tagged w/ S&L
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But first *** A short explanation of how we got to where we are
Today's banking crisis is the THIRD trillion dollar plus
US-caused financial meltdown in the last twenty years.
Each one of these crises came into being through the same basic
mechanism...the fraudulent over-valuing of financial assets by
Wall Street - with a "wink and a nod" (and sometimes a lot more)
from the White House and Congress.
The fraudulently valued assets stimulate the economy, impart
the illusion of health and then, inevitably, the fraud goes
too far and the whole house of card comes painfully crashing
back to earth.
The three trillion dollar plus frauds were:
Fraud #1: The so-called "Savings and Loan Crisis" of the late 80s
Fraud #2: The so-called "Tech Bubble" of the late 90s
Fraud #3: The so-called "Credit Crisis" of today
*** How the scam works
The mechanism of these frauds is simplicity itself...
...Take a shaky financial asset and blow up its value
and then sell as much of it as you can.
In the "Savings and Loan Crisis," the instrument was junk bonds.
In the "Tech Bubble" it was Internet stocks.
In the "Credit Crisis" it was individual mortgages collected
into pools and then re-sold to investors.
In each case, normal, well established "bread and butter"
financial principles were consciously thrown away by Wall Street
with no hint of protest from federal regulators.
***The "Savings and Loan Crisis" dissected
Junk bonds caused the Saving and Loan crisis which
resulted in the US taking over the assets of hundreds of
banks and selling them back over time to the marketplace
at fire sale prices.
Junk bonds, which caused the "Savings and Loan Crisis" were
shaky bonds that were pumped up by deliberate misrepresentation
and what I call "staged dealing."
Bonds get their value from two things: the amount of interest
they pay and how safe they are.
"Junk" bonds have to pay higher interest because they are less
safe. Therefore, until the "Savings and Loan Crisis," savings
and loan banks banks were not allowed by law to buy them and call
them assets.
Reagan/Bush changed all this and then a group of Wall Street
fraudsters used the new loophole to kick off an orgy of junk
bond creation and junk bond selling to banks and insurance
companies.
The crooks would deal the junk bonds back and forth
amongst themselves thereby establishing their "value"
and then they'd sell them to outsiders. The bonds
then became "assets" which could be borrowed against
and leveraged to buy even more bonds.
When the bonds failed, the banks failed and in stepped the
US government to "fix" the problem that it created at the cost
of at least one trillion dollars to US tax payers.
Deja vu, eh?
***The "Tech Bubble" dissected
The instrument of fraud in the "Tech Bubble" was Internet
stocks, start ups in particular.
A stock gets its value from the underlying company's sales,
its growth and its overall prospects for the future.
Pre-tech bubble, companies used to have to prove themselves
by being in existence for several years before they could
be sold on major exchanges. That standard was thrown away
during the tech bubble.
To pump of their values, the companies engaged in
"staged dealing" just like the junk bond crooks.
Company #1 would "sell" 20 million dollars in banner
ads to Company #2 which would in turn "sell" 20 million
in banner ads to Company #1.
In fact, nobody sold anybody anything. Company #2 ran
ads for Company #1 and billed it for them. Company #1
ran ads for Company #2 and billed for an equal amount.
These should have been called media trades not sales, but
Wall Street was happy to claim them as legitimate cash sales
and then use the sales numbers to fraudulently value these
companies - many of them totally worthless - in the
hundreds of millions and sometimes even the billions.
But first *** A short explanation of how we got to where we are
Today's... more
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