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Edmund Onward James





Joined: 04 Jun 2009
Posts: 1317
Reputation: 55
votes: 2

PostPosted: Wed Jul 22, 2009 9:45 am    Post subject: For those who care, or are affected, by the $$ crisis Reply with quote

Though I’m generally impecunious, lint in my pockets, I am curious about how the sub-prime mortgages, credit derivatives (based on quants – don’t ask me), credit default derivatives, swaps (unregulated insurance policies) broke the financial world at the core: Wall Street.

Tuesday evening I picked up Vanity Fair Magazine (whose chief editor is of the Hollywood Left) at a Chapters bookstore and read one or two articles. Of course, I return all material, which I glance through, back to the exact shelf spot. Thank you Heather Reisman C.E.O. for allowing people to read free. Occasionally, I pick up the strewn books and magazines and carry them to a store employee… or I tell the piggish customers they forgot to return what they had the privilege to read to where it belongs.

Now, back to the point of my piece. I read an article by Michael Lewis “The Man who Crashed the World”. Joe Cassano, of A.I.G. Financial Products (F.P.), who was the head of the credit default swaps –- unconstrained insurance policies for Wall Street banks and investment banks – pushed for more sub-prime mortgage loan insurance, more than their required capital. Cassano thought the majority of the houses held their value and he opened up the doors for other insurance policies. A.I.G. went from 10% to 95% sub-prime insurance investments.

Cassano is no longer with A.I.G.; he’s underground in London, England. Evidently, he didn’t know enough about the credit derivative formulae. He graduated with a major in Political Science, rather than mathematics or an MBA. Lewis indicates he was a bully with staff and perhaps he bullied his way to a high-paying responsible position.

Writer Lewis mentioned the book “Fool’s Gold” by Gillian Tett. So I picked up a hardcover copy and read the preface and epilogue. Fascinating information. Such as Wall Street insisted the house values couldn’t drop all at once. Hence, most of the packaged mortgages were solid. The new business tool works... will work… give it time. Ms. Tett’s focus is on J.P. Morgan bank and what she called “Morgan’s Mafia”.

The metaphorical Mafioso blamed the mortgage rather than their unshackled greed, excuse me, profit driven models. They were not the original developers of credit derivatives, but, they were big and powerful enough to take the mathematical formula to a higher level. Their brilliant ideas for “a new kind of financial alchemy basically helped to ignite a revolution in banking that went wildly out of control”. The banks were no longer constrained with this advanced model.

Gillian Tett called this part of the “Shadow Banking World”.

And, frankly, no one knew this would lead to a world crisis. Invincible Wall Street crashed, taking shareholders, hedge funds, investors, everyday citizens who had no clue (many blamed George Bush and the Iraq war), with them down the slippery-slope to a murky abyss.

In the preface of “Fool’s Gold” she asked, “Were the banks mad? Were they evil? Or were they simply grotesquely greedy?” I presume they were fed up the brains were going to brokers, fund management, and so forth, so they needed a way for huge bonuses for key employees and supposed profits for shareholders.

Also in her book is a statement by J.P. Morgan C.E.O. Jamie Dimon: “God knows, some really stupid things were done by American banks and investment banks… but it wasn’t just the bankers. Where were the regulators in all this?”

Indeed.

When the banks were unleashed to package the sub-prime loans through credit derivatives, mathematical gobbledegook few understand, President George W. Bush tried to establish some regulation when he found out but was a lame-duck. Therefore, TARP. Rather than pay attention to the economy he might’ve been too caught up with the Middle East jihadists. Maybe he relied on people, such as Alan Greenspan the Chairman of Federal Reserve.

Greenspan, who championed unfettered free-market competition, was shocked that banks did not protect shareholders and institutions. He was shocked? The former chairman said, “that was the flaw in the model”, the banks did not protect their clients. Uh-huh. What about the rest of society?

And Joe Cassano rides a race-type-bicycle in a posh London, England area. Maybe he’s training for a quick getaway, in case there are traffic jams when the American Senate asks him to pay them a visit.

I believe in free-market competition, however, there is something to be said about regulations. That’s why we have laws so complete anarchism is restrained. But I don’t like the fact that governments might nationalize and bureaucrats or czars rule.

Michael Lewis on A.I.G. vanityfair.com
http://www.vanityfair.com/poli...../aig200908
The Man Who Crashed the World. Almost a year after A.I.G.'s collapse, despite a tidal wave of outrage, there still has been no clear explanation of what
Posted by Edmund Onward James at 7:00 AM 0 comments
Edmund Onward James





Joined: 04 Jun 2009
Posts: 1317
Reputation: 55
votes: 2

PostPosted: Thu Jul 30, 2009 5:37 pm    Post subject: Reply with quote

So where is fiscalconservative who cares about economy? Or is it just Canadian economy and we are not affected by what happens in DC and surrounding areas?
Mac





Joined: 02 Sep 2006
Posts: 5500
Reputation: 104
votes: 35
Location: John Baird's riding...

PostPosted: Thu Jul 30, 2009 5:39 pm    Post subject: Reply with quote

Edmund Onward James wrote:
So where is fiscalconservative who cares about economy? Or is it just Canadian economy and we are not affected by what happens in DC and surrounding areas?

Please don't lower yourself with attempts to provoke conflict.

-Mac
Edmund Onward James





Joined: 04 Jun 2009
Posts: 1317
Reputation: 55
votes: 2

PostPosted: Thu Jul 30, 2009 5:43 pm    Post subject: Reply with quote

Part of my counter skill is to be provocative and evocative, one of the reasons my man Jones likes me on his Talk Radio program. However, MAC, I accept your good advice.
Forward





Joined: 04 Oct 2006
Posts: 293
Reputation: 59.2
votes: 2

PostPosted: Thu Jul 30, 2009 8:54 pm    Post subject: Reply with quote

Mac wrote:
Edmund Onward James wrote:
So where is fiscalconservative who cares about economy? Or is it just Canadian economy and we are not affected by what happens in DC and surrounding areas?

Please don't lower yourself with attempts to provoke conflict.

-Mac


Awww, :cry: come on Mac. Just a little conflict? It's fun and I promise we won't make any noise.
Mac





Joined: 02 Sep 2006
Posts: 5500
Reputation: 104
votes: 35
Location: John Baird's riding...

PostPosted: Thu Jul 30, 2009 9:16 pm    Post subject: Reply with quote

Edmund Onward James wrote:
Part of my counter skill is to be provocative and evocative, one of the reasons my man Jones likes me on his Talk Radio program. However, MAC, I accept your good advice.

Evocative is fine; even provocative occasionally but pugnacious isn't fun.

Forward wrote:
Awww, :cry: come on Mac. Just a little conflict? It's fun and I promise we won't make any noise.

Don't make promises you know you can't keep. I know you'll be up all night giggling if I don't shut it down.

-Mac
Forward





Joined: 04 Oct 2006
Posts: 293
Reputation: 59.2
votes: 2

PostPosted: Thu Jul 30, 2009 9:39 pm    Post subject: Reply with quote

ROTFLMAO :lol:
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