Ben Stein-Spills The Beans On $$$ Crisis: THE BIG SECRET-It's seriously mind-blowing.

Ben Stein almost lets out the Big Secret
by Inky99
Tue Sep 23, 2008 at 10:48:49 AM PDT

In fact, they can be so large that one might well wonder if the whole subprime fiasco was not set up just to allow speculators to profit wildly on its collapse...

What have they been doing? Who did they talk to? What did they promise?

before turning it down.

to ram things (and I do mean "ram") through Congress so they can get what they want while the rest of us are picking ourselves up off the floor wondering what the heck happened.

Phil Gramm. The Commodity Futures Modernization Act eliminated regulations on credit default swaps and other derivatives. The bill also contained the infamous "Enron loophole".

should be in prison, yet if they get their way he'd likely be the next henry paulson. i have a big feeling that paulson should be in prison as well. they're all fucking thieves and i am sick of being victimized.

All these failing companies need to file chapter 11 bankruptcies and go through what all the other failing businesses go through. If they survive, fine. If they're liquidated, that's fine, too.

and why none of the Congress persons are talking about it but keeping it hush-hush. All we are being told is that there's an urgent need to pump in tremendous amounts of money in the financial system. We're not being told that our entire system is rotten to the core. And you have to wonder if some of the Congress persons knew about this and sat by and did nothing, the way they knew about the spying going on by the Bush Administration and still did nothing.

without a doubt many members of congress are looking at the possibility of losing their shirts due to investing in these gravy trains.

thanks for this post.

I just KNEW there was a big rat here!

And now extortion of the taxpayer to top it all off.

Talk about your perfect storm...

And you just know, after the Congressmen and Senators finish grandstanding for the voters, they will give them the fucking money anyway.

There should be riots in the streets over this. Better yet, a revolution.

This "bail-out bill" is the final "Patriot Act". With this bail-out package as written by the Bush Regime all effective power in the government will be centered in the hands of the Executive branch. Couple this with the deployment of active combat troops (the 1st BCT of the 3rd AD - http://www.democracynow.org/2008/9/22/headlines#10 ) to the US mainland beginning 10/1/08 and the picture clears even more.

I don't know what happened or how it happened, I do know that the fascists are taking advantage of it and everyone seems to be allowing them to do so. This is as big a threat as this country has ever faced and most don't even know it...

with this disaster we don't even have to argue over whodunnit.

they've been planning this for a long time

The domestic troop brigade is some scary shit. Sadly, my mind is not deadened to what's happening, although they've done their best to make me and the rest of America comfortably numb.

one on this page-title starts : this is illegal

Now they are blackmailing us to give them more AND without any strings attached.

I don't think so homey.

mortgages for long, long, long terms 50 to 99 years. They will be essentially long-term leases. Europeans rent on such long-term leases all the time. It really isn't a problem. In fact it is good because it gives the people leasing the properties something they can pass on to the next renter and also provides for stability in neighborhoods.

Let's just write our Congressmen. Buy up the mortgages and the credit card debts and put Americans on long-term instruments that feed money into our treasury and relieve taxpayers of the horrible burden that Bernanke/Paulson's plan would impose on us. \

Hell, even hand written letters, although they get more attention, will change nothing. Congress does not represent the People. Congress represents the US Corps & Multi-Natl. Corps, the MIC & Investment Corps. The Busholini Regime has managed to take control of Amerika via the Corps.

congress is being bombarded right now and it's making a difference. and it's all we can do, so we need to keep doing it.

Shep is going to talk about Credit Default Swaps being the next big thing... coming up next segment.

They nailed it, and the fix the politicians are in.

Unfortunately, it will now be OUR pain.

They will panic and pass a bailout bill Thursday night.

http://www.concurringopinions.com/archives/2008/09/the_loophole_th.html


"...Why did the Fed bail out AIG but not Lehman?

The conventional answer—which is true but incomplete—is that AIG was too big to fail. But that begs two questions: Too big how? And why?

In part, AIG was too big to fail because it could owe an astronomical amount—allegedly about $300 BN—on credit default swaps issued to support mortgage-backed securities.

The problem, however, is not just the amount AIG owes, but the fact that these obligations are not like other obligations. They occupy a series of loopholes that make them unusually dangerous. Perhaps the greatest loophole of all came in the 2005 amendments to the Bankruptcy Code. Although designed ostensibly to “get tough” on profligate debtors, those amendments also made certain that CDS holders would get special treatment in bankruptcy—special treatment that may have made the Fed bailout inevitable..."


Found this about the 2005 bankruptcy bill... though I'm still trying to process the information.

:)


http://www.texasbusinesslaw.org/bankreform.pdf

"May, 2005

On April 20, 2005, President Bush signed S. 256, the Bankruptcy Abuse Prevention and
Consumer Protection Act of 2005 (the "Act"), enacting the most significant changes to the
United States bankruptcy laws in over a quarter of a century. While the majority of the changes
to the bankruptcy laws are aimed at the prevention of consumer bankruptcy abuse, a significant
portion of the Act amends commercial provisions to title 11, United States Code (the
"Bankruptcy Code" or the "Code"). These commercial amendments will have an impact on
many companies, including debtors and those that deal with Chapter 11 debtors in commercial
relationships. This summary identifies and summarizes the most significant changes...

http://spitfirelist.com/


episode #531



They've fucked us coming and going.

"rachel maddow just reported bu$hco has had this economic plan written for months"

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x4072320

And I believe we have proof of a pre-determined bailout package.

I believe she really does want us to send her articles re: our concerns.

The Duchy of Fenwick declares war on the U.S., hoping to live off the largess that the Americans provide to their vanquished foes.

Something like that. Fail on purpose and then cash the bailout checks.

Here is my new take on things which really is mind-blowing as K-Pete says, because up until this point I thought this was just rampant greed run amok due t lack of oversight and regulation, but now, I am seeing that this could actually be a well-thought out construct.

The reason for the bad mortgages is that there was a market for the bad mortgages. All former underwriting guidelines about credit rate, income, down payment, job history, get completely tossed to the winds. Jokes are even made that NINJA (No income, no job, no assets) are perfectly acceptable. All you literally need to get a loan is a name and a social security number. No mortgage broker or loan officer previously would have even considered pushing through these loans before because they would have been laughed out of underwriting and the industry. So what changed?

1. Someone told all the loan people to go ahead and write any loan anyway because they had investors who would buy them. The mortgage brokers probably said, "huh? well, sure, ok - if you want them, I'll write them" and they did and they earned zillions of dollars in fees and commissions on mortgages that previously did not exist, because buyers for these loans did not exist previously.

2. The someone or something who told the brokers to go ahead and write the bad loans didn't care, because they were going to bundle all the loans, good and bad into mortgage securities which they were going to sell and make a zillions of dollars in fees and commissions on mortgages that previously did not exist, because before buyers for the securities did not exist, but now they do.

3. The buyers for the securities don't care particularly about the underlying quality, and they probably even know how bad they are at this point, but they don't care, because they are actually going to bet AGAINST the securities by buying credit default swaps and THAT is how they are going to make the big bucks.

So that my friends, is why they needed BAD mortgages in the first place, so that they could bet against them later.

Imagine if the tulip mania people had the foresight in the olden days to run up the price of the tulips but to also be able to bet that the prices of the tulips will drop and that they would make EVEN more money on the downside.

It is unf!@#ing believable.

There it is in a nutshell. :grr:

Congress and the FEC must open up the black boxes that are hedge funds to keep something like this from happening again.

Investigation and regulation of all hedge funds is a good beginning at fixing this mess, but I'm not holding my breath.

I have been wondering the whole time WHO is going to profit by this mess.

I knew it was no accident

1. Follow the money
1. See #1

And we have no idea who is buying them, who is backing them or who is manipulating them? Sounds like a black hole. If no one even knows what the potential liability is, how can they possibly estimate how large the bailout needs to be?


"Congress resolved the legal question in 2000 with the passage of the Commodity Futures Modernization Act, which barred the CFTC from regulating credit-default swaps.

The law made it "crystal clear" that the CFTC would have no authority over the market, said Michael Greenberger, a professor at University of Maryland Law School and former head of the CFTC's trading and markets division.

The SEC's authority over credit-default swaps is limited. While it has broad antifraud authority to investigate market manipulation, its hands are tied when it comes to regulating credit-default swaps: it can't issue rules, including rules that would require public disclosure about the instruments.

"It has put them out of bounds to regulators," said Greenberger.

While such contracts have legitimate uses, some fear that the protection they offer could lead market participants to take risks they might not otherwise. Just who is using the instruments and who is backing them aren't clear, however. Also unclear is whether the parties who sell the protection to swaps buyers have the financial strength to make good on their promises, since there are no minimum standards for capital strength or liquidity.


UPDATE: Regulation of Credit-Default Swaps Has Fumbled Before - http://money.cnn.com/news/newsfeeds/articles/djf500/200809231755DOWJONESDJONLINE000675_FORTUNE5.htm

THAT'S the potential liability here. My mind is now blown. That's the amount that US banks currently have outstanding in credit default swaps. The CDS market itself has more than $62 trillion dollars in contracts. $62 trillion dollars in an unregulated, unaccountable speculators' market? At the beginning of 2007, the market was $28.9 trillion - so the market exploded by $33 trillion dollars in just one year.

"Credit default swaps are the most widely traded credit derivative product<2> and the Bank for International Settlements reported the notional amount on outstanding OTC credit default swaps to be $42.6 trillion<1> in June 2007, up from $28.9 trillion in December 2006 ($13.9 trillion in December 2005) and by the end of 2007 there were an estimated USD 45 trillion worth of Credit Default Swap contracts.<3>

But by the end of 2007 there were an estimated USD 62.2 trillion.<4>

In the US, the Office of the Comptroller of the Currency reported the notional amount on outstanding credit derivatives from reporting banks to be $16.4 trillion at the end of March, 2008.


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

the money that is needed by AIG and others is because a bunch of people made bad swap trades and now they have to make good on them. So what if they just say to the traders so sorry we have no money. What would happen ? It's like if I bought a lotto ticket and the state went bankrupt. so sorry too bad

I wondered the same thing. Why don't the banks just default on the CDS? Declare bankruptcy, sweep it away & start over again. But someone mentioned above that CDS got special protections in the 2005 Bankruptcy Bill. Unlike most other debts, CDS's are NOT discharged by bankruptcy, & the debt isn't stayed or postponed by bankruptcy. Which means, even if AIG declared bankruptcy, CDS holders would STILL be able to collect full value for their swap. This would create a potential cascade of CDS's basically taking all of the money in the bank up-front & leaving everyone else with nothing. That's an incredible loophole - and implies that the CDS market invested a whole lot of money & influence into Congress to get that special protection.

This blog lays it out:

"Credit Default Swaps and AIG"

Why did the Fed bail out AIG but not Lehman?

The conventional answer—which is true but incomplete—is that AIG was too big to fail. But that begs two questions: Too big how? And why?

In part, AIG was too big to fail because it could owe an astronomical amount—allegedly about $300 BN—on credit default swaps issued to support mortgage-backed securities.

The problem, however, is not just the amount AIG owes, but the fact that these obligations are not like other obligations. They occupy a series of loopholes that make them unusually dangerous. Perhaps the greatest loophole of all came in the 2005 amendments to the Bankruptcy Code. Although designed ostensibly to “get tough” on profligate debtors, those amendments also made certain that CDS holders would get special treatment in bankruptcy—special treatment that may have made the Fed bailout inevitable. ...


Credit Default Swaps in Bankruptcy

That logic fails in the strange world of credit default swaps. Swaps are not like other debts. 2005 amendments to the Bankruptcy Code were the culmination of a series of amendments which began in the 1980s, and which assure that CDS will essentially be untouched by the bankruptcy of any party to the swap.

Most important, the bankruptcy stay will not halt collection efforts by swap counterparties. Unlike other creditors, CDS counterparties may “net” their “positions”—claims—against the company. This simply means that if you were lucky enough to hold a swap issued by AIG, you would be able to enforce it even if AIG went into bankruptcy. If you were a bondholder, you wouldn’t.

For AIG, this presented a serious problem, because it meant bankruptcy could not realistically protect the company. Given the way the Bankruptcy Code treats CDS, an AIG bankruptcy would (likely) create a cascade of defaults, with all of AIG’s counterparties “running” the company to collect. Because the bankruptcy stay would not protect AIG, the CDS counterparties would simply be able to take their collateral and leave. With private lenders unwilling to lend, and bankruptcy off the table, this left only a Fed bailout as a viable alternative.

http://www.concurringopinions.com/archives/2008/09/the_loophole_th.html

The bailout money went to pay off Fannie Mae/Freddie Mac credit default swap buyers, in one of the biggest payments ever. And if this 700$ billion dollar bailout goes through, it looks like most of that money will also be used to pay off CDS holders. Someone's making a whole lot of money here, and there's no way to know who!

"Big Payments Are Expected in Credit Default Swaps"

REUTERS - Sept 8, 2008

The government’s takeover of Fannie Mae and Freddie Mac may lead to one of the largest ever payments in the credit default swap market, analysts said on Monday.

Credit default swaps are used to hedge against the risk of borrowers defaulting on their debt, or to speculate on a company’s credit quality. They trade in the private market, so the actual amount of protection written on Fannie Mae’s and Freddie Mac’s debt is hard to estimate.

Terms in the credit default swaps contracts specify that the payments are initiated by the government’s intervention, analysts said, meaning that protection sellers must pay buyers the full amount insured.

It is the first time a company in the benchmark investment-grade credit derivative index has had a credit event, a JPMorgan analyst, Eric Beinstein, said in a report on Monday.

“This will likely be the largest credit default swap credit event in terms of the amount of credit default swap contracts outstanding that has occurred,” he said.

http://www.nytimes.com/2008/09/09/business/09credit.html?_r=1&ref=business&oref=slogin

If the mortgages fail, they don't lose. It's rigged both ways. Yet, they still want the $700B.

Please help explain this! I didn't even know what CDS were until yesterday, so take this opinion for what it's worth (i.e. nothing). It's rigged both ways, but the difference is the players. CDS is sort of like "credit insurance", in that it pays out money if the mortgage-holder defaults on the loan, but unlike insurance, people can buy a CDS even if they have no connection at all to the actual mortgage. And the seller of a CDS can be totally unconnected to the mortgage as well. So speculators began buying up a ton of CDS', betting that the mort. market will collapse (a good bet) & insurance companies like AIG sold a ton of CDS' for some quick money. Because the market is totally unregulated, financial institutions didn't need to maintain enough capital to actually be able to pay off all the CDS' they were selling. If the mortgages don't fail, the lending banks make back their money, the mortgage doesn't default, the CDS seller (AIG) doesn't have to pay out & the CDS buyer (???) doesn't make any money from that credit default swap.

But if the mortgage fails, there's now 3 losers - mortgage-holder loses the house, lending bank loses money on the loan, and the seperate CDS seller now has to pay out to the CDS buyer. The CDS buyer is the big winner, hitting a jackpot that pays out much more than he paid for the CDS. CDS sellers like AIG want the $700 B & actually do need it, because otherwise they have no way to pay off all the CDS they sold. Since CDS gets special protections in bankruptcy, even filing Chap. 13 wouldn't save the banks from these massive potential payouts. And if the CDS buyer make a run cashing in their swaps, absolutely no money is left. Financial inst. have no liquidity left to make loans, pay out annuities or even allow account-holders to withdraw money from an ATM. Right now, the US banks have over $16 TRILLION dollars in outstanding CDS & probably don't have the money to cover even 10% of that liability. So they do need a bailout, but it's because of their own irresponsibility & desire to make money off of these "exotic" transactions.

The CDS market has boomed into more than $62 TRILLION dollars in less than 3 years, grown $33 trillion just in 2007 - someone is buying a whole lot of these policies, & w/astronomical numbers like that, there is a big chance that the speculators who bought the CDS' are the same ones who drove down the mortgage market in order enable them to cash in on them.

I think, if your assumptions are correct, you just broke this down in a way that even I can understand.

They gambled in a game where they, themselves, could be the holders of the bad paper, insuring themselves against the loss? So, we don't know who owns the bad paper, who will get the pay out, and they come out smelling like a rose either way. And we get the pleasure of watching them walk away with clean hands and stuffed pockets.

I am in the wrong business for sure. Too bad I couldn't have bought some insurance policy that would have paid off if my neighbors defaulted on their loans. :sarcasm: I could be racking in the dough too.

and how I see it connected to Grover Norquist and his stated want to "...drown (us) in the bathtub."

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=389&topic_id=4073835&mesg_id=4073835">"Starving the Beast"

They are burning our country to the ground, and they used the Constitution as the kindling.

What would happen if everyone took all their money out of the banks, sold all stocks, etc, BEFORE Congress passes any bailout? I realize that would, in all probability, trigger a depression, but we could survive and recover from that. Wouldn't that be preferable to the government going broke and collapsing?:shrug:

i'm starting to want to find out the financial firms (investment, banks) that did really well in the last eight years. i think the answer lies with the firms who were financially sophisticated enough to bilk the other firms. i think the story is with the firms that made money and the firms that went bankrupt are the fall guys.

As Mark Felt once said to Woodward & Bernstein, "just follow the money."

Dear ___________,

I am deeply disturbed at hearing Rep. Frank on Countdown describing the "oversight" Congress is proposing for the bailout plan as a board, funded by Congress rather than the Treasury, Fed, or financial institutions, that would be able to "ask" Treasury after the fact what was paid for each asset purchase, and for an explanation of why that was the right price. Neither this board, nor Congress, would have any ability to halt a purchase even if the price is drastically off, or change the individuals making the pricing decisions. We've had eight years of government officials being publicly exposed for wrongdoing and continuing the same actions anyway, in effect saying, "So you (Congress) don't like it and the public doesn't like it, but you can't do anything about it, so we don't care." In light of this history, and Paulson's recently exposed corruption, this is beyond inadequate and into the realm of stage dressing.

Pres. Hoover tried throwing money at the banks to deal with defaults arising from a troubled economy and it failed utterly. More recently Japan tried to cope with a serious recession by doing the same and found it useless. The financial institutions and their employees are as wrong on this as a solution as they were on mortgage-backed securities and derivatives. I also hear that requiring equity rather than asset purchases is no longer being considered; the taxpayers deserve having this reopened, especially in light of the debt too huge to rescue in the form of "credit default swaps".

The only obligation you have is to leave the next President enough money and borrowing power to rescue the economy by other, "New Deal"-style means after this fails. If excess borrowing to finance this moneypit is extreme enough to tank the dollar, the gov't will be broke just when the economy desperately needs help.

Sincerely,

Is it time yet? :grr:

We can't let them get away with having their one last big heist.

for the consequences of their own failures, and they are legion. They tell us routinely on their way to their A-list BBQ's and secret closed door meetings: That if we can't balance of own checkbooks we are broke and living beyond our means. It is time to stuff their own words down their throats.

They claim they are doing them, and they are not. I worked for Wells Fargo this year until June, I saw it. All they ever do, is make the burden more onerous by adding foreclosure costs ahead of time onto any payments missed and dividing that to make a "new payment amount". Lots of people are paying absurdly high rates for no reason - except unchecked greed.

They block refis too based on "credit scores".

Is that what this is saying?

Seems like there's a risk of deliberate containment and whitewash.

:hi:
(Hi, Agent Mike!)

guilty of treason and worthy of hanging on the gallows, following a fair trial of course.

How wondrous that less than two months after the bald Anthrax fraud, DUers & Democrats are so fucking gullible.

"The trust of the innocent is the liar's greatest tool" -- Mark Twain

and never has

"How to ruin America." I wonder if there's a chapter on this in it?

:kick:

I just wanted to cross-post this - a poster on the stock market thread noticed that the $700 Billion bailout matches exactly the estimated cash value of the CDS exposure.

"...Trajectory, growth, rhythm and magnitude of global credit derivatives expansion is quite like the character we observed above for the US banking system proper. In three short years, global CDS exposure has increased roughly nine-fold. We're talking about close to $45 trillion of credit derivatives on a notional basis. The BIS kindly estimates a gross cash market value for this exposure at $700 billion..."

http://contraryinvestor.com/2008archives/momar08.htm


http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=102&topic_id=3503637&mesg_id=3503981

It's like the same formula as Enron had. Wall Street is just one huge casino.

Always has been.

they are doing what they always do, slip something huge and horrible in fast before anyone can say, wait a minute this stinks!

and they play the fear card if you don't vote for this now something bad bad will happen the whole country will fall apart and you don't want that to be on the dems do you?

i just hope and pray and i am not religious that someone stands up finally for all of us and doesn't just cower and give money to people who are making money off bad investments they let happen in the first place.

regular folks don't understand it and they know that so they go on tv and say we have to do this or it will be the great depression and people are scared shitless and will do anything...just like iraq and the false effidence powell had...

makes me sick...

than the great country crash. We can recover from a depression, not so much if the gov't goes belly up.

It seems these corporatists and neocons will do the most outrageous things (like stealing elections, faking intelligence, outing CIA agents, etc. ad nauseum) exactly because they are so outrageous as to be unbelievable.

and then fine the hell out of the insurers, and put the CEOs in shackles.

their property, including their homes, and put the crooks out under a bridge somewhere to beg for a living.

"(The Depression) was not accidental. It was a carefully contrived occurrence.....The international bankers sought to bring about a condition of despair here so that they might emerge as rulers of us all".

"The sack of the United States by the Fed is the greatest crime in history. Every effort has been made by the Fed to conceal its powers, but the truth is the Fed has usurped the government."

both quotes from Charles McFadden, Chairman, House Banking and Currency Committee, 1932

Seems that those who caused one great depression are threatening to cause another.

This comes from a fantastic book called "The Web of Debt" by Ellen Hodgson Brown. It really spells out what is happening right now with the Fed and it is pretty frightening.

And while all this financial stuff is gaining the most attention, has anyone else read Naomi Klein's article of today? OMG she has painted a terrifying picture of the real reason Sarah Palin was picked for VP.

http://www.alternet.org/story/100069/has_sarah_palin_been_picked_as_the_titular_head_of_the_coming_police_state/

I'm truly starting to panic. Good luck all.