Piezoe is not entirely wrong on this one. Of course the banks provided crap loans to avoid ticking off liberal loud mouths in Congress... but lets take an even deeper look into the demand for CDOs.
the real deal was that China was pegging the dollar so they could sell an incredible amount of crap here and industrialize very quickly. As they were doing this they took in trillions of dollars.
The invisible hand of econcomics says that if they sold the dollars their currency should appreciate and the dollar should go down. But they did not want break the peg... so they had to find someplace for all those dollars. So they buried their dollars where they could...oil. gold and everywhere else. But they still had 1.5 trillion to bury. Again if they sold dollars it would make their goods look more expensive... so wall street made a ridiculously corrupt product for them in exchange for massive short term bonuses for everyone involved. Mortgage broker got to take 3-5 points out.
Wall Street guys to 100s of millions in bonuses out... and yet Warren Buffetts's moodys still pretended these were good loans.
Second loans... the last 20 percent of the loans... without even having customers prove they could pay them back. Prior to the Fed working with China... people who provided second trust deeds would get closing points and 6 extra points of interest for the risk.
Why would China do something so dumb? Because they were given a huge put.
The put was that the FED would change out their mortgages for U.S. treasuries at a later date. So in a short term the party could go crazy and then the FED would have the tax payers stand behind all this crap.
Wall street saw Long term capital management and Neiderhoffer and others get rich selling puts... and so they decided to sell trillions of puts. (mortgages) .
We have paid for the sick game with massive inflation.
The industry was regulated enough. People should have gone jail.
Because the cronies own the democrats and the establishment Rs we have been stuck with a zombie economy and massive inflation... and this will happen again. Next time I will cash in.
the real deal was that China was pegging the dollar so they could sell an incredible amount of crap here and industrialize very quickly. As they were doing this they took in trillions of dollars.
The invisible hand of econcomics says that if they sold the dollars their currency should appreciate and the dollar should go down. But they did not want break the peg... so they had to find someplace for all those dollars. So they buried their dollars where they could...oil. gold and everywhere else. But they still had 1.5 trillion to bury. Again if they sold dollars it would make their goods look more expensive... so wall street made a ridiculously corrupt product for them in exchange for massive short term bonuses for everyone involved. Mortgage broker got to take 3-5 points out.
Wall Street guys to 100s of millions in bonuses out... and yet Warren Buffetts's moodys still pretended these were good loans.
Second loans... the last 20 percent of the loans... without even having customers prove they could pay them back. Prior to the Fed working with China... people who provided second trust deeds would get closing points and 6 extra points of interest for the risk.
Why would China do something so dumb? Because they were given a huge put.
The put was that the FED would change out their mortgages for U.S. treasuries at a later date. So in a short term the party could go crazy and then the FED would have the tax payers stand behind all this crap.
Wall street saw Long term capital management and Neiderhoffer and others get rich selling puts... and so they decided to sell trillions of puts. (mortgages) .
We have paid for the sick game with massive inflation.
The industry was regulated enough. People should have gone jail.
Because the cronies own the democrats and the establishment Rs we have been stuck with a zombie economy and massive inflation... and this will happen again. Next time I will cash in.
