Here is another thing that boggles my mind.  Republican members of the Financial Crisis Inquiry Commission, which is looking into what happened with the financial crisis, omitted words from their preemptice report (and also sought this to in the final findings).  These words: Wall Street, derivatives, shadow banking, deregulation.

Anyone here want to try to defend this?

http://www.marketwatch.com/story/gop-omits-derivatives-from-crisis-report-2010-12-15
http://www.bnet.com/blog/financial-business/republican-financial-crisis-commissioners-maul-history-in-absolving-wall-street/9302

Eh, that's American politics these days. Republicans are showing who they really work for, and unfortunately, it isn't the middle class.

The committee doesn't see that as what caused it would be my guess.

Which, it really wasn't.  What caused the crisis was that housing was down all over the country at once.

Which generally was seen as an impossibility and only happened because of widespread government intervention in the housing market.

The housing market caused the derivitives to crash.

There was nothing wrong with the risk prevention methods set up in the derivities, outside of not considering the fact the government was going to fuck it all up.

It's like if you stored a bunch of propane in your backyard with more then enough protection and saftey measures... and it all exploded because your neighbor decided to break in smoking a cigarette.

How is that your fault?

What do you expect from the republicans?

For those who don't understand what derivitives are, think of them as "loan insurance."


One bank pays another bank to cover the risk for a package of loans that it has, carefully crafted with deals from with morgages from all over the country, because up until the national housing bubble, there has NEVER been a nationwide crash.  Housing bubbles are pretty much always localized in one or two cities... because cities fortunes rarely change togther and people are moving SOMEWHERE.

So I give pay you $200 a month say to cover 5 loans from NY, Dallas, LA, Chicago and Miami.  The chances that all 5 of those are going to fail is minimal and as long as one of them succeeds we're fine.  Heck as long as a few derivities sold suceeds we're fine.

However what happened was, due to the aforementioned subprime loans and other loans in general, the number of "risky owners" was waaay too high, and default rates started to be waaaay to high, nationwide, because nationwide loaning being too loose was the cause of the bubble.

Now this caused failures that caught that banks off guard because the failures were so paramount they had more debt then they had money.  So they had to start calling in other loans raising the interest rates, rates that lots of people weren't able to pay, and the whole thing collapsed hard.  (Hence why the number of sub prime loan defaults is a small amount, they started the avalache they weren't the avalanche.)

Were there not such agressive measures for EVERYONE to own a home there would of been no problem... ever.

If credit-default-swap and other wizardry that probably shouldn't have existed, didn't exist, then the housing bust wouldn't have done the catastrophic damage across the financial sector then exploding across the global sector. There would have been damage to be certain, from raw materials and construction sector, but the financial sector's enron-esque tactics caused it to ripple across the globe

If people were smart, and not greedy, they would of seen this coming.  You had Wall Street ending up leveraging off bubble growth numbers for housing prices going up.  They were unsustainable, but no one was paying attention.  Where I am had a microcosm of that.  Shoot, the entire Hudson Valley area of NY is a microcosm of America at this point.

What irks me here is that you have politicians from one party wanting to turn a fact finding mission into a partisan piece to pitch a certain agenda that doesn't cover all the facts.  They wanted the words "Wall Street", "derivatives", and "shadow banking" not to be used?  How do you report on something that did impact Wall Street without using those words?  And how can one say derivatives weren't a problem, when they were?  The derivatives and the leveraging off them were a problem.  The size of the derivative market go to be like over 10 times time size of the world economy.  If that isn't a problem, then what is?

Why shouldn't it exist... there is a very small chance of huge failure (which unfortunitly happened) and it's been a HUGE driver of growth.

There wouldn't of been such huge damage because there wouldn't been as much to damage.

If you think this is a problem... watch as the virtual markets pick up in steam.  Some are already valuable then poorer nations GDPs.

Who knows how valuable World of Warcraft is GDP wise.

There are large risks happening if the amount of economic growth is based on virtual assets, which are based on confidence of people in systems they are involved in, inflating prices and so on.  Once the confidence is shaken, then the bottom can fall out.  Unlike tangible assets, they evaporate in a puff of smoke.  This evaporation could happen, besides from a lack of confidence, an impact of things happening in real life, that deny people sufficient funds to prop up the virtual assets.  Have contraction, with job losses, and the entire thing could snowball.  What happens, for example, to all those World of Warcraft assets if people suddenly stop playing the game?

Virtual markets are at least a tangible service, though. There is a medium of reality here, but with CDSes you're just securitizing debt and then... converting it into profit?

Sounds like what GloboDyne was up to in the movie "Fun With Dick and Jane"

"We took our debt and pushed it into companies that we owned, and our balance sheets, they showed profit, when actually, there was debt."

Now i know better than to disparage that which i cannot understand, but something about this whole thing seems backwards