And who is at fault?

[striperman36]

Originally Posted by spence

I'm sorry to have to tell you, but rather how the financial companies gamed the system so they wouldn't have to keep capitol on hand to cover these debts if they defaulted, and the frenzy that followed as everyone wanted to cash in on this hot commodity.

These "credit default swaps" as I've come to learn were completely unregulated by the us government and had grown to a $60+ TRILLION market.

The lenders that are crashing first were heavily invested in this scheme, and they probably deserve to die, but not at the expense of our entire economy.

-spence

maybe somebody, likwid, whoever, can tell me how this works

http://en.wikipedia.org/wiki/Credit_default_swap

[justplugit]

I want to know the names of everyone,no matter who or what the party,
had a hand in the deregulation causing this mess.

Like to see everyone involved voted out of office to send a message that there will be accountability.

I understand there were 2 bills submitted and voted down in 2001 and 2003 that would have added back more regulation.

Who and why?

[TheSpecialist]

Here is the crappy thing. Many people took out interest only arm's as a gamble thinking in 3-5 years their house value would increase 50-100 thousand and they would sell and cash in. They new what they were doing, took a gamble, got spanked and now we are all paying the price for it. I was working in a new development in Hingham once. The houses were decent colonials. I asked the guy running the show how much they were going for? He told me $700 + , I said to him who the hell can afford that? He said alot of young couples taking interest only ARM's for 5 years, banking that the value would go up and then they would sell. Many of them lost their shirts.


The banks took a gamble and also lost. Now we are bailing them all out. I lost thousands on a stock, do you think the gov. would bail me out and give me some coin.

[spence]

Originally Posted by striperman36

maybe somebody, likwid, whoever, can tell me how this works

http://en.wikipedia.org/wiki/Credit_default_swap

Wow, you nearly need a finance degree to understand that.

Based on my understanding, basically what these are is like insurance for the lender. Someone else would agree to pay the loan if it went into default, and in return would get a monthly payment for the liability they were burdened with.

As the lender now had backup if the loan went bad, they could take the capital that government regulations said they needed to protect the loan, and invest it somewhere else.

The problem is, that the regulations are to ensure you can cover a % of loans if they go bad. The credit default swaps allowed a way around this, but the risk is now so obfuscated that nobody really knows where it is.

-spence

[striperman36]

The credit default swaps allowed a way around this, but the risk is now so obfuscated that nobody really knows where it is.

-spence[/quote]

Right,
nobody knows how good or bad it really is as they can't reconcile the total offering.

Amazing

[likwid]

Originally Posted by striperman36

maybe somebody, likwid, whoever, can tell me how this works

http://en.wikipedia.org/wiki/Credit_default_swap

Grab a cup of coffee and read this: http://accruedint.blogspot.com/2007/...-cds-work.html

And the comments.

More of less his explanation like an insurance policy is a VAST simplification but accurate.

There's no money to pay out the policy.

Honestly, I want to see the hedgefunds all crash hard and regulations put back in place. They need to be cleared out and the system set back a few years. This was predicted during the dotcoms that sooner or later it'd all come crashing down. People were loaning money like it was going out of style, they came down, it stopped (briefly) then started up all over again.

Honestly crap will sort itself out, we'll go back to freaking out about oil. Green energy will be the place to pour money into (already is... drive by TPI some time... they're turning out blades more than boats) and it'll hit a critical mass and come crashing down.