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The Meltdown in a Nutshell?
Me | 9/19/2008 | Me

Posted on 09/19/2008 11:51:15 AM PDT by agooga

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To: Texas_shutterbug
You are absolutely correct about it being the contractor's fault for the inferior construction. Using manual labor especially those homes built in the early 90's when the language barrier was much more difficult. (Before the big influx when housing really took off).

Of course they work especially hard since they are not spoiled americans yet which is what got us in this mess to begin with.

41 posted on 09/19/2008 2:16:41 PM PDT by Rapunzel (Never forget Fallujah..S. Helvenston RIP.....Sarah...Sarah...Sarah loves America)
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To: agooga

And another thing:

When two parties to a massive otc derivative contract each value the contract differently that is just crazy. The two parties should have to duke it out with each other every quarter to determine the value that both will use so that a contract that resulted in a zero sum of profit or loss does create a combined net profit.

If these super smart traders and hedgers want to make deals that are even harder to unwind than they are to understand, then force them to work together to prove that no profit has been booked on a zero sum event.

I know these are private contracts between consenting adult psychopaths, but there some things private citizens aren’t allowed to do. Like building a nuclear reactor in your garage.


42 posted on 09/19/2008 2:37:19 PM PDT by SBprone
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To: SBprone
The two parties should have to duke it out with each other every quarter to determine the value that both will use so that a contract that resulted in a zero sum of profit or loss does create a combined net profit.

I like your suggestions but there are some problems. There are three parties in the AIG cases, the creditor, the debtor and the insurer (AIG). Some of the insurance proceeds have been distributed as profit. Often, the insurance contracts themselves are sold out to a fourth party as a security often bundled and tranched with other deals to "lower risk" but which in fact removes any possibility of tracability.

43 posted on 09/19/2008 2:47:37 PM PDT by palmer (Some third party malcontents don't like Palin because she is a true conservative)
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To: palmer

Often, the insurance contracts themselves are sold out to a fourth party as a security often bundled and tranched with other deals to “lower risk” but which in fact removes any possibility of tracability.

You’re right. Traceability goes out the window when this stuff gets sliced and diced. Isn’t that what happens in money laundering?

I wonder how much the financial markets really benefit from spreading risk in this manner. Insuring against creditor defaults has given bondholders a false sense of security. Did they assume that if they were able to find someone to write the insurance and they paid the premium then they could sleep at night? I guess this assumption is the one that uncle sugar is making good on with the AIG bailout.

Lotsa questions, not so many answers.


44 posted on 09/19/2008 3:28:36 PM PDT by SBprone
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To: theBuckwheat
DING DING DING DING DING DING DING DING DING DING DING DING!

NO more calls, please. We have a winner!

Hint: this is why the "Bailout" of AIG is a good idea: they need *time* so that they can sell their securities in an orderly fashion, receiving a better price for them, thereby driving up the "market price" in "mark to market".

All the same, a loan at LIBOR + 850 basis points sounds like those SOBs are going to find out what it's like to be on the *receiving end* of a "fair and generous" credit card solicitation.

Cheers!

45 posted on 09/19/2008 6:40:04 PM PDT by grey_whiskers (The opinions are solely those of the author and are subject to change without notice.)
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To: SBprone
What's fun with the tranching and re-selling of mortgages is that it has happened that the bank which tried to foreclose could not, because they didn't have proof that they actually owned the loan.

Serves the greedy bustards right.

Cheers!

46 posted on 09/19/2008 6:45:31 PM PDT by grey_whiskers (The opinions are solely those of the author and are subject to change without notice.)
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To: Thane_Banquo

This is not a valid analogy. FASB 157 has nothing to do with the score shown by the board, instead it is about the rules by which that sore is computed. When you change the rules and the game must suddenly be played differently, of course all the old plays will yield different results.

In this case, a more suitable sports analogy would be: 10-15% of the players on the field were suddenly disqualified. Of course the game collapsed.


47 posted on 09/19/2008 6:55:02 PM PDT by theBuckwheat
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