Banks’ Self-Dealing Super-Charged Financial Crisis

[UpInArms]

Source: ProPublica

Over the last two years of the housing bubble, Wall Street bankers perpetrated one of the greatest episodes of self-dealing in financial history.

Faced with increasing difficulty in selling the mortgage-backed securities that had been among their most lucrative products, the banks hit on a solution that preserved their quarterly earnings and huge bonuses:

They created fake demand.

A ProPublica analysis shows for the first time the extent to which banks -- primarily Merrill Lynch, but also Citigroup, UBS and others -- bought their own products and cranked up an assembly line that otherwise should have flagged.

The products they were buying and selling were at the heart of the 2008 meltdown -- collections of mortgage bonds known as collateralized debt obligations, or CDOs.

As the housing boom began to slow in mid-2006, investors became skittish about the riskier parts of those investments. So the banks created -- and ultimately provided most of the money for -- new CDOs. Those new CDOs bought the hard-to-sell pieces of the original CDOs. The result was a daisy chain that solved one problem but created another: Each new CDO had its own risky pieces. Banks created yet other CDOs to buy those.

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

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criminals

[Downwinder]

1. A snake eating its tail. n/t

[Raster]

2. Yes, and when the house of CDOs began to collapse, Wall Street went high drama

that THEIR misdeeds would collapse the system--their system, their misdeeds, their toxic products, their profits--at our peril.

[Downwinder]

3. How is this any different than Bernie Madoff?

[quakerboy]

4. They own more senators and have more highly placed friends

[Frank Booth]

5. Plus, Bernie Madoff screwed predominantly rich people.

He should have avoided committing a punishable crime by preying on the middle and lower class.

[ooglymoogly]

6. The only thing certain about this fiasco in a long line of fiascos

is that it will fade from conciseness in a bank of fog; The Fed in collusion with the treasury, will hand out whatever is wanted to keep the powerful afloat and the 10-40 million dollar bonuses safe and we will be handed the bill for our grandchildren to pay in ever greater deficits; Trillions stolen by thugs.