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Exactly. The only way they could conceal this much longer, is if the SEC is complicit and also validates "updates to the in-house models" to shift the baseline as the crash goes.

Note that this will not be easy: I read last week that some (smart shark) hedge funds have shorted the bank stocks, purchased CDS from them without the underlyings (nothing prevents you from doing that, effectively betting on ACME going belly up), and sometimes even shorted the MBS when markets allowed. These hedge funds have officially demanded that the SEC applies regulation swifly and strictly to the big street names (in short: they will not let their preys escape). So there is big money pushing for a crash too, and lobbying power on both sides.

Pierre

by Pierre on Wed Jul 4th, 2007 at 11:48:05 AM EST
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I read last week that some (smart shark) hedge funds have shorted the bank stocks, purchased CDS from them without the underlyings (nothing prevents you from doing that, effectively betting on ACME going belly up), and sometimes even shorted the MBS when markets allowed.

In other words, fredoiul cannot profit from this any longer, as people with deeper pockets than him and earlier access to information already have ;-)

Can the last politician to go out the revolving door please turn the lights off?

by Migeru (migeru at eurotrib dot com) on Wed Jul 4th, 2007 at 11:50:12 AM EST
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Fredouille can still give it a try, I just gave the recipe. But it is risky: as always, timing is critical, as if you short too early and wait you pay a lot for margin calls, and some stocks could benefit from (heresy !) ... a bailout !!

Pierre
by Pierre on Wed Jul 4th, 2007 at 11:59:23 AM EST
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FSA sounds alarm on subprime lending (4 July)

The Financial Services Authority has started disciplinary action against five mortgage brokers for weak "responsible lending" practices in the subprime mortgage market.

The UK financial regulator on Wednesday issued a damning report on the sector, which lends to borrowers with spotty credit histories. Arrears among subprime borrowers are currently running at 20 times those of mainstream mortgage holders, sparking concerns firms have taken on excessive risk in ramping up their lending in this area.


SEC examines subprime market (27 June)

The Securities and Exchange Commission yesterday said it had initiated a broad-based investigation into the troubled subprime mortgage market.

Christopher Cox, chairman of the SEC, told a congressional panel that the regulator was investigating a dozen subprime mortgage issues, including collaterallised debt obligations (CDOs), which are repackaged pools of debt sold to investors.

The SEC is also looking into the secondary market for these instruments.

Asked what had prompted the scrutiny, Mr Cox said "the climate and the environment". He added: "The attention that is being paid generally to problems in this area causes us to be alert to the potential for violations of the laws and regulations that we enforce."



In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Wed Jul 4th, 2007 at 12:24:48 PM EST
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Funny.  CCox naming the problem "the climate and the environment" and then admitting the SEC is way behind the industry he is in charge of regulating.

Our knowledge has surpassed our wisdom. -Charu Saxena.
by metavision on Fri Jul 6th, 2007 at 07:24:53 PM EST
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