FRONTLINE special covered up the fraud......

[Postman]

Wed, 02/18/2009 - 18:02 — Alice X - Choms...
It is not possible to describe the entire meltdown in one hour.

Still there are several GLARING omissions and errors.

1-

As the housing bubble burst and trillions of dollars' worth of toxic mortgages began to go bad in 2007, fear spread through the massive firms that form the heart of Wall Street. By the spring of 2008, burdened by billions of dollars of bad mortgages, the investment bank Bear Stearns was the subject of rumors that it would soon fail.

The entire subprime market loss to the present is about $1 trillion. What is not stated is that the largest investment banks and insurance companies, traded heavily in Credit Default Swaps.

The program does identify Swaps, aka CDS by describing them as insurance like contracts on Mortgage Backed Securities, or the subset of CDOs, ie Collateralized Debt Obligations.

What they fail to mention and this is critical, is that the major banks et al sold MULTIPLE CDS on each mortgage backed security and that the purchaser did not need to own the security. Sometimes they sold as many as ONE HUNDRED per security.

Thus each dollar lost in a mortgage default can be multiplied by 10, 50 even 100 times.

This is an egregious omission.

In addition they fail to mention the process of replication whereby synthetic CDOs are created, are 'replicated', that is to say: made out of thin air, with the CDS as collateral.

They couldn't find enough subprime mortgages for their Credit Default Swaps which were sold on the risky mortgages, so they created them out of thin air.

This further multiplies the loss of each dollar in original mortgage default.

2-

Paulson let Lehmann Brothers go bankrupt. The program says he was not prepared to offer the same sort of backstop that he had previously with Bear Stearns. That appears to be so.

YET, the program fails to mention Merrill Lynch AT ALL which was also going bust at the same time as Lehmann Brothers.

Merrill was sold to BoA with some sort of pledge from Paulson. Within several weeks the IRS posted a note that tax code section 382 would be lifted, though only the Congress has the authority to change the law. This provided a stealth windfall for the investment banks of it was reported as $140 billion. In December BoA received a pledge of $118 billion loss backstop from Paulson.

Why did Paulson let Lehmann go into bankruptcy and not Merrill?

The program doesn't mention Merrill and it doesn't mention the section 382 change windfall for the Banks.

Paulson was the ultimate insider. They knew the accounting fraud that was to be found. They knew what would happen if Bear Stearns would have gone under. The same applied even more to Lehmann.

It was said they had been working on their 'Bailout' plan since March when Bear Stearns went down.

Yet 6 months later it was only three pages long. If they had proposed it in the spring the Congress might have held public hearings and had expert testimony.

With six weeks until the election the Congress did neither. The only conclusion that I can draw is they knew the shock of Lehmann would force the Congress to bail their buddies out.

Let us be clear, that is what is happening. The Fat Cats are being bailed out by their buddies in the Treasury and Fed at the expense of we the peons.

The bank bailout is the greatest swindle in the history of the world.

Too bad the program doesn't get to that point at all.

http://videocafe.crooksandliars.com/heather/frontline-inside-meltdown#comment-1023764

[zeemike]

1. All of those swaps and derivatives stuff makes the head spin

But I guess that is the point if you are in a film flam game.
The money is gone and no one is to blame.

[dem mba]

17. think of them as side bets

as if you and I bet money on the Superbowl. We did not invest capital in the Steelers or the Cardinals. We have no true financial stake in their wins, losses, operating profits, licensing fees, etc. However, we can win or lose quite a bit based on an event (the Superbowl) even though we are not actual stakeholders in either franchise.

Make sense?

[mistertrickster]

21. Yes, but why would it matter then if the Steelers went bankrupt? nt.

[dem mba]

36. the analogy was just too explain the concept of a derivative

of CDS (although CDS' work more like insurance). I can't really explain the financial meltdown using the NFL as an example, haha.

[zeemike]

33. Welcome to DU.

But with most gambling schemes the house always wins.

[MattBaggins]

43. Are you sure you're an MBA?

These guys were often stakeholders, or out right owners and did have interests in the wins, losses and other sundries.

[dem mba]

47. I was just tyring to explain what a derivative is

and basically, it is a side bet. That's all.

I wasn't trying to get into who owned what and what their positions were and all that.

[Lint Head]

2. The manipulation of oil prices was never mentioned.

The doubling of oil prices in one year impacted the world wide economy. Oil is an ingredient in almost every manufactured item that is not eaten. The transportation of food items does involve oil.

A simple experiment is to ask your local grocer why prices have not dropped on products when gas prices are down as they went up
when gas prices were high.

[Phoebe Loosinhouse]

3. I can't take seriously any discussion of financial rescue plans, etc

that DO NOT discuss CDS as the biggest elephant in the room.

I have come to the conclusion that they were essentially a sham and a swindle perpetuated by the brightest guys in the room, once again. The best description and commentary I have read is that they were an unregulated (hence illegal) insurance product that brought open gambling in the financial markets on a level never seen before and on a level that is and was financially unsustainable since all the bets, hedges, swaps,call them what you will, cumulatively account for more money than exists in the world due to the multiple leveraging of the same asset.

I would declare them retroactively illegal financial instruments. I would immediately declare null and void all instruments sold to uninvolved third parties who did not actually own a piece of the asset being hedged. I would ban forever the people involved in creating, promoting and selling these instruments from being a part of the monetary and investment systems of the world since they are too stupid to know that you can't take unlimited bets and build an ante that is bigger than all the monies of the world combined.

I would open a World Bank of Bad Assets and put all these instruments here to be sorted out. I would attempt to wall off these play money, imaginary assets from the rest of the world's monetary system.In order to keep the worlds financial markets and systems running, all this activity will be allowed to run off the individual books of the involved institutions so as to get people back to a place that existed before the madness began. If possible, I would refund the money used to purchase the swap, if that was not possible, I would say, oh, well, that's what you get for gambling. I would take my sweet time sorting through all this. It might take 10, 20, 30 years to wind down these imaginary assets.So what?

[Postman]

4. I like your idea.

But I wouldn't offer any refunds to any of these GD crooks.

I'd be setting up guillotines on Wall Street.

[Phoebe Loosinhouse]

6. The only reason for the refunds

is that it is always Other Peoples Money (the widows and orphans, if you will, that had no idea what fancy schmancy schemes their brokers and bankers were doing with their money). Plus how knows how much is left anyway. These guys doing these con schemes have very large tastes - big houses all over the world, private jets, yachts, limosines- they all want the Bernie Madoff lifestyle. They got big bonuses, don't you know, because they're the "Talent".

I didn't mention the criminal investigation and punishment part of my plan where all the miscreants have to hand build housing for the homeless and subsequently provide "green power" for the buildings by being yoked together in 8 hour shifts at giant turbines. A little sour gruel 3 times a day - Justice!

[bertman]

26. Nice work on the criminal investigation and punishment part of the plan, Phoebe.

Highly commendable and very creative to boot.

[KoKo]

34. I second that.....

very creative punishments...:D

[burythehatchet]

5. I see them analagous to buying 20 life insurance policies on two guys playing russian roulette n/t

[Postman]

7. Great example....

Mets? Mets !?!

Should be a good season coming up. Mets/Phillies rivalry is/has been fun the past 2 seasons.

[truedelphi]

30. Yes very good example.

Yet those bets are considered to be "Toxic Assets" as if by enabling the failed financial institutions to pay out to the winners of the bets, there are somehow "assets" that are real and physical, and that can someday be credited back tot he expense accounts of the middle incomes that will be paying for this nonsense for several decades, if not for several hundred years..

[dem mba]

19. you can't penalize people for following the rules

The brokers did their job, which is to maximize revenues. You can't come back and say, "oh ok what you did at the time was legal but it shouldn't have been and now I'm going to destroy your career and livelihood". Maybe penalize the principals at the SEC for being the Bud Selig of the financial world and turning a blind eye to all of this. Maybe penalize the loan officers who would give a mortgages to anyone that could fog a mirror. CDS blew up in everyone's faces, but they were legal financial instruments. It's simply BS to go back and penalize firms for using them.

Greater transparency and more competent regulation could have prevented or at least mitigated this crisis. I think what you are asking for is impossible ("I would immediately declare null and void all instruments sold to uninvolved third parties who did not actually own a piece of the asset being hedged") but obviously, drastic action needs to be taken. I never understood how hedge funds and some of these "shadow markets" are able to operate with billions and billions of dollars on the line without any oversight whatsoever.

[Vincardog]

22. you can penalize people for NOT following the rules of prudent investing

CDS were legal financial instruments based on nothing in come cases.
What prudent financial officer would buy paper backed by nothing?
Only a foolish one. Why do you want to defend the foolish?
The experts created these instruments without any oversight whatsoever on purpose.

[dem mba]

37. if you don't follow the rules of prudent investing you do get penalized

penalized with low returns.

Maybe "the experts" did create these without any oversight, but you know what, Congress and the SEC was fine with it, so as I said, you can't retroactively go back and penalize these guys for doing what was at the time, legal (and might I add, very profitable).

[MattBaggins]

42. Spare me that nonsense

They got their guys like Harvey Pitt in place at the SEC. They got their own guys in place as the regulators. Don't tell me you can get your Brother in Law appointed as sherrif and they say you are innocent of robbing your neighbor because he failed to investigate you.

[dem mba]

45. well there is one big problem

who is going to know how to regulate Wall Street that has no Wall Street connections or experience?

If it's not Harvey Pitt then it will be someone else who has these CEOs in their rolodex. But I can't defend the SEC and won't, they suck big time.

[MattBaggins]

32. Ah the Nuremberg defense

Actually you can penalize people for either creating bogus rules or operating outside of the rules in the grey area knowing that it is risky.

[dem mba]

38. but who created the bogus rules?

It was Congress. I don't think they are going to penalize themselves. Bear Stearns, Lehman Brothers, etc were all just playing the game to their best ability according to the rules set by Congress (and the SEC, the Fed, etc).

And no you definitely cannot legally penalize a firm for being risky with their investments. Stockholders can penalize the firm by selling stock. Board members can oust the CEO, etc. But you can't sue Bear Stearns for making bad bets in good faith.

[MattBaggins]

41. You may live in a different America then I do

but those poor Bear Sterns and Lehman brothers are the Government. They paid for Raygun to unwrite the regulations, and they looked deep into every hidden grey area to figure out how to scam folks.

Stockholders can not do squat to these guys anymore. Bush's idiot SEC pick, Harvey Pitt helped to ensure that companies bigwigs would be untouchable from the commoners. The board members get the same big bennies whether the company succeeds or fails so they don't care either.

Bear Stearns didn't make bad bets in good faith. They knew damn well the system was a scam. They helped ensure it was; and tried to play it for as long as they could. I am not falling for the poor old financial companies just played by the rules bullshit.

[dem mba]

44. well the tech boom and bust happened under Clinton

so were you asking for the same penalties when investors lost half their portfolios from overvalued tech stocks? I doubt you were.

AS for financial companies looking into gray areas to "scam folks", well as I said, predatory lending should be prosecuted. But as for trying to profit in an unregulated market, I don't see how you can blame them. Firms are going to seek new revenue streams wherever they can. It's either junk bonds or tech stocks or mortgage-backed securities, etc etc. It will always be something.

[DUlover2909]

31. What would happen if we just made lending money illegal?

What if every product or service had to paid for with cash up front, but make allowances for utilities for which the amount of each monthly payment may vary according to usage, and if the bill is not paid when it's due then the utility shuts off service? I understand that switching to this system might not be easy in the beginning, but over time people would accumulate savings by avoiding interest payments and late fees. They would learn to be responsible with their money. Products prices would be lower because the sellers would understand that no financing would be available. People in the short term would earn less per hour because of the lower prices, but as time goes on, maybe a generation, then people could afford to pay more based on their saved money. Banks would exist only as places to store deposits and no interest would be paid to depositors. Depositors would pay a fee based on their savings to support the bank's infrastruscture, which would be regulated by the government. Nobody would profit from doing nothing other than collecting interest payments.

Borrowing and financing is one way to do business, but it's not the only way, or the best way.

[Phoebe Loosinhouse]

8. kick!

[Uncle Joe]

9. Off to the greatest pages.

Thanks for the thread, Postman.:thumbsup:

[Chimichurri]

10. and they were awfully kind to Paulson. Making him seem an unwilling

participant in the greatest heist every committed in the U.S.

His bailed out banker friends and the unaccounted trillions beg to differ. Even selecting "TARP" as the name for a program initially designed to remove the deregulated junk being held by banks, was incredibly condescending.

[specimenfred1984]

11. Agreed, Frontline is like PBS for dummies

They follow the media mantras like calling crimes "toxic assets" instead of calling it bank fraud and criminal. Simply put, Frontline is propaganda.

[Junkdrawer]

12. That was my take too....Lipstick on a mighty ugly pig n/t

[glitch]

13. Limited hang out? Kind of expected it, sadly. Thanks for posting K & R nt

[leftofthedial]

14. 8 years of theft, and the "fix" is more theft

[BrklynLiberal]

15. Damn that liberal media...lying to us again...

[democraticinsurgent]

16. Excellent post

I am sick and tired of hearing all the news/talk--even and especially on NPR--about "we are all to blame" because we all got greedy and borrowed too much, bought houses we couldn't afford, etc.

BUSHIT.

It's the illicit gambling casino set up by the financial sector that caused this mess. Period.

[omega minimo]

18. and the media talking point was "exotic" "too complicated for most of us to understand"

What's so hard to understand about "created out of thin air"?! :wtf:

"What they fail to mention and this is critical, is that the major banks et al sold MULTIPLE CDS on each mortgage backed security and that the purchaser did not need to own the security. Sometimes they sold as many as ONE HUNDRED per security.

Thus each dollar lost in a mortgage default can be multiplied by 10, 50 even 100 times.

This is an egregious omission.

In addition they fail to mention the process of replication whereby synthetic CDOs are created, are 'replicated', that is to say: made out of thin air, with the CDS as collateral.

They couldn't find enough subprime mortgages for their Credit Default Swaps which were sold on the risky mortgages, so they created them out of thin air."





The more the "exotic" "products" were described -- if they bothered to do that, rather than tell us no one could understand them -- it was OBVIOUS there was "no there there."

[mistertrickster]

20. Mega-dittos! That's what I was thinking when I watched it too. Another omission:

credit default swaps have an insurance function but RepubliCONs made sure that CDS would never be REGULATED like insurance.

Heigh ho, the rest is history.

[proud2BlibKansan]

23. I liked what they said about CNBC

and I don't doubt it at all. Our media really sucks.

[snot]

24. K&R'd

[snot]

25. Just to K again . . . I didn't bother watching, 'cause I've yet to see anyone

other than a few DU'er's and bloggers mention these aspects.

Actually, I don't think it's all that hard to understand if someone explains it clearly; the problem is that the only experts most of the corporate media are interested are motivated to OBSCURE those aspects rather than explain them.

[bertman]

27. I nominate for an Emmy the moment when the narrator says "this was something that

no one could have foreseen."


:rofl: :rofl:


And did you see how SAD Hank Paulson looked!! And his suits!! Where the fuck does he buy those suits??!! The motherfucker is worth hundreds of millions and he looks like a Wall Street HOBO.

I feel so sorry for him. Poor Hank.

[HCE SuiGeneris]

28. And so it goes...

another trillion or ten swept under the rug. Move along, now.

:(

[truedelphi]

29. You Say: (In your excellent piece)

"What they fail to mention and this is critical, is that the major banks et al sold MULTIPLE CDS on each mortgage backed security and that the purchaser did not need to own the security. Sometimes they sold as many as ONE HUNDRED per security.

Thus each dollar lost in a mortgage default can be multiplied by 10, 50 even 100 times.

This is an egregious omission."

Hey the media doesn't FAIL TO mention anything. The world view that the Media presents is the world view that their corporate masters demand they portray.

In my opinion it woul dhave been far better for the American public to have been exposed to an hour of "From Freedom to Fasism" by Aaron Russo, or to the wonderful YouTube by Attorney Gary Fielder on YouTube (His video works so well in part becuas e some of his friends helped him
assemble key film footage from Sixty Minutes" that so consistently spells out waht we are up against.

What the Establishemnt and its whoring Media describe as "Toxic Assets" are not at all assets but are the pledged payments to those who won by betting that the economy would fail. The media pretends that these "Assets" are houses or buildings or whatever - but much of the debt is simply what is owed to those who bet correctly on the impending implosion of the Global Economy. So how is any of that an "asset?"

The oinly winners in any of this are those who were clever enough to not get sucked into the Bubble fo the stock market bet against that market, and n9ow they want to cash in their winning tickets. And whatever monies they may receive.

And of course those at the top of the game - Hank Paulson, Kashkari, and the executives and insiders at the firms that those two players designated as being worthy of being bailed out.

[KoKo]

35. Joe goes to the track and bets 2$ on a horse.... (more comments from C&L site)

From

http://discuss.epluribusmedia.net/node/2717

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? 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. The issue with the home market is that the only "investor" was the person who bought the home. All those engaged in the meaningless derivatives spun off from this are gambling. You can see how quickly the face value of all these side bets can exceed the underlying investment. Who is holding these side bets - not the homeowner? It is the people at the failing investment banks, hedge funds and similar enterprises. Notice that the bailout is being directed at them not the homeowners. The real world is, of course, even more complicated. Over the last 30 years people have been allowed to place bets on everything starting with the value of stock averages. They might as well bet on the temperature in Newark at 8:00 AM. So when you hear everybody saying this is a crisis caused by the housing collapse, be skeptical. We are in the midst of a classic pyramid or Ponzi scheme and there is no way out except for people to lose a lot of money. All that is different this time is that it is the taxpayers who are being asked for the cash.

------------
Whitewash
Wed, 02/18/2009 - 20:05 — myshadow

My God! I watched in horror the whitewash that Frontline did. Not a syllable about who was driving up the price of commodities, grains, metals, and oil during the run up to the melt down. WHO did they sell all of those toxic securities. Not a syllable about the Basel II agreement that forced international transparencey by Sept 30. Washington Mutual going from a market cap of 365 billion one day being sold for 3 Billion the next. Not a syllable about where the first 350 billion vanished...It went to the same WHO that we sold all that counterfeit crap to and we had to make good. A lot of people should be going to jail and not a syllable about the rapacious criminal fraud that these monsters foisted on the world...Instead they blamed the whole thing on the bubble...and not the fraud. It should have been two hours. That would have only been the beginning. What and who were the forces that made the credit markets seize. If the Obama administration won't reveal what really happened and fairly soon, they will be tarred by the crimes of the 'bush permitted' unregulated manipulators and be accessories after the fact.

[niyad]

39. did I miss something about all the money that paulson gave away that he didn't tell anyone about?

something in the neighborhood of a couple of trillion dollars?

[Greyhound]

40. Kick.

Once we've identified the problem, the solutions are very bad for the owners.

[SmileyRose]

46. Paulson's thing with Lehman was personal payback

and I agree the frontline thing should have been a longer program to include more information.