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Robert Preston, BBC business editor in his blog:

Is there reason to believe that many of the securities manufactured out of subprime loans are worse than ordure?

I'm afraid so. Here are just three reasons:

  1. As the FT pointed out this morning, many of the underlying subprime loans were taken out by fraudsters and will therefore never be repaid in full.

  2. When repackaged as mortgage-backed bonds, they were given ratings by the credit rating agencies based on delinquency experience during the benign conditions of the past few years - which almost certainly means that the ratings flattered their innate (poor) quality. Or to put it another way, investors have bought the financial equivalent of poisoned mutton dressed as prime lamb.

  3. Hundreds of billions of dollars of these mortgage backed bonds have been re-engineered as collateralised debt obligations. These CDOs are customised bonds of varying quality and varying yields. There is nothing intrinsically noxious about them. However there are CDOs made out of other CDOs, called CDOs squared, which are marketed as high quality investments - and they've been bought by the "one-born-every-minute" brigade. What's more, there's accumulating evidence that even the simpler CDOs have been bought by naïve investors, who had no idea what they were buying.

It is wonderfully ironic that a disproportionate share of losses from America's dodgy mortgages should be born by financial institutions in France and Germany - and that the European Central Bank is pumping cash into the banking system to avert a possible crisis.
The incongruity is that the Anglo-American model of financial markets is despised in many European capitals; it is droll that their banks were seduced by Wall Street.

This comment on the blog struck my eye:

At 10:17 PM on 09 Aug 2007, Xeno7777 wrote:

The USA has no true Central Bank; The New York Branch; of the USA Federal Reserve; sets US Interest Rates. Its board is made up of the representatives of three Banks, J. P. Morgan Chase + two very small banks, 1 from New Jersey, 1 from upstate New York; these 2 banks will do whatever Chase asks. The controlling stockholder of J. P. Morgan Chase, thus sets USA interest rates; his position is derived from the controlling stockholder of the Rockefeller Fortune; his name is David Rockefeller. His predecessor and grandfather, John D. Rockefeller Sr.'s decisions sent the USA, and the world, into the Great Depression of the 1930's! In 1896, The Standard Oil Trust's President was sentenced to two years in Sing Sing Prison for dynamiting a competitor's Oil Refinery, while John D. Rockefeller Sr., was its Chairman of the Board!
How can the world avoid being sent into another Great Depression, much worse than the 1930's Original? The USA must replace the Federal Reserve with a True Central Bank! English nations must break up the Re-Assembled Secret Offshore Standard Oil Trust, consisting of J. P. Morgan Chase, Citi-Group, Exxon Mobile, Chevron Texaco, Royal Dutch Shell, British Petroleum, and the Saudi Royal Family. They must mandate the Two Controlled Combustion Cycles, The Texaco Gasoline and The Mann Diesel, which wil cut crude oil consumption for automotive engines in half! Then both nations must adopt Silver, perhaps include a market basket of other valuable metals, as the basis for their currency, and seize the four big international oil companies. Both governments must finance all political campaigns, and perhaps dissolve all political parties!



You can't be me, I'm taken
by Sven Triloqvist on Fri Aug 10th, 2007 at 06:12:58 AM EST

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