ProPublica: How Banks Faked Demand And Made The Financial Crisis Much Worse

[marmar]

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. ..............(more)

The complete piece is at: http://www.propublica.org/article/banks-self-dealing-super-charged-financial-crisis

[ixion]

1. "Fake Demand" = Fraud

So let trials begin. (Yeah, right, like that'll happen any time soon.)

[marmar]

2. They absolutely need to be tried and jailed for this.

[SammyWinstonJack]

4. That wouldn't be "forward looking" now would it?

:evilgrin:

[QC]

5. Please do try to be more sensible. n/t

[KharmaTrain]

3. And The Beat Goes On...

No surprises here...and that's the real tragedy that has grown worse over the past couple years. While the bank bailout happened under booosh...who put no strings on the billions the banks sucked up, the Obama administration blew a great opportunity with all the discontent with Wall Street and the banksters to put the screws to the ongoing speculation games and reregulate the market. Underwater mortgages...that continue to grow are no new surprise...this administration knew the ticking bomb of consumer debt and the credit crunch would result in more foreclosures and the depression of the housing market...yet they did precious little.

The banksters have only one "fiduciary" responsibility...and that's to its shareholders. Not to its depositors or country...only to those who approve the big bonuses and vote in stock and board elections. They're gonna continue to rig the game or come up with new "vehicles"...especially when they know there's a tepid administration scared shit of confronting them.

[indepat]

6. We can take comfort knowing Holder's Justice Dept. will track down and prosecute every fraudster to

the fullest extent of the law. :P

[SammyWinstonJack]

7. heheh

:evilgrin: