Archive for the ‘Corruption’ Category
High Risk Investment That Brought Down The U.S. Economy Returns, With A New Name
Tuesday, February 10th, 2015When a restaurant fails a health code inspection, sometimes the easiest thing to do is to close up shop, let people forget what happened, then slap a new sign on the door and reopen under a new name. That’s essentially what the world’s biggest banks are doing with a complex, high-risk investment product that helped destroy the global economy less than eight years ago.
Goodbye, “collateralized debt obligations.” Hello, “bespoke tranche opportunities.” Banks including Goldman Sachs are marketing that newfangled product, according to Bloomberg, and total sales of “bespoke tranche opportunities” leaped from under $5 billion in 2013 to $20 billion last year.
Like other derivatives, these “BTOs” allow investors to place wagers on the outcome of various loans, bonds, and securities in which they are not directly invested. Hedge funds and other sophisticated financial industry actors use derivatives both as a form of insurance to manage the total risk they are exposed to across their whole investment portfolio, and to gamble on real-world economic events such as mortgage payments, municipal bonds, and the price of physical commodities. The resulting web of complicated contracts can be very difficult to untangle, and can involve impossible-sounding amounts of money. The Financial Crisis Inquiry Commission concluded that derivatives “were at the center of the storm” and “amplified the losses from the collapse of the housing bubble by allowing multiple bets on the same securities.” In 2010, the total on-paper value of every derivative contract worldwide was $1.4 quadrillion, or 23 times the total economic output of the entire planet.
Collateralized debt obligations (CDOs) are a form of derivative that breaks one pool of financial assets — either direct loans or securities that are based on groups of loans — into multiple layers of riskiness. Those layers care called tranches, and investors who buy the least-risky tranche of the derivative will get paid before those who buy the second tranche, and so on. Banks selling traditional CDOs had to create these multiple risk tranches based on a given set of loans or securities, and then hope that someone would buy each of them.
The new “bespoke” version of the idea flips that business dynamic around. An investor tells a bank what specific mixture of derivatives bets it wants to make, and the bank builds a customized product with just one tranche that meets the investor’s needs. Like a bespoke suit, the products are tailored to fit precisely, and only one copy is ever produced. The new products are a symptom of the larger phenomenon of banks taking complex risks in pursuit of higher investment returns, Americans for Financial Reform’s Marcus Stanley said in an email, and BTOs “could be automatically exempt” from some Dodd-Frank rules.
This is not the first time that large banks have tried to reboot the CDO machine since the financial crisis made those products a much-reviled household name. In early 2013, JP Morgan Chase and Morgan Stanley tried and failed to find buyers for a new set of CDOs. The nature of that failure helps illuminate the rationale behind the new version of the product. Finding buyers for the various different layers of risk was “like trying to line up boxcars,” one investor told the Financial Times after the 2013 reboot effort fizzled. Many of the firms that used to buy such products prior to the crisis “no longer exist, and those that survive have very bad memories” of the experience, another analyst said.
Since then, those same old characters seem to have found a way to get back into the business. In addition to Goldman, which narrowly avoided criminal chargesafter a Senate investigation revealed its shady pre-crisis mortgage dealings, sellers of “bespoke tranche obligations” now include Citigroup and the french banking giant BNP Paribas. BNP’s recent notoriety doesn’t relate to the financial crisis, but rather to the bank’s violation of various U.S. sanctions against Iran, Cuba, and Sudan. And while Citigroup’s past leadership now says financial deregulation was a mistake and that megabanks like Citi should be broken up to protect the economy, its current leadership is chipping away at key Dodd-Frank reforms. Citi was also heavily involved in the “robosigning” scandal that lead to hundreds of thousands or even millions of unjust foreclosures.
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Just a trio of stories from the passing river
Wednesday, November 12th, 2014– So, here are three stories that I’ve gleaned from the river of passing news just today.
– For all of you who think things are just fine, you should pull yourself up out of whatever obsessive thing it is you are doing and smell the coffee. The smell has changed, my friends, and its got a serious stink to it.
– Story # 1 is about a man named Richard Berman who lobbies for the Oil Industry.
Secret oil industry strategies inadvertently revealed
– small point to glean here: these folks do not care if they ruin the world. They are unabashedly out to confuse and manipulate you so they can massively profit from oil sales in the near term. And they do not care about you or the long term.
– Story # 2 is about something called Asset Forfeiture.
Police Use Department Wish List When Deciding Which Assets to Seize
– small point to glean here: you do not have to be found guilty for them to seize your assets. And, if you are found innocent later, it will still cost you a bundle to get your stuff back – if you ever do.
– Story # 3 is about a woman named Alayne Fleischmann.
Alayne Fleischmann exposes JPMorgan’s “massive criminal securities fraud”
– small point to glean here: these folks committed bigger crimes than most of us can even conceive of. And none of them – none – have gone to jail for it.
– You should read all three stories and reflect that there’s more and more of this stuff going on around you all the time. And that at some point, it is going to get rude enough and personal enough that it is going to intrude into your little world.
– The rich are out to take what you have. And the police, whom you might think should be protecting you, are out to take what you have as well, if they can.
– You’re just like a little mouse down in a safe corner and the only reason you are still safe is because the dogs from hell haven’t discovered you yet
– If I dipped my foot in the river again, I’m sure I could come up with another three stories, or 10 or 20. The water’s running deep and fast out there in the river of news and information but you really need to turn away from your TV screen to see it because they damn sure are not going to put the real news on your screen to warn you. That screen is there to sedate you.
– That there are big and growing problems in your world is not going to be a recognition you are going to want to have late in the game. Earlier is always better when you want to reposition yourself out of harm’s way.
– U.S. friends – don’t think any of this is real, that it won’t entangle you and yours or that it won’t actually amount to anything?
– No problem. At least you won’t be getting in anyone else’s way when they have woken up and are bailing out.
– dennis
America Is Declining at the Same Warp Speed That’s Minting Billionaires and Destroying the Middle Class
Tuesday, May 20th, 2014Not a single U.S. city ranks among the world’s most livable cities
“The game is rigged,” writes Senator Elizabeth Warren in her new book A Fighting Chance. It’s rigged because the rich and their lobbyists have rigged the rules of the game to their favor. The rules are reflected in a tax code and bankruptcy laws that have seen the greatest transfer of wealth from the middle class to the rich in U.S. history.
The result?
America has the most billionaires in the world, but not a single U.S. city ranks among the world’s most livable cities. Not a single U.S. airport is among the top 100 airports in the world. Our bridges, roads and rails are falling apart, and our middle class is being gutted out thanks to three decades of stagnant wages, while the top 1 percent enjoys 95 percent of all economic gains.
A rigged tax code and a bloated military budget are starving the federal and state governments of the revenue it needs to invest in infrastructure, which means today America looks increasingly like a Third World nation, and now new data shows America’s intellectual resources are also in decline.
For the past three decades, the Republican Party has waged a dangerous assault on the very idea of public education. Tax cuts for the rich have been balanced with spending cuts to education. During the New Deal era of the 1940s to 1970s, public schools were the great leveler of America. They were our great achievement. It was universal education for all, but today it’s education for those fortunate enough to be born into wealthy families or live in wealthy school districts. The right’s strategy of defunding public education leaves parents with the option of sending their kids to a for-profit school or a theological school that teaches kids our ancestors kept dinosaurs as pets.
“What kind of future society the defectors from the public school rolls envision I cannot say. However, having spent some time in the Democratic Republic of Congo—a war-torn hellhole with one of those much coveted limited central governments, and, not coincidentally, a country in which fewer than half the school-age population goes to public school—I can say with certainty that I don’t want to live there,” writes Chuck Thompson in Better off Without Em.
Comparisons with the Democratic Republic of Congo are not that far-fetched given the results of a recent report by Organization for Economic Co-operation and Development (OECD), which is the first comprehensive survey of the skills adults need to work in today’s world, in literacy, numeracy and technology proficiency. The results are terrifying. According to the report, 36 million American adults have low skills.
It gets worse. In two of the three categories tested, numeracy and technological proficiency, young Americans who are on the cusp of entering the workforce—ages 16 to 24—rank dead last, and is third from the bottom in numeracy for 16- to 65-year-olds.
The United States has a wide gap between its best performers and its worst performers. And it had the widest gap in scores between people with rich, educated parents and poor, undereducated parents, which is exactly what Third World countries look like, i.e. a highly educated super class at the top and a highly undereducated underclass at the bottom, with very little in the middle.
The report shows a relationship between inequalities in skills and inequality in income. “How literacy skills are distributed across a population also has significant implications on how economic and social outcomes are distributed within the society. If large proportions of adults have low reading and numeracy skills, introducing and disseminating productivity-improving technologies and work-organization practices can be hampered; that, in turn, will stall improvements in living standards,” write the authors of the report.
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