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Wed Jan 23, 2013, 06:38 PM

Morgan Stanley Bankers Sold Off 'Shitbag' CDOs With 'Nuclear' Capabilities To Clients: Emails

Morgan Stanley Bankers Sold Off 'Shitbag' CDOs With 'Nuclear' Capabilities To Clients: Emails
Mark Gongloff - HuffPo
Posted: 01/23/2013 4:03 pm EST | Updated: 01/23/2013 4:13 pm EST

?6

<snip>

It's becoming depressingly familiar: Bankers joke openly in emails about a toxic investment they're creating. Bankers sell said toxic investment to clients while betting against it. Everybody loses money, nobody goes to jail. Rinse, repeat, crash the economy.

The latest round of emails was produced in a lawsuit by a Chinese bank suing Morgan Stanley over a $500 million subprime-mortgage collateralized debt obligation the bank created and marketed as "Stack 2006-1." ProPublica's Jesse Eisinger writes that documents in the case show Morgan Stanley bankers had very different ideas about what it should be called. Those names, according to internal emails from early 2007 unearthed in the case, included "Shitbag," "Nuclear Holocaust," "Subprime Meltdown" and "Mike Tyson's Punchout."

The bankers were clearly kidding. They floated some nice names, too, before settling on "Stack." More troubling is what the rest of the documents show, according to Eisinger: Morgan Stanley was stacking its shitbags of subprime garbage high while knowing full well that the whole thing was sure to topple and make a huge mess:


People across the bank understood that the American housing market was in trouble. They took advantage of that knowledge to create and then bet against securities and then also to unload garbage investments on unsuspecting buyers.


So why aren't any of these people in jail? For one thing, they have a fairly sturdy defense. Morgan Stanley says the Chinese bank and other investors were big boys in the big leagues and should have known what they were buying. The bank says it warned investors in offering documents that they might bet against the CDOs they were creating. And Morgan Stanley also points out that it owned a chunk of Stack and lost money on it. It also lost money when it got caught holding too many subprime shitbags when the crisis erupted.

U.S. officials have been spooked enough by these defenses to stay far, far away from criminal charges in any of these cases, as a "Frontline" documentary Tuesday night showed again in depressing detail: http://tinyurl.com/bfrx29b

<snip>

More: http://www.huffingtonpost.com/2013/01/23/morgan-stanley-cdo-emails_n_2535784.html?utm_hp_ref=business







38 replies, 2491 views

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Reply Morgan Stanley Bankers Sold Off 'Shitbag' CDOs With 'Nuclear' Capabilities To Clients: Emails (Original post)
WillyT Jan 2013 OP
Vinnie From Indy Jan 2013 #1
WillyT Jan 2013 #3
MannyGoldstein Jan 2013 #9
WillyT Jan 2013 #15
MannyGoldstein Jan 2013 #19
WillyT Jan 2013 #20
banned from Kos Jan 2013 #24
WillyT Jan 2013 #26
banned from Kos Jan 2013 #27
bigapple1963 Jan 2013 #29
uponit7771 Jan 2013 #37
reformist2 Jan 2013 #2
WillyT Jan 2013 #4
CountAllVotes Jan 2013 #5
Initech Jan 2013 #6
WillyT Jan 2013 #7
CountAllVotes Jan 2013 #8
WillyT Jan 2013 #10
Initech Jan 2013 #11
malaise Jan 2013 #12
Octafish Jan 2013 #13
bigapple1963 Jan 2013 #21
Fire Walk With Me Jan 2013 #14
Melinda Jan 2013 #16
annabanana Jan 2013 #17
libdem4life Jan 2013 #18
marmar Jan 2013 #22
WillyT Jan 2013 #23
Whovian Jan 2013 #25
bigapple1963 Jan 2013 #28
Whovian Jan 2013 #30
bigapple1963 Jan 2013 #31
Vinnie From Indy Jan 2013 #36
bigapple1963 Jan 2013 #38
just1voice Jan 2013 #32
smokey nj Jan 2013 #33
WillyT Jan 2013 #34
woo me with science Jan 2013 #35

Response to WillyT (Original post)

Wed Jan 23, 2013, 06:53 PM

1. Don't forget the corruption at the ratings agencies as well.

It is simply breathtaking how the rule of law no longer applies to the banking industry.

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Response to Vinnie From Indy (Reply #1)

Wed Jan 23, 2013, 07:14 PM

3. More Here:

Breuer Identifies Real Clients on Frontline then Quits
By: masaccio - FDL
Wednesday January 23, 2013 4:03 pm


Lanny Breuer, Judge, Jury and Prosecutor, Rules for the Banksters

<snip>

Lanny Breuer is out as head of the Criminal Division of the Department of Justice, according to the Washington Post. After his ratlike performance on Frontline (transcript here: http://www.pbs.org/wgbh/pages/frontline/business-economy-financial-crisis/untouchables/lanny-breuer-financial-fraud-has-not-gone-unpunished/ ) it won’t be long before we find him at some creepy New York or DC law firm defending his best friends, the banks and their sleazy employees. His legacy is simple: too big to fail banks can’t possibly commit crimes, so minor civil fines and false promises of reform are punishment enough. Jamie Dimon couldn’t have put it better.

Breuer tried his best to dodge questions about why he violated his promise to Senator Kaufman that he was actually conducting an investigation of Wall Street fraud. Martin Smith, the interviewer, asks:

We spoke to a couple of sources from within the fraud section of the Criminal Division, and through mid-2010 they reported that when it came to Wall Street, there were no investigations going on; there were no subpoenas, no document reviews, no wiretaps.


Breuer responds: “we looked very hard at the types of matters that you’re talking about.” He doesn’t deny that there were no investigations; no subpoenas, no document reviews, no wiretaps. Instead, he tries to shift the subject to his pointless insider trading cases, his Ponzi cases, the Lee Farkas case (the mortgage firm Taylor, Whitaker and Bean), and a few hapless mortgage originator cases, and even a policeman defrauded by some fraud or other. Smith won’t let that pass. Eventually we get to the heart of the problem to Breuer:

But in those cases where we can’t bring a criminal case — and federal criminal cases are hard to bring — I have to prove that you had the specific intent to defraud. I have to prove that the counterparty, the other side of the transaction, relied on your misrepresentation. If we cannot establish that, then we can’t bring a criminal case.



But in reality, in a criminal case, we have to prove beyond a reasonable doubt — not a preponderance, not 51 percent — beyond any reasonable doubt that a crime was committed. And I have to prove not only that you made a false statement but that you intended to commit a crime, and also that the other side of the transaction relied on what you were saying. And frankly, in many of the securitizations and the kinds of transactions we’re talking about, in reality you had very sophisticated counterparties on both sides.


Smith says “You do have plaintiffs who will come forward and say that they relied on the reps and warranties, and they relied on the due diligence claims that were made by the bank.”

Breuer keeps talking, but he can’t worm out of this one. Smith then says:

“We’ve spoken to people inside the Residential Mortgage-Backed Securities Working Group who said that when they began their work in January, February, March of 2012 that they found nothing at the Justice Department in the pipeline, no ongoing cases looking at securitization.”


<snip>

More: http://my.firedoglake.com/masaccio/2013/01/23/breuer-identifies-real-clients-on-frontline-then-quits/

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Response to WillyT (Reply #3)

Wed Jan 23, 2013, 07:55 PM

9. Unbelieveable.

All hail the Third Way and their banker masters.

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Response to MannyGoldstein (Reply #9)

Wed Jan 23, 2013, 08:36 PM

15. Yep...

You know... we have a member or two... at least... that work in Finance...

I would LOVE to hear their thoughts on this.




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Response to WillyT (Reply #15)

Wed Jan 23, 2013, 09:06 PM

19. I'm guessing at least one of them isn't on Kos.

Just a hunch

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Response to MannyGoldstein (Reply #19)

Wed Jan 23, 2013, 09:13 PM

20. I Have NO Idea What You Are Suggesting...










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Response to WillyT (Reply #20)

Wed Jan 23, 2013, 09:59 PM

24. Well, since you ASK.....

 

There is no law prohibiting an entity from selling a security it "knows is in trouble" unless that information is not public (insider) information.

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Response to banned from Kos (Reply #24)

Wed Jan 23, 2013, 10:08 PM

26. So... Are We Just Naive To Think There's Some Justice Here ???

And I ask in earnest... I REALLY want to know.

ARE WE JUST NAIVE IN DEALING WITH THE BANKS, WALL STREET, ETC...



I'm serous... And I'd love your advice.




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Response to WillyT (Reply #26)

Wed Jan 23, 2013, 10:35 PM

27. Have you ever read an MBS prospectus? I have.

 

It says this (except with pages of detail).

You could lose your entire investment if -

the mortgage market sours
our assumptions are wrong
we fail to deliver
credit conditions change
interest rates skyrocket
UE goes to 15%
so on and so on for pages


Point is when you sign off on that - you forfiet on everything.

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Response to WillyT (Reply #26)

Wed Jan 23, 2013, 10:40 PM

29. what law do you think they broke?

 

securities fraud? insider trading? breach of fiduciary duty?

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Response to Vinnie From Indy (Reply #1)

Fri Jan 25, 2013, 12:18 PM

37. Another extremely gating factor in the whole mess, without RA changing risk models there would be no

...big money in the whole crash.

They were sued but for very little

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Response to WillyT (Original post)

Wed Jan 23, 2013, 07:02 PM

2. Maybe this makes me a radical, but I don't believe in caveat emptor.


I believe the seller should have a legal obligation to tell the buyer at least some basic truths about what he/she is selling.

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Response to WillyT (Original post)

Wed Jan 23, 2013, 07:33 PM

4. Thanks All !!! - This Is Damned Important !!!






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Response to WillyT (Original post)

Wed Jan 23, 2013, 07:37 PM

5. Everytime a story like this appears

These types of stories make me cringe and also make me think (know) that Wall Street is a place where the crooks can and always will be found and lead one to not care to have anything at all to do with them.

Carry-on capitalist pigs. Some day you'll find your troughs empty!

& recommend.

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Response to WillyT (Original post)

Wed Jan 23, 2013, 07:42 PM

6. Fuck this "too big to prosecute" bullshit. We need to go after these fuckers now.

Or they'll keep crashing the economy again and again and getting off scot-free.

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Response to Initech (Reply #6)

Wed Jan 23, 2013, 07:44 PM

7. Amen Initech... A-Fucking-Men !!!





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Response to Initech (Reply #6)

Wed Jan 23, 2013, 07:44 PM

8. All they want is one thing

Your money and all of it. They'll "invest" it for you and make you a millionaire in no time!

I know why I stay away from these crooks! That is because they are crooks and they belong in jail for the rest of their lives.

Instead they get some huge year-end bonus for all of their "hard work".



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Response to CountAllVotes (Reply #8)

Wed Jan 23, 2013, 07:57 PM

10. Preach It CountAllVotes... Preach It !!!








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Response to CountAllVotes (Reply #8)

Wed Jan 23, 2013, 07:58 PM

11. Yup it's the only true form of legalized gambling we have.

Of course unlike Vegas style gambling, it only has one outcome and it *ALWAYS* favors the house.

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Response to WillyT (Original post)

Wed Jan 23, 2013, 08:10 PM

12. K & R

Very important

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Response to WillyT (Original post)

Wed Jan 23, 2013, 08:17 PM

13. That used to be called 'Fraud.'

Now it's called Banking.

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Response to Octafish (Reply #13)

Wed Jan 23, 2013, 09:18 PM

21. only

 

if there was material misrepresentation made. An opinion is NOT a misrepresentation of fact. Some parts of Morgan Stanley may have believed that the housing market was going to crash. But then again, it might not have crashed. The bubble could have gone on and Morgan Stanley could have lost on their shorts.

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Response to WillyT (Original post)

Wed Jan 23, 2013, 08:18 PM

14. K&R

 

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Response to WillyT (Original post)

Wed Jan 23, 2013, 08:48 PM

16. K&R

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Response to WillyT (Original post)

Wed Jan 23, 2013, 08:53 PM

17. Damn pity that the Fourth Estate is essentially dead. . .n/t

Frontline represents little flickers of a dying light.

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Response to WillyT (Original post)

Wed Jan 23, 2013, 08:57 PM

18. "Too big to fail" really means that everybody's "Two Big" hands are in the till.

Starts way down the Pecking Order...fully vetted and owned by the time anyone might have any reform power.

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Response to WillyT (Original post)

Wed Jan 23, 2013, 09:21 PM

22. k/r


Bankster's Paradise

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Response to WillyT (Original post)

Wed Jan 23, 2013, 09:49 PM

23. Remember When We Were... The Underground ???






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Response to WillyT (Original post)

Wed Jan 23, 2013, 10:03 PM

25. Why aren't these bastards in jail?

 

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Response to Whovian (Reply #25)

Wed Jan 23, 2013, 10:38 PM

28. what

 

statute in the US Code did they break?

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Response to bigapple1963 (Reply #28)

Wed Jan 23, 2013, 10:44 PM

30. I'm not a lawyer.

 

Couldn't name a statute if I tried. But I do know evil when I see it.

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Response to Whovian (Reply #30)

Wed Jan 23, 2013, 10:48 PM

31. what's so evil?

 

Here's a very simple analogy.

You call up your private banker at your bank. You want to buy 1m EUR. Now, this desk could be net long or net short EUR/USD. The bank as a whole could be bearish EUR because all their economists say Greece, France and Spain are bankrupt.

Now, is the bank doing anything illegal or immoral (evil) as you call it by selling you EUR without explaining why it's bearish? Or does it assume you're a big boy and you know what you're doing when you say you want to buy 1m EUR.

Now, just substitute "housing market" for EUR.

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Response to bigapple1963 (Reply #31)

Fri Jan 25, 2013, 12:11 PM

36. LOL! What a load of hooey!

The fact is that there is PLENTY of evidence that fraud was comitted not only by the banksters, but by the rating agencies that had the fiduciary duty to examine and rate bundled mortgage securities that they had to have known were junk. Your currency analogy is bogus.

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Response to Vinnie From Indy (Reply #36)

Mon Jan 28, 2013, 01:04 PM

38. fraud

 

has a precise legal term. There needs to be a material misrepresentation of facts. What facts did Morgan Stanley misrepresent? An opinion on the direction of the housing market is not a fact.

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Response to WillyT (Original post)

Wed Jan 23, 2013, 11:29 PM

32. K&R, justice is required here instead of praying to a fake god on MLK's bible

 

I also K&R'd this post because of an obvious lying piece of shit in this thread who should be banned from here as well.

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Response to WillyT (Original post)

Thu Jan 24, 2013, 07:41 AM

33. Kick!

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Response to WillyT (Original post)

Thu Jan 24, 2013, 11:03 PM

34. Last Kick From Me...


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Response to WillyT (Original post)

Fri Jan 25, 2013, 09:20 AM

35. Kick

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