Thursday, December 24, 2009

Rigged betting parlor

Goldman Sachs is coming under increasingly close scrutiny for having created billions in CDOs (collateralized debt obligations) to sell to their clients and then betting against them with derivatives. Incredibly this is probably legal unless it can be shown that they systematically picked the debts most likely to fail to sell to their clients. Your pension fund lost billions buying these worthless pieces of paper but the chances of you ever seeing any of your money are slim at best.

Not only did Goldman make billions from this scheme but certain hedge funds that apparently knew what was happening also bet heavily against these worthless debt bombs and made billions as well. In fact Goldman and the few hedge funds were the only people allowed to place bets against the debt funds that Goldman itself was selling. Goldman is using as a defense that investors did know that Goldman itself was betting against its own investment funds but they chose to keep buying into Goldman’s ponzi scheme anyway since it continued to go up in value.

But the investment banks were also advertising the historical record of low default rates of consumer debt when they sold CDOs even though they knew the historical data was really ancient history from a day when what they were doing to the real-estate and mortgage markets was illegal. They knew it would blow up and they structured ever more complex derivatives to harvest as much money as possible from the system when it did.

So far this collapse has cost 14 trillion Dollars although much of this money is just paper printed by the Federal Reserve to keep the banks worldwide from going under. The theft has really been going on for forty years or more as the debt has piled up and the wealth of the middle class has disappeared. Americans that haven’t lost everything already don’t realize that what they do have isn’t worth much. With a dead economy real wealth disappears very quickly


Anonymous said...

It took Americans a very long time to learn of these type of schemes. Unfortunately, the lesson should have been learned back during brother Bush days and the savings and loan heist. Maybe with Americans short memories we will soon forget all that is taking place and just go on to elect another Family member into office. Or, break free and elect Dennis Kucinich.

md burton said...

its all corrupt and the larger the debt the more likely everything will at some point collapse It will happen its not rocket science numbers don't lie but the government and corporations do

Fake_William_Shatner said...

How the heck can this stuff be regulated -- when the REGULATORS themselves, end up going to work for these companies in 3 years for huge consulting fees?

Then we get Paulson from the same industry that he helped scheme through every bank default and Government bailout in the past 3 decades.

If we could just have a firing squad for this sort of treason... not just the occasional show trial once a year from the Crooks who happen to steal from the wrong people.

And why is it all the huge scandals are the few Women or Black investor class? I mean, when I think of people betting on dog fights -- I picture some Red Neck -- not Michael Vick.

Here is a good clip to back up your 14 Trillion figure -- which likely came from Naomi Prins research;

>> Interesting that all the REALLY big stories are at 4 am, and the content at Prime Time looks like filler. Local TV should have some hard-hittine expose of the Mechanic who rips you off, or the controversy over a strip club. "When News Breaks, We On Break!"