STRAUSSIAN
New member
- Jul 3, 2009
- 18
- 0
- 1
place? I have been reading a lot about banking practices from 2000 to 2007, and a lot of what happened was simply ridiculous. For example, look at this chart:
http://www.zerohedge.com/sites/default/files/images/user5/imageroot/Leverage%20MBS.jpg
Basically, it shows how banks took a near-useless source of income (subprime loans), and then used leverage and financial trickery to create a mountain of new financial instruments with purely speculative values.
Think of it this way - your friend loans you $100. Then he "cuts" your loan into "tranches," mixes your tranches with other people's tranches, and creates a new "instrument" called a loan-backed derivative (LBD). Then he takes different LBDs and cuts them up and mixes them into new instrument called an LBD-squared. Then he turns a bunch of LBD-squareds into LBD-cubeds.
And that's just the start! They did crazier things with "default swaps" and other forms of "exotic" insurance.
Why did we - the American people - allow them to do this in the first place? Why didn't we regulate these banks at all?
Are we just idiots or something?
http://www.zerohedge.com/sites/default/files/images/user5/imageroot/Leverage%20MBS.jpg
Basically, it shows how banks took a near-useless source of income (subprime loans), and then used leverage and financial trickery to create a mountain of new financial instruments with purely speculative values.
Think of it this way - your friend loans you $100. Then he "cuts" your loan into "tranches," mixes your tranches with other people's tranches, and creates a new "instrument" called a loan-backed derivative (LBD). Then he takes different LBDs and cuts them up and mixes them into new instrument called an LBD-squared. Then he turns a bunch of LBD-squareds into LBD-cubeds.
And that's just the start! They did crazier things with "default swaps" and other forms of "exotic" insurance.
Why did we - the American people - allow them to do this in the first place? Why didn't we regulate these banks at all?
Are we just idiots or something?