When the smartest person in the room designed a credit default swap, they forgot to ask a single thing. Credit default swaps (CDS) are a form of derivatives that are used to hedge credit exposures. They are sold for "default" as "insurance" and are used by banks instead of proper capitalization. However, CDS is not an ordinary insurance. The insurance company is regulated by the government to check the reserve requirement, the statutory limit, and the periodic check of books by the examiner to cover potential claims. The CDS is a private bet and the Federal Reserve system from the era of Alan Greenspan is guaranteed that regulators are letting go. The atheist free market probably regulates itself. The problem with this approach is that regulation is just a rule. In the absence of rules, players can do cheating. Gamblers addiction deceives what they have. In December 2007, the Bank of International Settlements reported a derivative transaction at $ 681 trillion combined with ten times the gross domestic product (GDP) of all the countries of the world. It is clearly false about the amount of someone brought to the game and its realization is done for a very uneasy market.
Following CDO (secured debt, SIV (structured investment vehicle), other unclear financial acronyms) last year, CDS has been called "Derivative du jour", but the basic idea That means you can guarantee that you will invest. Self decreases so that the asset covers everywhere it moves. Credit default swap is the most widely traded form. In default swaps of credit derivatives, "protection buyers" earn great rewards in the event of a default in a certain period of time, "protection sellers "Recovers periodic payments assuming risk of default. In a blogger example, hedge funds want to increase their profits, but they only earn a premium of 320,000 dollars a year by simply selling 'protection' "to dangerous BBB junk bonds insurance The fee is "free" grant money until the bond is actually defaulted when there is a possibility that the hedge fund may spend $ 100 million on insurance claims. Also, what if a hedge fund does not have funds? The corporate shell or limited partnership goes bankrupt, but it strictly supports the creditors.
Derivatives 'insurance' looks like insurance fraud. The fact was particularly strong, especially as a result of a rating downgrade of "monoline" bond insurance companies and the recent collapse of Bear Stearns. Monoline insurers are the largest reporters of CDS and Bear Stearns, the leading Wall Street investment broker, was the 12th largest counterparty in credit default swap transactions in 2006. All of these players make large credit line default swaps, and when "protection" is done, the fragile debtor will be attached to it entirely. But the imminent and unavoidable collapse of the derived monster must not be the cause of despair. Derivative transactions are $ 681 trillion, the last super-large bubble of the 300-year pyramid scheme, and now occupy the entire financial system. The wealth of the state leaked to the private safe, and the disaster is rare. It is a corrupt system, and the change is delayed for a long time. Something can replace it better only when an old leaked ship has fallen. A major crisis is a great opportunity for change.
"Derivatized Chernoville"
At the weekend of St. George Patrick & Day Bear Stearns Shakeup brought a direct hit from Derivative Iceberg to Titanic Bank. Bear Stearns promoted the explosive growth of credit derivatives markets where investors such as banks, hedge funds and the like are wagering $ 45 trillion worth of corporate and national creditworthiness. In 2006, Bear was the 12th counterparty of credit default swap transactions. On March 14, the rating of Bear & # 39; s was downgraded by Moody & # 39; s. Bear was bought by JP Morgan for 1 dollar penny on March 16. This was designed to avoid legal merger of bankruptcy. This transaction was backed by the $ 29 billion credit facility of the Federal Reserve Board. As one headline told it, the "bear suspension of federal relief derivatives" Chernobyl "bear received a $ 13.3 trillion report on derivative transactions. [cite] But the news that Bear was "rescued" or the news that Chernobyl was interrupted by the Fed's remedy have been quite misleading. The CEOs were able to relieve a staggering bonus, but were "remedies" for JPM and Bear's creditors. For shareholders, it was a wipeout. Their stocks initially fell from $ 156 per share to $ 2, 30% of which were held by employees. Another big chunk of it was held by pension funds of teachers and other civil servants. The stock price was later raised to ten dollars in response to the rage of shareholders, but the shareholders were still missing out. And I feel confident the fact that we have to give Wall Street banks to Lions to rescue others. Neutron bombs are not so easily included.
Bear Stearns hit on January iceberg since the world market fell at its worst since September 11, 2001. The commentators were asking if this was a "big thing", that is, the collapse of the 1929 type. Whether skillful market operations quickly covered catastrophic events approaching. This plunge was due to the threat of rating downgrades of Mongolian major insurance companies Ambac and MBIA and a loss of $ 7.2 billion from derivatives transactions by Societe Generale, the second largest bank in France. "Monoline" is so-called "monoline" because it is permitted to "guarantee" the so-called bond industry. Like Bear Stearns, they work as a division of the credit default swap website, and rating downgrades endanger the entire volatile derivatives.
The January collapse in the international market occurred at Martin Luther King Day where the US market was closed. In other words, there was no US Federal Reserve Board (FRB), there was no CNBC business channel, and there were no plunge protection teams to conduct disaster relief activities. The team clearly went to work the day after the market suddenly turned the course. But curtains were thrown long enough to see what the future would be like. The plunge protection team is a team of experts assembled with presidential decree, especially to manipulate the market. Formally called the President's working group on financial markets, President, Treasury Secretary, Federal Reserve Chairman, Securities and Exchange Commission Chairperson, Commodity Futures Trading Commission Chairperson. If there was a question as to whether or not such a team would actually act in such a situation, it was rejected by Senator Hillary Clinton's statement issued by the State Council on 22nd January 2008.
"I think it is essential to take the next step." The President should already and should do so, and the working group on the president's financial market must be convened. This has to be coordinated between the regulators here and obviously regulators and central banks around the world. "
The market was reversed with rumors of a $ 15 billion remedy measure of monetary insurers wagered by banks with the biggest losses in case of bankruptcy. However, remedial measures will not be established the following month. Even if it was there, obviously $ 15 billion was owed for relieving the monoline. Insurance companies with medical conditions may need as much as $ 200 billion to maintain a viable state, analysts said. Also, if you lose the highest credit rating, investors warned that investors face huge write-downs on the valuation of securities guaranteed by insurers. The insurance company "guarantees" the securities using credit default swaps, thinking that they do not actually need to pay. Local bonds rarely default, so it was effective for the local bonds traditionally promised. A monoline mistake was branching into a securitized mortgage debt. When the housing market changed, the default was all cascading.
On February 22, 2008, after a bad week in the US market, rumors of relief measures suddenly caused stock market reversal. But again rumors are suspicious. Bill Murphy wrote "Midas". "My guess is that I am trying to do something to avoid the abyss while watching the potential possibilities of Asia on Sunday night.The submission date of the remedy has passed and it was not announced and the final In fact, when the resolution was announced, Ambac only raised 1.5 million US dollars in capital by issuing shares, but the PPT had to work to create the illusory necessary to restore "market confidence" I had gone. Especially since the Federal Reserve needs to justify the veneer of "Triple A" now, I have not heard anything about monoline downgrades. I took the debt of subprime loan as collateral for Bear Stearns' deal.
Institutional investors have lost a lot of money in all of this, but the real disaster is in the bank. Institutional investors who purchased mortgage bonds stopped buying in 2007 when the housing market fell. However, it costs billions of dollars for large investors who had sold it. It is worth remaining in their books, and these banks will particularly lose if Chernobyl collapses. Without a monoline insurer, Triple A securities will return to the junk bonds by a multi-billion dollar equivalent of triple A investment. Because many institutional investors have a credibility obligation to invest in "safest" Triple A corporate bonds, banks whose downgraded bonds are dumped in the market and still retain billions of dollars in value are To endanger. Ambac's downgrade in January means a simultaneous downgrade of bonds from more than 100,000 municipalities and institutions, totaling more than $ 500 billion.
Paradise of remedy measures
Highly leveraged banks and hedge funds had to put the cards on the table and had to expose unworthy hands, so this enthusiastic free marketer scolded to save from large loss through government intervention It is. Bluff was still good. In response to their protests, the people behind the curtains were confused to devise various remedies. However, this scheme was robust at its best. It is clearly impossible to relieve the $ 681 trillion derivative institution with taxpayers' money. As Michael Panzer observed on SeekingAlpha.com:
"While the wreck of the slow motion train in the financial system continues, there will be plenty of bankruptcy, regulatory authorities, politicians' propaganda, demolition, plans as well as unforeseen remedies and suspicious folding plans. We are trying to purchase and strive to figure out what damage is thrown over what kind of patissy (eg taxpayer)'s knee. "
The idea is to keep the violin performance while the big money boys get on the mist and get on the lifeboat. As pointed out in the blog "Jesse & CaféAmericain" on Ambac's remedial measures,
"As AMBAC was used as a" cover "for banks, it seems that these loan claims have resulted in a bad evaluation. In this way, the mortgage has failed and AMBAC can not pay, they can not cover the debt and the bank does not want to mark these CDOs [collateralized debt obligations] In the market [downgrade them to their real market value] They are probably worth up to 60 cents, but they are in balance with the banks in a balanced manner. That is to pay 40% to the debt enough to sink all the banks involved in this situation ... In fact, if you mark the market bank, for all purposes and purposes, Currently it is bankrupt. , Banks provide capital to AMBAC ... [but] It's just a game that hands money around ... Why is the bank engaged in this trade? It began to collapse and became worse. . "
Wall Street · Ponzi · Sheim
It is not another wrong investment strategy that the Ponzi plan worsened. It is in the true center of the banking industry and has been raising it during the third century. The Ponzi scheme is a type of pyramid scheme, and new investors have to be drawn to the lowest to support investors at the bottom. In this case, the new borrower must always be sucked in to support creditors. The Wall Street Ponzi Scheme is based on "partial reserve" loans that allow banks to create "credits" (or "obligations") that contain accounting items. Banks are currently permitted to lend ten to thirty times their "reserves", they inherently counterfeit the loaned funds. Thus, over 97% of the US money supply (M3) is made by banks. The problem is that the bank does not create the interest rate necessary to make the principal only and repay the principal, so the new borrower will have enough "gold" (or "credit") to respond to the old loan, In order to create a money supply. Scrambling to find a new debtor, since the creation of the Bank of England in 1694, banks all over the world have devoted themselves to debt over 300 years ago. Private money monopoly. The Ponzi project eventually reached the mathematical limit. We owe you "All."
When the bank ran out of creditworthy borrowers, we had to head to an untrustable "subprime" borrower. To avoid losses from default, they removed these risky mortgages from the book by bundling them "securities" and selling them to investors. To attract investors, these securities were "insured" by credit default swap. However, the housing bubble itself is another scheme of Ponzi, historically, no one borrower is obliged to fall in rent. When subprime borrowers cease payment, investors ceased purchasing mortgage-backed securities. The bank then left suspicious paper. Without the triple A rating, there is little chance of finding this 'junk' buyer. However, the crisis is basically not a healthy economy itself, but it can also be an appropriate credit system to pour oil into production circles. The crisis is in the banking system and can no longer conceal the shell game that you went for 3 cents with other people's money.
There is no doubt that banks are looking for the only government bailout from the only pocket than their own. If the federal government tolerates it, it may have been pulled by a huge debt cyclone of mortgage turmoil. With a tremendous 9 trillion dollar debt, the federal government 's triple A rating is already at risk. Before entering the government's bank relief agreement, appropriate interim measures should be asserted. In England, the government agreed to rescue bankruptcy mortgage bank Northern Rock, but only in exchange for bank shares. On 31 March 2008, London 's Daily Telegraph reported that FR' s strategist witnessed the nationalization that relieved Norway, Sweden and Finland from the banking crisis from 1991 to 1993. According to a Norwegian Norwegian adviser, he was able to dominate 100% of banks whose capital was below zero. "
Benjamin Franklin & Solutions
The nationalization traditionally had infamy in the United States, but its solution can actually be an attractive alternative to the US government. When diverting a bankrupted Wall Street bank to a public institution, the government can get out of the debt cyclone by undoing what we brought to us. The government will be able to tackle this problem, whereas Peter is trying to increase debt by scattering into the ocean of debt instead of robbing Paul. Congress, the public agency Its duty was delegated under the Constitution.
The most glorious bank model in our national history was established in Pennsylvania State in Benjamin Franklin early 18th century. Local governments have created "land banks" which are banks that issue land that they believe is supported by land. The provincial government created enough extra funds to cover interest that was not made with the original loans and put it into the economy with public services. The land bank was publicly owned, and the banker who adopted it was a civil servant. Interest generated by the loan was sufficient to fund the government without tax. As the newly issued funds returned to the government, the result was not inflation. The Pennsylvania banking system was a product of ingenuity and ingenuity in America, but it was a wise and viable system that could not have the opportunity to prove itself after the colonies became a state. According to Benjamin Franklin and others, restoring the power to create their own currency was ironic as colonists were the main reasons deserving independence. There are two cents of bunkers & experienced tests, which proves to be a failure. Sovereign sovereignty is the time to be taken over from the private bank's elite and returned to the Americans.
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