The Free Market, Financial Style: How the Scam Works »
Posted By dissent 7 months, 1 week ago in NewsNewspaper reports seem surprised at how high banks are bidding for the junk mortgages that Treasury Secretary Geithner is now bidding for, having mobilized the FDIC and Fed to transfer yet more public funds to the banks. Bank stocks are soaring – thereby bidding up the Dow Jones Industrial Average, as if the “financial industry” really were part of the industrial economy.
Why are the very worst offenders – Bank of America (now owner of the Countrywide crooks) and Citibank the largest buyers? As the worst abusers and packagers of CDOs, shouldn’t they be in the best position to see how worthless their junk mortgages are?
That turns out to be the key! Obviously, the government has failed to protect itself – deliberately, intentionally failed to do so – in order to let the banks pull off the following scam.
Read Full Story at counterpunch.org »
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dissent
we live in a culture of war.
let's make it a culture of peace.
"my country is the world. and my religion is to ...
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obiefrommuskogee7 months, 1 week ago
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Sounds like the same smoke and mirrors that caused the economic crash we have now. Inflated financial transactions piggybacked on worthless securities. Financial agents just passing around airballs.
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We should be taxing the beJesus out of each transaction. Why aren't these transactions taxed? -
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dissent7 months, 1 week ago
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fta
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"Suppose a bank is sitting on a $10 million package of collateralized debt obligations (CDOs) that was put together by, say, Countrywide out of junk mortgages. Given the high proportion of fraud (and a recent Fitch study found that every package it examined was rife with financial fraud), this package may be worth at most only $2 million as defaults loom on Alt-A “liars’ loan” mortgages and subprime mortgages where the mortgage brokers also have lied in filling out the forms for hapless borrowers or witting operators taking out mortgages at far more than properties were worth and pocketing the excess.
The bank now offers $3 million to buy back this mortgage. What the hell, the more they bid, the more they get from the government. So why not bid $5 million. (In practice, friendly banks may bid for each other’s junk CDOs.) The government – that is, the hapless FDIC – puts up 85 per cent of $5 million to buy this – namely, $4,250,000. The bank only needs to put up 15 per cent – namely, $750,000.
Here’s the rip-off as I see it. For an outlay of $750,000, the bank rids its books of a mortgage worth $2 million, for which it receives $4,250,000. It gets twice as much as the junk is worth." -
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dgoodii7 months, 1 week ago
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Just smoke, Government is still just buying bad debt from banks in long run. Now we see how congress and federal government are insuring their donors will come out OK in the end. The scam goes from private to public with no punishment of either.
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