Definitive Expose: ProPublica's "Banks’ Self-Dealing Super-Charged Financial Crisis" LINK

[Blackhatjack]

Clear, concise and stunning revelations .... worth the entire read.

http://www.propublica.org/article/banks-self-dealing-super-charged-financial-crisis

"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 <1> that solved one problem but created another: Each new CDO had its own risky pieces. Banks created yet other CDOs to buy those."

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[Vincardog]

1. This explains how 1 M in bad loans became 25 Billion in toxic derivatives. It down not explain why

WE have to make the Banksters corrupt 'earnings' good.

[Hannah Bell]

2. +1

[Blackhatjack]

3. IT does explain how fraud and cross-dealing contaminated all the Wall Streeters

The 'daisy chain' of new CDOs created to buy the riskier portions of original CDOs that were not selling is the rough equivalent to a PONZI SCHEME.

But to take down the main players at this game, you would have to implicate all the Wall Street players, AND that would have meant a real accounting of assets held entities who were unwilling to take the losses(ie. hedge funds, institutional investors).

And don't forget the international implications -- it lead to the nationalization of firms like Royal Bank of Scotland. How do you roll that back? You can't.

[Count Olaf]

4. K&R

nt

[Blackhatjack]

5. Key excerpt shows how Merrill and others 'faked' demand for CDOs...

"An analysis by research firm Thetica Systems, commissioned by ProPublica, shows that in the last years of the boom, CDOs had become the dominant purchaser of key, risky parts of other CDOs, largely replacing real investors like pension funds. By 2007, 67 percent of those slices were bought by other CDOs, up from 36 percent just three years earlier. The banks often orchestrated these purchases. In the last two years of the boom, nearly half of all CDOs sponsored by market leader Merrill Lynch bought significant portions of other Merrill CDOs <3>.

ProPublica also found 85 instances during 2006 and 2007 in which two CDOs bought pieces of each other's unsold inventory. These trades, which involved $107 billion worth of CDOs, underscore the extent to which the market lacked real buyers. Often the CDOs that swapped purchases closed within days of each other, the analysis shows."

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[Blackhatjack]

6. This is the kind of information that could lead to uprisings amongst the citizenry....

Take a look at who got bailed out with taxpayer $$ AND PRESERVED BILLIONS IN PROFITS AND RAISES, and compare them to those who lost their jobs, were foreclosed upon, and now have few prospects of receiving help from anyone.

Sounds like the recipe for an angry citizenry.