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# The Monster That Ate Wall Street

- 2918 days ago - newsweek.com
How 'credit default swaps'--an insurance against bad loans--turned from a smart bet into a killer. Interactive Graphic: Major Players in Economic Crisis
 Blue Bunting (855) Sunday September 28, 2008, 3:59 am The crisis explained Joe goes to the track and bets \$2 on a horse. Two guys standing nearby get into a discussion and Fred says to Sam, “I’ll bet you \$5 that Joe wins his bet.” Next to them are Bill and Bob. Bill says: “I’ll bet you \$10 that Fred welshes on his bet if he loses.” Next to them is Sally. Sally says: “For \$3 I’ll guarantee to Bill that if Bob fails to pay off, I’ll make good on the bet.” Sally then goes to Mary and borrows the \$7 needed in case she has to ever pay off and promises to pay back \$8. She doesn’t expect to every have to pay since she believes Bob will always make good. So she expects to net \$2 no matter what happens to Joe. A quick calculation indicates that there is now 2+5+10+3+7 = \$27 riding on the outcome of the horse race. Question how much has been “invested” in the horse race? Wait for it: Answer: \$50,000 by the owner of the horse who is expecting to recoup his investment from the winnings of the horse and other future deals. Everyone else is gambling, not investing. So, when Hank Paulson and his golfing buddies go to the track and lose the rent money playing the ponies, we should pay up? http://www.correntewire.com/the_crisis_explained That's perfect and it’s not even an analogy - it’s exactly how derivitives and credit default swaps work, including none of the gamblers having any financial relationship to the underlying asset (the horse, or mortgages) in a lot of cases. Why is this inappropriate? Your report has been submitted to Customer Service. Thank you. There was a problem submitting your report. Please try again later.
 Blue Bunting (855) Sunday September 28, 2008, 4:22 am Mother Jones: Where Credit is Due: A Timeline of the Mortgage Crisis A field guide to the loan sharks and politicos who got us into the predatory lending mess Why is this inappropriate? Your report has been submitted to Customer Service. Thank you. There was a problem submitting your report. Please try again later.
 Blue Bunting (855) Sunday September 28, 2008, 12:59 pm ..... just read the article in Newsweek about credit default swaps, which finally someone is talking about, explaining. In essence, we're bailing out all these high rollers who played fast and free with money, not guaranteed by the government, but now guaranteed by the government. After the S & L scandal, that's when credit default swaps reared their ugly heads. We're not in this mess because people have defaulted on their mortgages, we're in this because Wall Street wants us to clean up after their party. Why is this inappropriate? Your report has been submitted to Customer Service. Thank you. There was a problem submitting your report. Please try again later.
 RAFFAELLA PACI (2) Sunday September 28, 2008, 1:34 pm Dear Blue Bunting, your comment are very interesting....do you work in the field?I am a financial advisor and am so mad and worried about what happened in Wall Street.Less than two years ago,I read an article in the biggest italian financial newspaper about how cds were dangerous..... Why is this inappropriate? Your report has been submitted to Customer Service. Thank you. There was a problem submitting your report. Please try again later.
 Blue Bunting (855) Sunday September 28, 2008, 2:07 pm Raffaela, I'm retired but family membes and friends work in the field, two especially work with CDS ... EVERYONE on this thread needs to read the following two pieces. http://www.huffingtonpost.com/leah-mcelrath-renna/is-bush-profiting-from-th_b_120205.html http://www.bloomberg.com/apps/news?pid=20601087&sid=av8fOkC1HHEc&refer=home Goldman Sachs, Hank Paulson's "former" employer and the Booosh family stand to make billions off this "bail out". Of particular interest to me is the timing of the GS purchase of Litton, a "loan servicing" firm based in (surprise, surprise) Texas. Why is this inappropriate? Your report has been submitted to Customer Service. Thank you. There was a problem submitting your report. Please try again later.
 Blue Bunting (855) Tuesday September 30, 2008, 8:36 pm Call or e-mail Senator Obama. Tell him he does not need to be sitting there trying to help prop up Bush and Cheney and the mess they've made. Tell him we know he has the smarts to slow this thing down and figure out what's the best route to take. Tell him the rich have to pay for whatever help is offered. Use the leverage we have now to insist on a moratorium on home foreclosures, to insist on a move to universal health coverage, and tell him that we the people need to be in charge of the economic decisions that affect our lives, not the barons of Wall Street. Call your Representative in Congress and your Senators. (click here to find their phone numbers). Tell them what you told Senator Obama. You have to call them now and say "NO!" If we let them do this, just imagine how hard it will be to get anything good done when President Obama is in the White House. THESE DEMOCRATS ARE ONLY AS STRONG AS THE BACKBONE WE GIVE THEM. CALL CONGRESS NOW. Why is this inappropriate? Your report has been submitted to Customer Service. Thank you. There was a problem submitting your report. Please try again later.
 Paul Puckett (46) Saturday September 26, 2009, 3:30 am Moore interviews a Lehman Bros exec about Credit Default Swaps in his new movie. Doubt he gives true capitlism a fair shake, but heard the interview excerpt from the movie and can't wait to see it. Rafaella, I'm in the field as an author and investment advisor. Very interesting climate when you're responsible for advising retail investors.... Why is this inappropriate? Your report has been submitted to Customer Service. Thank you. There was a problem submitting your report. Please try again later.

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