If you have not seen The Big Short, I seriously recommend you watch.

[onecaliberal]

Last edited Mon Mar 21, 2016, 09:49 AM - Edit history (1)

The banks started selling CDOs again in 2015. It's going to be much worse this time.

[Punkingal]

1. I saw it...and we will get screwed again, worse than before.

Everyone should see that movie, or better yet, read the book.

[elleng]

2. Right.

[nadinbrzezinski]

3. They got a new fancy name

Tranche opportunities. But same shit, different year

And it is likely one of the most critical movies in a long time

[highoverheadspace]

20. Saw that.

If you think about it, to makes a lot of sense due to its double meaning. Its going to leave a huge crevasse.

[nadinbrzezinski]

21. yup

[longship]

4. I have read the book multiple times, movie coming from NetFlix Wed.

The book is wonderful; the characters are amazing, especially Steve Eisman (AKA Mark Baum, played by Steve Carell), Greg Lippmann (AKA Jared Vennett, played by Ryan Gosling), and Dr. Michael Burry (played by Christian Bale). The focus of the book is the iconoclastic Steve Eisman (Mark Baum) who speaks his mind no matter who he is talking to. His personality is the one who moves the action of the book forward. It is his ethics at the end, when the entire world economic system is melting down, and he has made a huge fortune betting against that system, that he takes absolutely no comfort in those facts.

Yet, throughout the book, he was the only one who dared to state, "This is legal? No! This is fraud!"

Eisman (Baum) is the ethical center point of Michael Lewis' narrative.

Wednesday I get the DVD from NetFlix. Can hardly wait.

Eisman: "Say that again?"

[longship]

5. CBOs????

Don't you mean CDOs? Collateralized Debt Obligations. In the case of the mortgage meltdown of 2007-8, they weren't so collateralized as they were sold.

The epitome of insidiousness of the big Wall Street banks wasn't the CDO. It was the synthetic CDO, whose contents were not just mortgages, but also credit default swaps on other mortgage bonds (which precisely replicated the bond's risk therefore the original mortgage bond), plus since there were trash bonds which wouldn't sell because they were junk. They wrapped them all up into the synthetic CDOs, with the same layered tranches. S&P and Moodies would still rate the top tranches as AAA (equal in security to federal treasury bonds, no risk) even though they were nothing but recycled junk from the bottom tranches of other mortgage bonds.

And the Wall Street banks did this over and over and over again. The entire mortgage bond infrastructure was nothing but tissue paper. And every retirement account in the world bought them. And they were all replicated by insurance, the credit default swaps, which gave the investment banks even more product to sell, since the swap exactly replicated the risk of the original mortgages and could be built into yet more CDOs.

The only problem is, if house prices did not keep on rising, the whole thing collapsed on itself. As soon as the teaser rates on the adjustable rate mortgages expired, those mortgages would default, all at once. When that happened, the mortgage bonds would default, ALL AT ONCE. The credit default swaps would then become due, ALL AT ONCE. The issuers of that insurance (mainly AIG) would all go broke, ALL AT ONCE. Then, the Wall Street banks holding an incredible amount of debt on their books would then collapse, ALL AT ONCE.

That is what happened in 2008. And when Treasury Secretary Hank Paulson let Lehmann Bros fail, the collapse went into hyperdrive. We were clusterfucked.

And the $800 billion TARP bailout had zero for those who lost their homes, because the only thing the government cared about was the Wall Street banks. They were too fucking big to fail.

Thank you very little Bill Clinton and George W. Bush.

[pfitz59]

6. and none of the Wall Street slime went to jail

One floor selling CDOs to Pension Funds. The next floor down betting against them with Hedge Funds. Brokers from both floors laughing and partying their asses off...

[longship]

8. To hell with the sellers.

Why weren't Dick Fuld (Lehmann), Jamie Dimon (JP Morgan), Lloyd Blankfein (Goldman Sachs), John Mack (Morgan Stanley), etc. not held in chains for what they did?

And yes, I still want to see Joe Cassano of AIG FP in fucking chains for life. He made the tissue paper on which the rest of the edifice was built, the credit default swaps. Plus, he was a fucking jerk ON TOP OF THAT!

But you may be right, there were plenty of sellers who should do hard time. But if we restore regulation and put some of these top bankers in prison for life, just maybe we won't have to worry about the sellers.

That would be my recommendation. Bankers in Chains. Sounds like a good opera title. I wonder if Michael Lewis will turn "The Big Short" into an opera at the Met.

[Ruby the Liberal]

17. And don't forget John Thain (Merrill)

In December 2008, this weeks-from-unemployment for running ML into the ground (and arms of BoA) assclown presented the argument to the board that he should be awarded a $10mm bonus (!) because it could have been worse.

I only wish I was kidding.

Boggles the mind...

[Spitfire of ATJ]

9. There should have been frog marches out of the ratings agencies....

Instead, the mere MENTION of looking at them caused Standard and Poors to show who's boss. They had the nerve to downgrade the credit of the United States Government.

[JDPriestly]

10. Excellent summary.

And Hillary Clinton blamed the homeowners as equally at fault for the crash. She never talked to any homeowners who were caught in this fraudulent banking scheme. She never saw any of the incriminating evidence against the mortgage companies and bankers.

It was as bad as the S&L crisis of the 1980s if not worse, yet I don't think that the Justice Department every properly investigated it.

[Ruby the Liberal]

18. Ya gotta love it

Dear Hillary: Common Sense 101 says follow the money.

It wasn't the people who lost their homes (and their investment) who made out like bandits BEFORE, DURING and AFTER this scheme.

[killbotfactory]

7. Seriously, a good movie. K&R nt

[jmowreader]

11. If CDOs are properly rated and properly tranched, I don't see much of a problem

The Wharton School, a very famous and very good business school, agrees.

http://knowledge.wharton.upenn.edu/article/cdos-are-back-will-they-lead-to-another-financial-crisis/

Let's talk about what a CDO is supposed to be - kind of the mutual fund of the credit derivatives trade. You know what a mutual fund is: someone who has, supposedly, great experience in investing purchases a basket of 20 to 30 stocks and sells shares of the fund. A CDO is the same thing but it's with loans and derivatives - all sorts of them. A CDO creator can buy all sorts of debt of all different kinds for the derivative he is creating - some of these monsters contain mortgage-backed securities on both residential and commercial properties, various kinds of asset-backed securities (same thing as an MBS but with non-mortgage debt), leaseholds, cash, whole mortgages...just anything you want. They then evaluate each loan in the portfolio and place it in one of five categories (slices, or "tranches" - the French word for slices) according to risk. They've been issuing exactly these CDOs since 1987 and, until Mitt Romney figured out you could build a more-balls-than-brains CDO out of subprime loans and sell it at hedge-fund-level interest rates, no one ever heard of CDOs because they weren't a problem at all.

Mitt Romney is the whole key to this mess. He needed a new funding source for his corporate raids (the old ones were breaking rocks) so he decided he could tranche the nastiest subprime crap in the world into one huge pool instead of five. He naturally needed lots of subprime to do this with and the mortgage industry was happy to oblige. And of course they needed lots of expensive houses people couldn't afford to write subprime on, so the builders cooperated. (Why the hell do you think the McMansion craze came about?) And he needed these things rated Triple-A, so the rating agencies cooperated.

No sir. If CDOs are brought back to their roots as diverse investment vehicles, tranched properly and sold to the right investors, it'll be okay.

[onecaliberal]

12. They weren't properly rated, they never will be when ratings agencies are afraid

They'll lose business for doing so.

[librechik]

15. usually the funds HIRE the ratings agencies--no conflict there! n/t

[Scuba]

13. Should be "must see" for all Americans. Saw it a couple days ago, great movie.

I definately don't want more of the same. That's why I support Bernie Sanders for President.

[hedgehog]

14. Here's what I don't get: I loan you money, and two people who have nothing to do with us

place a bet as to whether you pay me back or not. How is this not gambling?

[onecaliberal]

16. How in the hell is that legal.

[Ruby the Liberal]

19. Thanks for the reminder

It isn't streaming? Blah. I moved it to the top of my DVD queue, so will plan to watch this weekend. Can't wait to see this!

[onecaliberal]

22. Be prepared to get pissed and have your mind blown several times at the fact

This could happen. Sad thing is the process is happening all over again and there is ALOT more to be lost this time.

[hedgehog]

23. This is the first time my husband told me to keep the DVD

until he watches it again!