Housing History Repeating Itself?

Discussion in 'Politics' started by kwc57, Apr 3, 2013.

  1. Toddsterpatriot
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    Toddsterpatriot Platinum Member

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    and then of course you have secondary markets for CDS contracts which is where opaque CDS risk chains come into the picture (A buys a CDS contract from B who then sells it to C who then sells it to D, if D can't pay off then everybody up the chain takes it in the rear) .

    Pretty sure they didn't work that way in 2007-2008.
    All swaps were between the 2 parties. A couldn't sell the contract he signed with B to C, A would have to write a new contract with C.....no netting.
     
  2. MACAULAY
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    MACAULAY Gold Member

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    _________________________________

    I'll try.

    Because they were based on loans to people who were allowed to get loans using their Welfare Payments as income, or unverified income, meaning LIES.

    Clinton started this by letting Fannie Mae and Freddie Mac set the rules for who qualifies, because he wanted deadbeat Democrats to be able to live in nice house just like people who actually worked for a living.

    Bush tried to stop it, because it was obvious what the end result would be, but the Cocksucking Liberals called him a Racist....lead by that official Cocksucker Barney Frank....who assured everyone that Fanny Mae and Freddie Mack were just fine and solvent as Hell, even though they had loads of loans on the books that were from many Democrats who would never be able to pay them back.

    So, Wall Street got involved---that's mostly the very Greedy, and mostly Democrats....and jumped on the wagon with Fannie Mae and Ferddie Mac-----and then the defaulting on the bad loans commenced in earnest.....and Fanny Mae & Freddie Mac crashed out as they obviously had to...and that nearly took the Shyster Democrats on Wall Street down with them.

    Because the Democrat control about 90% of the Media, the Republicans got the blame....because 1) Bush was still in office, and 2) Democrats are too poorly educated to understand it all anyway.....when in fact, lots of Democrats should have gone to jail. The Republicans do share some of the blame for being so scared shitless of the Democratic/NewYork Media, that they didn't do enough to stop the Scam, for fear of being called Racists.

    So, yea, if you are a dumb-ass Democrat, you think Credit Default Swaps did it. And you were probably educated in a rotting northern city run by Democrats for more than 40 years.
     
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  3. NightFox
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    NightFox Wildling

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    Unfortunately you're mistaken, CDS Contracts were regularly sold off so the underwriters could move risk off their books, they're financial assets after all and thus they're "tradeable", in fact it was common for speculators to buy both the underlying debt and the CDS contract for the debt if they reasoned that the debt was likely to default (so they could get the risk premiums on discounted debt) as well as the inverse case where speculators buying high premium CDS contracts and the underlying risky debt that they reasoned wouldn't default (same reason as the inverse case). Along with the above you also had a proliferation of naked CDS positions which is essentially just another synthetic derivative bet by speculators on assets they didn't own thus magnifying the negative effects of credit disruptions if the bets went bad.

    The bigger problem however wasn't the buying and selling of contracts (since that is a two party risk transfer), it was the situation you described where the original underwriter insures the CDS risk (with a new contract) to a third party and then that third party does the same thing with a fourth party and so on, this creates an opaque risk chain; its difficult to calculate actual risk because it's hard to determine who all the parties in the chain are let alone which ones are the "weak link(s)"; there is a cascading effect if any of the parties involved are unable to pay off in the event that the original debt defaults.
     
  4. Toddsterpatriot
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    Toddsterpatriot Platinum Member

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    Unfortunately you're mistaken, CDS Contracts were regularly sold off so the underwriters could move risk off their books, they're financial assets after all and thus they're "tradeable",

    No. They're contracts between 2 parties. Not standardized, not nettable and not tradeable.
     
  5. NightFox
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    NightFox Wildling

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    You need to do more homework because you're wrong, CDS are credit derivatives and were and are still bought and sold (traded), just like a myriad of other types of derivative contracts.
     
  6. Toddsterpatriot
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    Toddsterpatriot Platinum Member

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    You need to do more homework because you're wrong, CDS are credit derivatives and were and are still bought and sold (traded),

    If Goldman wrote a CDS contract with Merrill, Merrill could not liquidate the position by selling it to Morgan.
    If Merrill wrote an offsetting contract with Morgan, Merrill would have 2 contracts on the books, not zero contracts.

    just like a myriad of other types of derivative contracts

    Don't confuse these contracts with exchange traded options and futures.
     
  7. martybegan
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    martybegan Platinum Member

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    Just like any failure, be it mechanical or programmatic, there is almost never just a single event that leads to the result of the failure, it is normally a chain of events that cause the inevitable result.
     
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  8. NightFox
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    NightFox Wildling

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    Why not? it's a contract, just like a mortgage is a contract, the obligations and benefits on either go to the holder of the contract.

    Yeah and? what makes you think that risk is calculated by counting the number of contracts one has on one's books?

    I'm not but it appears that you are since you're the one that's claiming that CDS aren't tradeable, which leads one to conclude that you think that trades only occur on public exchanges.
     
  9. easyt65
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    easyt65 Diamond Member

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    'Those who fail to learn from history / their mistakes are doomed to repeat them."
     
  10. Mr.Blonde
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    Mr.Blonde VIP Member

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    Based on the article that was posted on this topic if it does "crash" the housing market again then the market needs to crash.

    If the only way a home owner can be one is through a tax credit then that person doesn't need to be one. My Grandmother worked for a bank all her working life and when the "bank crash of 08" happened she couldn't understand why (she had been retired for a few years and had been out of the loan department for even longer).

    She asked why. She had told me when she was in the loan department if someone wanted to buy a house the bank would put the person through hell to make sure they could afford a house.

    With the college debt bubble something will have to be done because that debt will bring down the housing market before a tax credit.
     

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