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12/26/2009 12:54 AM ID: 82202 Permalink   

Big Banks Made Beaucoup Bucks By Betting Against Their Own Bad Bundles


Goldman Sachs, Deutsche Bank, Morgan Stanley and smaller firms peddled bundles of bad mortgages as investments and then short-sold them -- making financial bets that their own securities would fail, according to people briefed on an investigation.

The SEC and Wall Street's self-regulatory Financial Industry Regulatory Authority are investigating whether securities or fair-dealing laws were broken by companies that created and sold collateralized debt obligations and then sold them short.

Sylvain R. Raynes, a structured finance expert at R&R Consulting, said the practice was "the most cynical use of credit information that I have ever seen" and likened it to "buying fire insurance on someone else's house and then committing arson."

    WebReporter: Ben_Reilly Show Calling Card      
ASSESS this news: BLOCK this news. Reason:
  Cudo´s to you Ben  
On a good title! And a good summary of the article!
  by: Allanthar     12/26/2009 10:33 PM     
Just when American capitalism couldn´t get any worse, it does! It seems that ethics and morality have been flushed down the toilet of greed.
  by: Lurker     12/27/2009 07:12 PM     
  and why isn´t this...  
and why isn´t this considered akin to insider trading.

they had inside information that theirinvestments were failling and bet on that...

if martha stewart can go to prision for this kind of unethical behavior show should these goons which make her crimes a pittance by comparison, she sold sold her 4000 of ImClone cancer drug shares based on inside information from Sam Waksal the same should apply to banks betting on on their own securities using that inside information.

would seem to be pretty open and shut... but then again martha stewart wasn´t running a bank and lobbying the government, hence she was a much easier target.
  by: HAVOC666     12/27/2009 07:55 PM     
That isn´t Capitalism. Its Bipartisan corporatism.
  by: vrich187   12/27/2009 11:54 PM     
Let´s be honest about this -- capitalism is basically anything capitalists want to do. If the government prevents them from doing anything they want to do, they call it socialism. The only way we can avoid reviving the Soviet Union in their view is to let capitalists do whatever they want to do.
  by: Ben_Reilly     12/28/2009 04:28 PM     
  Good summary Ben  
This is a really good example of finding the silver lining for every cloud. When Clinton forced the banks to loan money to people who could not possibly afford to pay it back, the banks took the only action they could.

As to that "buying fire insurance" bit, I would have to disagree. Nobody forced those people to not pay their bills. The banks just knew that they wouldn´t be able to, so they did what they had to do to keep from having to collect a bad debt. They made money for their stockholders, which is the only purpose of a corporation. My hat comes off to them for being able to see the future so clearly.
  by: WillyMaykett   12/28/2009 07:54 PM     
Your premise doesn´t make sense. Even if Clinton administration forced banks to make bad loans, it certainly forced no one to sell investment products consisting of bundles of those bad loans and then to short-sell their own products in the marketplace.
  by: Ben_Reilly     12/31/2009 07:05 PM     
You´re right, of course. But nobody forces you to eat, either. You do it for your own self-preservation. Wonder if self-preservation had anything to do with it?
  by: WillyMaykett   01/02/2010 06:31 PM     
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