Via Pro Publica comes the latest tale of theft and woe of the big banks derivatives scams: Selling products to themselves, artificially creating fraudulent profits (capturing big bonuses). Whent he underlying assets drop, the derivatives become worthless — but the bonuses are already spent!

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Sources:
Welcome to CDO World!
Al Granberg, Special to ProPublica
ProPublica, August 26, 2010

http://www.propublica.org/special/cdo-world

Banks’ Self-Dealing Super-Charged Financial Crisis
Jake Bernstein and Jesse Eisinger
ProPublica, August 26, 2010

http://www.propublica.org/article/banks-self-dealing-super-charged-financial-crisis

Category: Bailouts, Derivatives

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

15 Responses to “Welcome to CDO World!”

  1. Petey Wheatstraw says:

    There is no independence for anyone involved in a Ponzi scheme — or in any criminal enterprise, for that matter. In for a dime, in for a dollar — makes no difference that you only drove the getaway car.

    Past gains were the retainer for these managers. Now that their role is pivotal in keeping the scheme/scam going, they are beholden to their associates to follow through on their assigned role.

    Amazing, still, that despite all of the obvious criminality that got us here, there have been no legal consequences for the perpetrators, who are well-known, and whose criminal activities are apparent, even to the casually interested. Only Madoff has experienced the applied force of the law, and his crimes were independent of the scam that is the greater economic fleecing of the US Treasury by the Corporatist machine.

  2. dead hobo says:

    1) Its pro publica, not pro pubica. I felt like washing my hands after reading that sentence.

    2) While GWB was in control when this all went on, I am gobsmacked at the lack of interest in Speechy Obama’s administration in prosecuting anyone. Perhaps they’re afraid of some embarrassment coming out if the defendants claim the need for bailout details to be made public?

    3) I’m happy, though, that within 18 months the person responsible for all of this will probably answer for it in a SEC press release (inside joke meant for frequent readers)

  3. O, Wait! You mean this whole Set Up was set up, to be taken down?

    set up
    1. To place in an upright position.
    2.
    a. To elevate; raise.
    b. To raise in authority or power; invest with power: They set the general up as a dictator.
    c. To put (oneself) forward as; claim to be: He has set himself up as an authority on the English language.
    d. To assemble and erect: set up a new machine.

    8. To lay plans for: set up a kidnapping.
    http://www.thefreedictionary.com/set+up
    ~~
    try 2 d. with heavy overtones of 2 b., then 8.
    ~~~
    regardless of ‘timeliness’, kudos to Al Granberg, Jake Bernstein, Jesse Eisinger, and ProPublica..

  4. btw, can get the Names of the ‘Investors’, esp. those Operating with an explicit Fiduciary duty, that were buying this G*rbage?

    and, maybe, you know, how they were ‘compensated’?

  5. quiddity says:

    BR: You doubled one panel and the last one is missing.

    ~~~

    BR: I don’t see the dupliates — the graphics are the same, but look at the content of the text. The headlines are all different

    But I did lose the last panel — I’ll add that now!

  6. cp says:

    How cool is it that this comic is done in the same style as the comics offered to children by the Federal Reserve? (Available free of charge from the New York Fed, if anyone’s interested.)

    https://www.newyorkfed.org/publications/result.cfm?comics=1

  7. Ilya says:

    Replace Banker with the Treasury, CDO manager with the FED, and CDO’s with Treasury paper and the cartoon becomes relevent in todays market.

  8. WFTA says:

    I’ll have to wait until later in the day to peruse the Propublica pieces. But aside from the content, why do we have to depend on a public interest foundation for this information? I mean WTF were the WSJ, the NYT, WP, CBS, NBC, ABC, FOX and all the rest of the so-called24-7 news organizations?

  9. James says:

    Amazing, still, that despite all of the obvious criminality that got us here, there have been no legal consequences for the perpetrators, who are well-known, and whose criminal activities are apparent, even to the casually interested.

    Indeed, isn’t it? How is it that the country and people have been so damaged by this sh*t, but there has been so little consequence for those who were responsible?

  10. ToNYC says:

    The SEC should require ALL deals be put in cartoon format on the first page. This simple measure would level the playing field and better match the attention span of the average retail investor. No offense meant and present company excluded.

  11. Lugnut says:

    “Indeed, isn’t it? How is it that the country and people have been so damaged by this sh*t, but there has been so little consequence for those who were responsible”

    That old saw rings true, although in a more updated varient: If you steal $100 from a bank your in big trouble, but if you steal a $100 Billion dollars, the bank (the Fed) is in trouble. Prosecution=>destabilizing the banks=>press down on their share prices=>capital ratio contraints=>destabilizing 75% of the banking infrastructure=>panic button being pushed.

    So, Obama, the SEC, the AG, et al turn a blind eye on widespread felony fraud and securities violations ‘for the welfare of the country’. If they didn’t connect those dots themselves, I’m sure the CEOs of the banks in question personally painted the picture for them, out of their concern for the country, no doubt.

  12. DeDude says:

    That has to be criminal fraud in some way. Shareholders should be able to sue and claw back those bonuses.

  13. ToNYC says:

    Life is Good when the FED crew needs you to be Too Big To Jail.
    The print-to- bubble excuse for an outsourced, strip out the embedded US wage base and depatriate the cash that’s left for the cronies to keep the curtain up in the Wizard’s OZ machine.

  14. David Merkel says:

    It would be very hard to get criminal prosecutions to succeed. Remember that Eliot Spitzer had relatively strong laws to work with, but rarely tried anyone – he would try to get them to surrender though use of the media.

  15. AHodge says:

    nice again
    this is basically one more accounting horror story. i have been boring my friends with the like for 3 years.
    While Goldman mentioned, they are not guilty of internal self dealing at mismatched prices.
    In fact they are against this. proposed forbidding it last year on their company web, as part of their financial reform proposals.

    Say what you will about Goldman, they favor good accounting. And know how to do it, along with Morgan. This protected them from bankruptcy and their execs looting the company. This is a key reason why the rest of Wall st—who wants to keep on selling overpriced badly valued product–joined in Goldman’s lynching.