO it is logical.
Rod Speed
> Les Cargill <lcarg...@comcast.net> wrote
>>> If it were to happen that readily, why didn't it happen before Gramm's legislative sleight of hand?
>> Good question.
> I'm going to guess that before Gramm's repeal of part of the Glass
> Steagal Act any entity which was large enough to engage in those
> transactions were afraid to do it in the UK (even if it was legal) if
> it involved mortgages based in the US.
Nope, it did happen, just not to anything like the same extent as it did later.
It was more of a fad/fashion thing than anything else.
> The US Justice Department has a long, long arm.
There was a reason it was done by the british arm of those operations.
> If your firm does business in the US (any entity that size would have a US division), you don't want to fuck with the
> USDoJ.
Try telling that to Goldman Sachs. Dont be too surprised when they just laugh in your face.
> That's just a guess on my part, but IMO it is logical.
Fraid not.
Rod Speed
>>>> If it were to happen that readily, why didn't it happen before Gramm's legislative sleight of hand?
>>> Good question.
>> I'm going to guess that before Gramm's repeal of part of the Glass
>> Steagal Act any entity which was large enough to engage in those
>> transactions were afraid to do it in the UK (even if it was legal) if
>> it involved mortgages based in the US.
> Nope, it did happen, just not to anything like the same extent as it did later.
> It was more of a fad/fashion thing than anything else.
There was also a real sense in which it was an invention thing too.
It took a while for CDOs to be invented, particularly bundling of securitized mortgages.
Then it took them getting AAA ratings that they didnt even come close to qualifying for
that allowed them to be bought by operations that had surplus money that they wanted
a decent return on, particularly when the yield on treasurys was so poor because
interest rates had been driven down in an attempt to stimulate the economy.
And then someone invented CDSs and hordes decided that they were one hell
of a way to minimise risk and the whole thing got up one hell of a head of steam.
It really didnt have a damned thing to do with the changes to the regulations that Gramm was involved in.