Ted Cruz's Creditor Pays Historic Regulatory Penalty

[g5000]

I took one of my money managers to task during the bubble for investing my money in bond derivatives (always read the fine print!). He was an idiot.

I spent hours with him, drawing the problem on a whiteboard. Nothing was penetrating, so I took all my money away from that company.

They took it up the ass big time when the shit hit the fan.

I also exerted a lot of effort to alert my friends in the media. But there are few professions stuffed chock full of idiots more than the media.

We still have a lot of rubes walking around who are absolutely clueless about the shit which went down and the crimes which were committed, and the level of collusion between Wall Street and the US government and its regulators. They are absolutely clueless, and thus vulnerable to no end of bullshit manufactured specifically to keep them stupid and handing their money over to thieves.

You will be retiring with a lot less money than you should be. Sorry, rubes, but you deserve that.

 

[g5000]

What the investors did not realize is that they were insuring toxic CDOs.

Are you telling me that these very sophisticated investors, investing billions of dollars, made a bet on mortgages and then the mortgages defaulted? Were they unable to research the mortgages these synthetics were mirroring?

Where you went wrong was assuming the investors were "sophisticated". The inside joke in the industry is that money managers think proximity to billions of dollars of other people's money makes them "sophisticated". They aren't. They are easily bought with hookers and blow and box seats. They are clueless.

This is who is managing your money for you. Clueless coked out fools in a baseball stadium box seat.

Traders have an expression for when they take down one of these idiots. "I ripped his face off!" And they high five.

Even worse, the individuals on the other side of the bet were the ones who picked the toxic instruments which were packaged into the synthetic CDO,

One sophisticated investor won, another lost. And?

No, a con man won and a rube lost.

And? The con man broke the law.

They did not inform the investors they were the ones who chose the products which the synthetic CDO was build on

Usually, an investor doesn't know the guy on the opposite side of the trade. Not sure if that was the case here.

It is required by law they inform the investors of this.

and that is illegal.

Against the "tell me who picked the mortgages" law? Do you have a link to that law?

I have provided link after link after link. READ THEM!!!

 

[BluesLegend]

How many guys from Goldman did Obama hire again to fill spots in his cabinet? OH SNAP!

Bush brought a lot of Goldman execs on board. In fact, almost every modern Administration has. OH, SNAP!

Bush's Treasury Secretary came to the job straight from the CEO position at Goldman. On his way out the door, Hank Paulson signaled he knew some seriously bad shit was going to come down.

Neel Kashkari also came from Goldman. He was the overseer of TARP.

The list of Goldman Sachs alumni in the Bush Administration is longer than the ones in the Obama Administration.

BOOOOOOOOOOOOOOOOOOOOOOOOOSH!! We are talking about Obama fool.

No, we are talking about Goldman Sachs and its crimes which contributed to the economic crash. Obama wasn't even around then, retard. Your hack idiocy attempting to drag Obama into it doesn't even rank a "nice try".

No you people were throwing mud at Cruz for taking out a loan at Goldman, I pointed out your hypocrisy given Obama hired a bunch of guys from Goldman, then you deflected with a BOOOOOOOOOOSH! Now you are embarrassed and have a sour grapes face on.

 

[g5000]

No you people were throwing mud at Cruz for taking out a loan at Goldman,

No, I wasn't. Try again.

 

[g5000]

If I have time later, I will explain how a synthetic CDO works, and how the ABACUS scam worked.

An explanation will take about a full page, and I am not even sure it is worth the effort since the rubes are persistent in defending their delusions and staying on as slaves at their master's Wall Street plantation.

 

[BluesLegend]

No you people were throwing mud at Cruz for taking out a loan at Goldman,

No, I wasn't. Try again.

There you stand, cookie crumbs all down your shirt looking guilty, claiming you didn't steal a cookie. lol

 

[g5000]

No you people were throwing mud at Cruz for taking out a loan at Goldman,

No, I wasn't. Try again.

There you stand, cookie crumbs all down your shirt looking guilty, claiming you didn't steal a cookie. lol

Now you must provide evidence to back up your lie.

Good luck with that.

 

[NoTeaPartyPleez]

ZZZZZZZZZZZZZ

I'm sure this is boring for you, so very far out of your depth on threads like this. The only dots you can connect are in your kid's game books.

 

[NoTeaPartyPleez]

No you people were throwing mud at Cruz for taking out a loan at Goldman,

No, I wasn't. Try again.

There you stand, cookie crumbs all down your shirt looking guilty, claiming you didn't steal a cookie. lol

I swear sometimes I need to put up flash cards....

Cruz lied by omission about his loan from GS. All funds for campaigns have to have their source listed with the FEC. Cruz, a Princeton graduate and Harvard Law School graduate, conveniently "forgot" that minor detail.

 

[g5000]

To understand what a synthetic CDO is, you first have to understand what a CDO is, because a synthetic CDO is a derivative of a derivative.

A CDO is an instrument used to transfer risk. You can look at the payments flowing in from all the loans out there as a revenue stream. An investor can buy a cup to dip into that stream. Bigger cups are cheaper than little cups, but little cups get to dip into the stream first. So a little cup is very low risk investment since it gets first dibs on the revenue stream. These little cups are the senior tranches of a CDO. The biggest cups, which dip into the stream last, are the equity tranches.

If the CDO is solid gold (AAA), the equity tranches will recoup their investments fairly quickly, and then each subsequent dip into the revenue stream is big profit. But everything depends on that revenue stream not drying up due to defaulting borrowers.

A firm like Lehman Brothers gets a fee for creating a revenue stream and from selling the cups. So the more streams Lehman can make, the more fees it collects. More profit.

Therefore, there is huge motivation for making as many loans as possible since they are what create the streams.

You lend the money, then recoup the money, and then some, when you sell those cups. There is virtually zero risk to you, if you don't drink your own bongwater.

Lehman drank their own bongwater.

A broker at the beginning of the pipeline has the lowest risk of all. Before the ink is even dry on the mortgage contract, he has sold it up the pipeline for a profit, which he then turns around into even more loans.

As long as the upper part of the pipeline (the investors) is screaming for more cups, the broker will keep making loans to create the streams. And if he runs out of good borrowers, he is going to start looking for anyone with a pulse to throw money at. "If we don't do it, someone else will" became their motto.

Once the broker-dealer gets the loan from the broker, he slices and dices it up into all kinds of wild and wonderful pieces. This is the derivatives portion of the program. He then bundles these pieces into CDOs, creates an SPV, and starts selling cups.

The first CDOs were actually very low risk. They were comprised of loans made to blue chip corporations, and so the chance of one of those CDOs going kaput was very, very, very low. Nonetheless, in order to convince the regulators they didn't need to have the required capital reserves, the CDO creators bought credit default swaps (CDS) against them. A CDS is a form of insurance, with a single crucial exception. And this is where AIG comes in.

AIG saw there was zero risk of ever having to pay any money against any losses because the first CDOs were so solid, and so the CDS premiums were like free money coming in. So they didn't put any cash in reserve in the eventuality of a CDO failure.

As good risk borrowers dried up, rather than slow down, Wall Street sped up. Investors had a real appetite for those cups. So CDOs began being built out of more and more toxic loans. AIG wasn't paying close attention and did not notice for a while. Not until the beginning of 2006 or so.

Once AIG caught on, they got out of the CDS business. But it was too late for them. Once all those toxic loans began resetting in 2007 and 2008, all hell broke loose.

 

[NoTeaPartyPleez]

If I have time later, I will explain how a synthetic CDO works, and how the ABACUS scam worked.

An explanation will take about a full page, and I am not even sure it is worth the effort since the rubes are persistent in defending their delusions and staying on as slaves at their master's Wall Street plantation.

I wouldn't bother. I posted constantly about CDOs and Wall Street banks and the crash of 2008 and it's always fallen on deaf ears. Their memory banks just don't go back that far....January 2009 is where it all started for them.

 

[NoTeaPartyPleez]

With all the shit Hillary has pulled this is what gets you worked up? LOL

Below is the spreadsheet and playbook for rightwing trolls.

Liberal Thread on:
Trump
Cruz
Rubio
Carson
Bush
Christie

Knee-jerk response from right:
Obama, Hillary

 

[g5000]

A Credit Default Swap is an insurance policy. If you build a CDO, which is made of loans, you can buy a CDS against the possibility of that revenue stream drying up from too many loan defaults.

If too many loans default, the seller of the CDS must pay off the investors in that CDO to cover their losses. It is very important to fully understand this later when I explain the ABACUS scam.

AIG was the biggest seller of CDS, until 2006. I explained why they stopped in my previous post.

So, we understand that a mortgage payment is a revenue stream. You loan out money. The money you loan is coming from investors who bought a CDO tranche. Those cups I described above.

In return, the borrower makes monthly payments. This is the revenue stream in which those investors dip their cups to recoup their investment.

The creator of the CDO buys insurance against defaults on those loans. He buys a CDS.

Now, what do those CDS premiums look like?

Right! They are a revenue stream for the seller of the CDS. And what do we do with revenue streams?

Right! We package them into CDOs and sell them to investors.

So the CDS revenue stream, which is insurance against another revenue stream, is what we call a "synthetic CDO". This is one of the wildest derivatives out there.

This is what Wall Street started doing when AIG announced it was no longer going to sell CDS against Wall Street's CDOs because the CDOs were too toxic. AIGs announcement is irrefutable evidence Wall Street knew their CDOs were toxic by this point.

Okay. This is the part where you have to slow way, way, way down and think about what it is you are actually doing when you buy a tranche in a synthetic CDO.

When you buy a synthetic CDO, the money you are getting when you dip your cup in that stream is an insurance premium.

This means you are the seller of the CDS behind that CDO!

Oopsie!

This means if the underlying CDO suffers too many defaults, this will trigger a payout by the entity which covered that CDO with a CDS.

If you are the investor in that synthetic CDO, that entity is YOU!

So you stand to lose much more than your initial investment in that synthetic CDO. You have to cover the losses of the underlying CDO.

Here's the worst part: There is no insurable interest requirement for a CDS.

What's that mean?

Next post.

 

[g5000]

If you own a house, you buy fire insurance against that house because you stand to lose money if it burns down.

If the house of someone across town burns down, you don't suffer a financial loss. This means you do not have an "insurable interest" in that stranger's house.

You cannot buy fire insurance against a stranger's house because of the insurable interest requirement.

The reason you cannot buy insurance against a stranger's house is pretty obvious. There would be a shitload of arsons. A guy could buy insurance against a stranger's house, make a single premium payment, and then torch that stranger's house to the ground and collect the insurance.

So not all regulations are bad, eh? Some save lives and money.

But imagine if you could buy fire insurance against a stranger's house. Imagine if everyone could.

A $200,000 house could have ten policies against it by strangers. Now if the house burns down, the insurance company isn't out $200,000. It is out $2 million!!!

And that is the problem with CDS. They do not have an insurable interest requirement. They are totally unregulated.

A person could bet against your mortgage burning down. Not kidding.

Now think about that.

If you are an arsonist, what's a sure way to guarantee a bunch of mortgages are going to burn to the ground?

You lend money to people you know can't possibly make the payments. Then you build a CDO out of those mortgages. Then you build a synthetic CDO on top of that toxic CDO.

But since there isn't even an insurable interest requirement for CDS, you can go out and find toxic mortgages which you didn't even make, and pack them into your synthetic CDO!

Then you sell the tranches for that synthetic CDO to some mushroom investors who you don't tell you built this whole firetrap. They have no idea you are on the other side of the bet, because you used Goldman Sachs as your cutout.

Then you throw the match and collect the insurance.

That's ABACUS 2007 AC-1.

Now tell me those fuckers don't belong in prison.

 

[g5000]

Jon Paulson made one billion dollars just off ABACUS 2007-AC1.

One billion dollars.

ABN Amro, one of the investors, went under because of that scam. They were acquired by RBS, which also went under later in the crash.

You know how big a fine Goldman paid for that scam?

HALF a billion dollars.

 

[NoTeaPartyPleez]

Jon Paulson made one billion dollars just off ABACUS 2007-AC1.

One billion dollars.

ABN Amro, one of the investors, went under because of that scam.

You know how big a fine Goldman paid for that scam?

HALF a billion dollars.

That's the bottom line. This is the slap-on-the-wrist that Elizabeth Warren has been shouting about for the last eight years. None of these bankers go to jail.
Teddy and Heidi Cruz are right in bed with these guys. He's a bigger phony than Trump.

Great documentary that lays it all out: "Inside Job"

 

[NoTeaPartyPleez]

Jon Paulson made one billion dollars just off ABACUS 2007-AC1.

One billion dollars.

ABN Amro, one of the investors, went under because of that scam. They were acquired by RBS, which also went under later in the crash.

You know how big a fine Goldman paid for that scam?

HALF a billion dollars.

Is Jon Paulson by any chance related to Henry Paulson? You remember, the ex-CEO of Goldman who just happened to also be Dubya's Secty of the Treasury.

 

[paulitician]

Must have made Hussein's 'Enemies List.' Neither him or any of his IRS Henchmen have been held accountable for their crimes. It's time to investigate and prosecute the President.

 

[NoTeaPartyPleez]

Must have made Hussein's 'Enemies List.' Neither him or any of his IRS Henchmen have been held accountable for their crimes. It's time to investigate and prosecute the President.

A better use of time and taxpayer's money would be an investigation into the SEC.

 

[paulitician]

Must have made Hussein's 'Enemies List.' Neither him or any of his IRS Henchmen have been held accountable for their crimes. It's time to investigate and prosecute the President.

A better use of time and taxpayer's money would be an investigation into the SEC.

Yeah, i'm sure these folks made Hussein's 'Enemies List.' He's been using Government Henchmen to go after political rivals for years. He's gotten away with it all. He should be Impeached for his awful IRS abuses.