Tag Archives: Derivatives

How To Steal Trillions: A Game Plan

Posted on by
Reply

Here’s the  step-by-step game plan the Wall Street Bankers followed to steal money, homes and hope from the American middle class.

  1. 2B2F Banks assures Local Banks they will purchase any and every mortgage they can originate
  2. Local Banks make loans to people who clearly cannot pay
  3. Local Banks sell all mortgages to 2B2F Banks, make easy money on fees and take zero risk
  4. 2B2F Banks package all those loans up into pools (Mortgage Backed Securities) for sale to Pension Funds and commercial investors
  5. 2B2F Banks pay Rating Companies, (Fitch, S&P, Moody’s), to rate these MBS as AAA – in other words – every bit as secure as US Treasury Bonds
  6. Rating Companies intentionally avoid performing due diligence on MBS packages so that they can rate them AAA and thus get paid by the 2B2F Banks
  7. 2B2F Banks sell MBS  to Pension Funds which – by charter – can only buy AAA-rated debt
  8. 2B2F Banks buy CDS’s on MBSs from Insurance Companies (AIG).
  9. When mortgages in MBS became overdue, 2B2F Banks ran to Uncle Sam, threatened the end of the world, and got Congress to buy the mortgages using taxpayer money
  10. 2B2F Banks foreclose on homes they don’t own. They don’t own the homes because they destroyed the original documents because those documents would prove the loans were fraudulent, the MBS were fraudulent and the CDS’s were essentially a guaranteed sure-fire bet.

My question for you, dear readers, is this: Now that you know that Banks intentionally, willfully and deliberately set about defrauding you, and now that you know that the Federal Goverment was their willing accomplices, what are YOU going to do about it? Are you gonna bend over and take it, or are you going to resist?

As for me, my strategy is to starve them out.

KEY:

2B2F = Too Big To Fail – these are the banks, insurance companies and car companies that the government decided were too big to fail and thus “deserved” to be have their debts paid by the American middle class. Note that the bankers who are employed by these banks have taken somewhere in the neighborhood of $200 billion in bonuses since they got their bailout money. These include, but are not limited to: Fannie Mae, Freddie Mac, Goldman Sachs, JPMorgan-Chase, Morgan-Stanley, Wells Fargo, Bank of America, Citibank, GMAC Finance, GE Financial, Deutsche Bank, UBS, RBS, etcetera, etcetera.

MBS = Mortgage Backed Security – A commercial bond that is backed by a pool of mortgages. Compare this to a municipal bond that is backed by the citizens of a city, or a treasury bond that is backed by the government.

CDS = Credit Default Swap – An insurance policy on a financial instrument, in this case, Mortgage Backed Securities. If the MBS fails, then the holder of the CDS is paid off.

The reason AIG was considered 2B2F is because they had sold trillions of dollars worth of CDS’s to the 2B2Fs. When Lehman Brothers went bankrupt, they were obligated to pay the holders of CDS’s written against Lehman Brothers. Note that the 2B2Fs knew that the mortgages in the MBS were junk. They made money when they sold the MBS to the pension funds, they made money on the mortgages, they made money when the mortgages in the MBS went bad because of the CDS’s they bought, they got money for free from the government because they were 2B2F, they made money by foreclosing properties they did not own and then selling them, and they will likely make more money in other devious ways which are not yet public.

Share

Derivatives Explained

Posted on by
Reply

This was forwarded to me by a fellow trader. I don’t know where it came from and would gladly give attribution if I did.

Explanation of Derivative Markets

Heidi is the proprietor of a bar in   Detroit . She realizes that virtually all of her customers are unemployed alcoholics and, as such, can no longer afford to patronize her bar. To solve this problem, she comes up with a new marketing plan that allows her customers to drink now, but pay later. Heidi keeps track of the drinks consumed on a ledger (thereby granting the customers’ loans). Word gets around about Heidi’s “drink now, pay later” marketing strategy and, as a result, increasing numbers of customers flood into Heidi’s bar. Soon she has the largest sales volume for any bar in  Detroit . By providing her customers freedom from immediate payment demands, Heidi gets no resistance when, at regular intervals, she substantially increases her prices for wine and beer, the most consumed beverages. Consequently, Heidi’s gross sales volume increases massively.

A young and dynamic vice-president at the local bank recognizes that these customer debts constitute valuable future assets and increases Heidi’s borrowing limit. He sees no reason for any undue concern, since he has the debts of the unemployed alcoholics as collateral. At the bank’s corporate headquarters, expert traders figure a way to make huge commissions, and transform these customer loans into DRINKBONDS, ALKIBONDS and PUKEBONDS. These securities are then bundled and traded on international security markets. Naive investors don’t really understand that the securities being sold to them as AAA secured bonds are really the debts of unemployed alcoholics. Nevertheless, the bond prices continuously climb, and the securities soon become the hottest-selling items for some of the nation’s leading brokerage houses.

One day, even though the bond prices are still climbing, a risk manager at the original local bank decides that the time has come to demand payment on the debts incurred by the drinkers at Heidi’s bar. He so informs Heidi. Heidi then demands payment from her alcoholic patrons, but being unemployed alcoholics they cannot pay back their drinking debts. Since Heidi cannot fulfill her loan obligations she is forced into bankruptcy. The bar closes and the eleven employees lose their jobs.

Overnight, DRINKBONDS, ALKIBONDS and PUKEBONDS drop in price by 90%. The collapsed bond asset value destroys the banks liquidity and prevents it from issuing new loans, thus freezing credit and economic activity in the community.The suppliers of Heidi’s bar had granted her generous payment extensions and had invested their firms’ pension funds in the various BOND securities. They find they are now faced with having to write off her bad debt and with losing over 90% of the presumed value of the bonds. Her wine supplier also claims bankruptcy, closing the doors on a family business that had endured for three generations, her beer supplier is taken over by a competitor, who immediately closes the local plant and lays off 150 workers.

Fortunately though, the bank, the brokerage houses and their respective executives are saved and bailed out by a multi-billion dollar no-strings attached cash infusion from their cronies in Government.. The funds required for this bailout are obtained by new taxes levied on employed, middle-class, non-drinkers who have never been in Heidi’s bar.

Now do you understand?

Again, if you can provide any evidence of where this originated, I will gladly provide attribution.

Share