The real villains behing The Big Short weren't wall street traders: http://fee.org/files/doclib/houseunclesambuiltbooklet.pdf
I thought the fault came in on the tail of the failure to regulate the illegal trading and fraud. No doubt HFT has a part to play as well. As numerous pundits posit, the concept of 'market' no longer exists.
I'm not sure what illegal trading and fraud you are referring to and what regulations you were suggesting. At it's heart the fault lay with the government's housing policy, based upon the false premise that housing should be affordable for everyone and that it would secure loans in the event of any defaults, coupled with The Fed's easy money policy that injected excess credit into the market. It made it both popular and profitable to loan anyone money, regardless of their financial capacity to repay the loan.
The fraud by the mortgage writers - the NINJA loans etc. The illegality of creating the CDOs etc. Tracing it back before then, it was the drug cartels withdrawing funds from Wachovia because Wachovia turned over for the Feds on a laundering matter, and so they were hit by the drug cartels emptying their accounts, which in turn became the first of the dominos that toppled Lehman. But in essence, the corruption of Wall Street.
You are referring to the mortgage backed securities that were rated AAA by the ratings agency? I'd accept that as fraud, and the banks that sold those mortgage-backed securities were complicit so it could be argued they were behaving fraudulently, but remember who was behind the two banks that issued these securities - the government. I don't really inderstand how they work but I don't see the CDOs as being illegal, just another investment strategy where you sell or buy insurance. You've lost me there about the drugs bit but you're suggesting the corruption of Wall Street played a bigger role than the policy of the Federal government and the reserve bank? You're a kind judge to let the government off the hook so easily. :lol:
The government was blind and ignorant and was taken for mugs by the Wall Street banks that told them the world as they knew it was over and they needed 700 billion to fix things (pretty paltry considering US debt just hit a trillion). Lay it at the feet of a corrupt Clinton if you wish, although he was just the final nail in the coffin. Wall Street had been lobbying for years for the 'banking reform' that allowed the Wall Street banks to no longer abide by the provisions of the Glass-Steagall Act - instituted after the Great Depression to protect the people from exactly what happened in the GFC - in essence, bad investments taking down the whole institution, and not just its investment arm. The repeal of G-SA really opened the floodgates to the corruption of the CDO scams and the legendary greed and conflicts of interest by Wall Street banks such as Goldman Sachs. Have a read of Matt Taibbi's article in Rolling Stone on the vampire squid which touches on all this and explains the mechanisms. http://www.rollingstone.com/politic...the-mega-banks-most-devious-scam-yet-20140212 and http://www.rollingstone.com/politics/news/the-great-american-bubble-machine-20100405 Incidentally, that repeal also allowed things such as the Goldman Sachs manipulation of aluminium prices by moving containers around storage yards and claiming costs and price increases on every forklift trip. The CDOs were illegal in that it was misrepresentation of what was offered. Supposedly AAA investments which were in fact nowhere near - thank the rating agencies for that collusion.
Not greed, it was the policy of government to make housing affordable for all and The Feds manipulation of the cash rate that provided the environment for this mass of speculation that led to the GFC. Greed is natural, it will always be a part of any market, it's not good, but don't blame greed for the crisis, otherwise you're going to have to blame everyone of being greedy, from the investment banks down to those who took out mortgages without any downpayment speculating that capital gain would mean they could flip that house off to someone else 6 months later for a tidy profit: https://www.washingtonpost.com/lets...ass-steagall/2012/07/27/gJQASaOAGX_story.html Edit to add: the CDOs weren't illegal. Edit to add: it was from the Washington Post so it's not entirely accuarate but it's useful Edit to add again: and you may as well quote from Marxist Weekly if you're going to cite any Rolling Stone economic commentary. :lol:
Thank you Gordon Gecko, Goldman Sachs is doing god's work, and yes Virginia, there is a Santa Claus. In other news....
When argument fails, appeal to authority :lol: Read more here: http://europe.newsweek.com/big-short-margin-call-steve-carell-brad-pitt-ryan-gosling-410603?rm=eu
The government and Fed under Greenspan provided the cesspool environment for the mal-investment in real estate and MBS to grow after the dot com bubble burst through extended low interest rates. The big banks, The SEC, credit agencies and the sheeple all played their role in the collapse. You can still buy CDS today as insurance/hedge against a bond or on their own. Commonwealth Bank CDS which is a proxy CDS for the Australian economy is trading around the 100 mark and is slowly moving upwards. e.g if I was holding either Australian government bonds or CBA corporate bonds and I thought the Australian economy and real estate market was going to tank, I could buy CDS as a hedge against my positions to mitigate possible losses on the bonds. The CBA CDS was trading around the 200 level when the GFC hit in 2008. Also The Markit iTraxx Australia Index measures the top Australian corporate CDS yields to get an overall picture of how close Australia is to defaulting on corporate debt but it covers all sectors. I don't have anything to do with CDS, but I use it as one of many indicators of financial stress in an economy for other more conventional trading
Julie you wouldn't recognise bias if it was served up to you as the main course in your Annual Socialist Front AGM and dinner. Edit to add: did you actually understand caput's post?
Yes I did but in my opinion it doesn't support the contention that government caused the GFC and not Wall Street corruption and fraud.
