Same Old ...

The problems with Greece debt has brought to the forefront the same old "root cause" of the Panic of 2008 and all the problems that arose in that financial crisis.

The root cause is the colossal sums sloshing around in hedge funds and the Wall Street "investment" banks that facilitate their antics.

Look at the FT article today: http://www.ft.com/cms/s/0/87c3d0c6-1b30-11df-953f-00144feab49a.html

Here are some excepts if you can't get it all: "A few weeks ago, a distinctive delegation was spotted in the financial quarter of Athens: bankers from Goldman Sachs were escorting a high-powered team from the investment group run by John Paulson, the American hedge fund guru, around meetings with Greek officials and analysts ... "

"That is partly because of the manner in which hedge funds and others are perceived to be betting against the euro in general, and the debt of economically “peripheral” countries such as Greece in particular, by using derivative instruments such as credit default swaps ... "

"Goldman burst on to the Athens scene in 2002 by arranging a massive swaps transaction aimed at reducing the cost of financing that country’s public debt, which had reached a level that exceeded annual gross domestic product. The deal involved some €5bn ($6.8bn, £4.4bn) of off-market cross-currency swaps linked to outstanding Greek debt, where bonds denominated in yen and dollars were swapped for euros. Because it was treated as a currency trade rather than a loan, it helped Greece to meet European Union deficit limits while pushing repayments far into the future."

In simple words, it was a financial scam to defraud "real" bond investors of necessary information. Who make hundreds of million (billion ?) facilitating the fraud ? GS.

Who created the subprime mess ? The Wall Street investment banks did, and the hedge fund provided money for the equity and lowest rated tranches. Of course, BOTH then shorted the securities they were selling to real investors. Their swaps and positions in phony indexes such as created by Markit and derivatives on those gave them a huge, unregulated sandbox to play their games.

And they created all those phony collateralized debt obligations (CDO) - some concocted out of swaps alone - and the credit default swaps on those. All that was done to have a hidden playroom for their proprietary trading arms and their co-conspirators, the hedge funds. Nothing was regulated or reported accurately.

And what is DC doing ? Ooops I means RC = Racketeer Central. Nothing. Most are busy collecting bribes and payoffs (oops, I mean campaign contributions) from hedge funds and Wall Street as payoffs to slow and complicate efforts for real reform.

Ban all credit default swaps. Stop proprietary trading operations in ANY financial institution with any governmental licenses for anything. Bring back openness and expose all "swaps" to disclosure and require real cash collateral to back open short positions in those. And regulate all large hedge funds; limit lending to them. They are dangerous to the common man.

Word of the Day

"Incontinent" - adjective [$10 for precise definition]
Incontinent means 1. unable to control movements of the bowels or bladder or both; 2. lacking self restraint (especially in regard of sexual desire); 3. (followed by 'of') unable to control.
Sentence: In the long term, the greed inherent in Wall Street and hedge funds make them terminally incontinent of their leverage and risk. Without real regulation, they will blow up again. That old "Liar's Poker" metaphor of a "Big, swinging dick" fits their incontinence (definition #2) perfectly, too.