Do derivatives confuse you? Do you hate bond math? We feel the same way! So we simplified your life with headache free QE math. Compounded rates, equivalent rates, production functions: who needs old math?
"The government’s bailout plan destroyed capitalism. In a capitalist system, those who stood to gain–and already made off with large gains—would have to bear the risk. The bailouts represented a corruption of capitalism. Crony capitalism violates the spirit of democracy established by the Founding Fathers of the republic known as the United States." - Janet Tavakoli
All of the suffering and hardships the majority of Americans are experiencing today are directly related to the coup pulled off by the crony financial oligarchs in the fall of 2008, and all of the media and political minions that helped them do it. People realize we have become a Banana Republic and they have now lost all hope.
Global financial markets are awash in hundreds of trillions of dollars worth of derivatives. By some estimates, the total amount exceeds one quadrillion. Derivatives played a central role in the 2008 credit crisis, as they had a brutal multiplying effect on the magnitude of the carnage. As a bad asset was written down, oftentimes there were derivative contracts written against it that resulted in total losses 10x greater than the initial write-down. But what exactly are derivatives? How do they work? And have we learned to treat these "weapons of mass financial destruction" (as Warren Buffet colorfully coined them) any more carefully in the aftermath of the global financial crisis? Not really, claims Janet Tavakoli, the danger behind derivatives doesn't lie in their existence, she stresses, but when abused, derivatives can create massive damages. So at the root of the "derivatives problem" is control fraud - the rampant unchecked criminal action by influential players on Wall Street.
Do the good citizens of the Wall Street establishment broadly defined understand the risks taken by the House of Morgan?
What's $2 Billion for Ben Bernanke's Chosen Son?
Deconstructing Corzine's lawyered up rat speak.
My favorite football introductory book is an out-of-print book by Joe Namath, FOOTBALL for Young Players and Parents. You may enjoy my favorite lines as you get in the mood for the Super Bowl
A peek into the 60's manipulation and why the CFTC is a joke.
The current situation may indeed be different from that presented by Long Term Capital Management, but it may be even more alarming, not less alarming. Due to the use of structured products and derivatives, hedge funds can take on hidden leverage above and beyond that which can be explained by polling prime brokers. Furthermore, illiquid structured products will experience a classic collateral crash when hedge funds try to liquidate these assets to meet margin calls or collateral "cures". Since 2000, assets invested in hedge funds have more than tripled to around $1,500bn. While on average leverage may appear manageable, some hedge funds - Amaranth to cite a recent example - employ high degrees of leverage. A potential source of a "great unwind" arises from a trigger event affecting highly leveraged hedge funds, and another potential source is systemic risk that effects a larger cohort of hedge funds.
Janet Tavakoli shares a presentation she prepared for the Federal Housing Finance Agency Supervision Summit earlier today, in which she attempts to explain to politicians how banks made fraud into a "business model" and how the damage can be repaired. It may not be easy: as she says, MBS became a "widespread interconnected ponzi scheme" - "Securitization professionals at several financial institutions knowingly bundled fraud riddled loans into RMBS. New investors needed to pay-off old investors. To delay being busted, they escalated and sped up the fraud. This required more “complexity” and the involvement of more cronies. Many CDOs and virtually every CDO-Squared were more fraud to cover-up fraud." Of course, the same can be said about the global economy, as now everyone is aware that the global Keynesian system is nothing less than Madoff's scheme taken to the infinite degree. But nobody will ever go to jail for that. For any remaining questions on the motives, the schemes, the payoffs, and, most importantly, the players, both the protagonists and the bribed co-stars, the below presentation attempts to answer all. And, unfortunately, Ms. Tavakoli's suggestion for how to fix this, which is remarkable precisely the same one we have been espousing since our advent, will never happen as it means the end of the Ponzi and the elimination of trillions in generationally stolen middle-class wealth.
The inception of the mortgage fraud crisis has been extensively documented by pretty much all media outlets now. The question that everyone is grappling with is what happens next. Janet Tavakoli writes in with some suggestions, more at the thought experiment level, as to what the next steps in fraudclosure/fauxclosure may be.
In the following interview with the WaPo's Ezra Klein, Janet Tavakoli shares some more information on why every bank is about to shut down all foreclosures, in what she calls the "biggest fraud in the history of capital markets." Not very surprisingly, we are, so far, spot on in our 29th September projected timeline at this point: "We predict that within a week, all banks will halt every foreclosure currently in process. Within a month, all foreclosures executed within the past 2-3 years will be retried, and millions of existing home sales will be put in jeopardy."
William K. Black, a regulator during the dark days of the Savings & Loan Crisis, gave the most sensible testimony about the financial crisis heard in Washington so far.* Fraud thrives and spreads in a regulatory free, highly paid, criminogenic environment. Cheaters prosper driving honesty out of the market. It's time to bring back Black and resolute regulators like him. Our proposed "financial reform" bill is a sham, and the health of our society and our economy is at stake.
Goldman Sachs claims great risk management skills, while it shirks responsibility for its role in the near collapse of the U.S. economy. The former is a myth, and the latter is a dodge.  As taxpayer wealth was destroyed, Goldman exploited the financial crisis it helped cause, while the U.S. was (and remains) at war.
Goldman Sachs released its 2009 annual report today showing it made net revenues of $45.17 billion with net earnings of $13.39 billion. In its shareholder letter, Goldman says it repaid TARP money, but did not mention the massive new taxpayer subsidies it continues to enjoy.
"Goldman did not and does not operate or manage our risk with any expectation of outside assistance."
Yet due to the influence of highly placed Goldman Sachs former officers, Goldman received--and continues to receive--enormous assistance from taxpayers.
Views on upcoming, yet unannounced testimonies from Blankfein, Dimon et al from Janet Tavakoli, as well as the maddening inefficiency and government when it comes to all things financial. And some stern condemnations: "Credit derivatives have been criticized for information asymmetry, so why not criticize how these committees operate? I am happy to publicly state that they are rigged."