"Some see private enterprise as a predatory target to be shot, others as a cow to be milked, but few are those who see it as a sturdy horse pulling the wagon." - Churchill

It would be silly to suggest that there haven't been abuses. But those simply do not rest SOLELY on the shoulders of bankers.

Regulators, (Home/Propety) Appraisers, and borrowers are surely complicit. In fact, in the run-up in the mortgage debacles there clearly was a symbiotic relationship. Fools were flipping houses to make a quick profit and it was all good until the music stopped.

Have a read of Michael Lewis' wonderful books - 'The Big Short' and 'Boomerang: Travels in the New Third World'.

In the first he bares witness to the fact that almost NO ONE understood the CDO/CDS and a particular Deutsche Bank trader went from full bull to full bear on the whole game, much to the incredulity of his peers, his employers, and two other parties who'd figured out that the emperor had no clothes. In essenece, when everyone was making money, no one could stop or at least didn't believe the music would stop without them having a chair (musical chairs).

If an Art History major, even one from Princeton, can figure this out . . . it's not rocket science. (Granted, some sections of 'The Big Short' are a bit mathematical.)

In the second, he examines, with pithy irony, "beware of Greeks bearing bonds" and how various populations (Greece, Ireland, Germany, etc) behaved when the money was there for the taking.

As for the whole CDO/CDS . . . go back to '98 when an intrepid Brooksley Born raised in investigation into the entire market of CDSs. She was effectively shot down by Alan Greenspan, Larry (Lawrence) Summers, and Arthur Levitt (head of the SEC). At that time the market was in the mid-100 $Billions. By 2008 it had increased to an estimated 56 $Trillion, one year of TOTAL global economic output.

That enormous leverage, and it's lack or regulation, gave forth to ENORMOUS counter-party risk.

So . . . back to "bankers". AIG, an enormously successful company of over 100,000 employees was brought to it's knees by about 1,000 folks in London of whom perhaps 40 were directly responsible.

Too much money chasing too few assets - asset bubble. The "chasers" - borrowers, appraisers, credit rating agencies, regulators . . . and some bankers.

__________________
Orange, it's the new black.

Thanks for the book recommendations; there seem to be a few Boomerang editions, so at least this author is making a decent living.

Would you credit it! Top of the news today in the UK is the latest scandal for which there is a report from the UK FSA.
Yep, this refers to the "infamous" credit debt swops (CDS) which apparently hardly anyone understood when they were mis-sold by banks, to businesses.
It is reported that this one will be much bigger than that of PPI, mentioned here earlier, in monetary terms alone.
And it will keep the lawyers and courts busy for a while.

Some of the pundits on the news are calling the financial products "interest rate swops" but the way they are discussed indicates that they are one and the same thing as CDSs.
It is alledged that up to 90% of those sold to businesses were "mis-sold" but I haven't heard any clear definition of what that is - maybe in this day and age, if you don't understand what you are doing but you go ahead and do it anyway then you are a victim??


Incidentally, I had similar thoughts about musical chair games and "the emperor has no clothes" fables, but also the game of pass the parcel = someone ends up holding the parcel when the music stops.
The latter seems to be the essence of the whole CDO/CDS saga.
It was also a process of passing the risk contained in bad debts back to those who originally borrowed from the banks, thus closing the loop of "passing the parcel".

__________________
Dave

Those parties directly affected by this mis-selling are organised it transpires:-
Bully-Banks Supports Businesses Who Were Mis-Sold IRSAs - Interest Rate Swap Agreements by Rogue Banks
The bullet points in the highlights on the main page of this web link summarise the way these financial products were foisted onto businesses.

And for anyone who has read this far there is plenty of further explanation within the press, such as:-
http://www.telegraph.co.uk/finance/r...and-banks.html
Interestingly, the posts at the end of that article cover just about every range of opinion that has been expressed in here to date.

__________________
Dave