RE: Fed doesnt bail out Leman brothers (Full Version)

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meatcleaver -> RE: Fed doesnt bail out Leman brothers (9/16/2008 1:32:40 AM)

quote:

ORIGINAL: Mercnbeth

quote:

ORIGINAL: pahunkboy

in a nutshell-  junk bonds were rated AAA ....these "investments" were fraudulently rated.

A guy walks into bank. robs it goes to prison.

now this happens... to the tune of billions maybe over a trillion, and do you think any one goes to jail?????   and Allenwood is a country club...not a real prison....


If I have the marketing skills to sell my cell phone to a rube for $1 Million should I go to jail when they find out it wasn't worth $100?



It depends if you was honest about what you were selling and the person who bought it was stupid. What was happening in the financial markets as has been pointed out, Hedge funds were selling high risk debt as copper bottomed debt with virtually no risk. That in any other industry would be classed as fraud and the sellers would be behind bars before they sold their stock.



Mercnbeth -> RE: Fed doesnt bail out Leman brothers (9/16/2008 6:48:16 AM)

quote:

Hedge funds were selling high risk debt as copper bottomed debt with virtually no risk.


MC,
"Virtually" is correct. There is "virtually" no risk that a train will run head on into another train on the same track. "Virtually" happens!

I get to read many prospectus concerning investments. I've never interpreted one to be no risk. In fact they are all very clear and specific regarding the risk of losing investment income and principle. Words like 'virtually', 'practically' don't appear anywhere where risk is being disclosed.

There is no fraud. There can not be fraud if the underlying collateral is not fixed in value or has value contingent on market conditions.



meatcleaver -> RE: Fed doesnt bail out Leman brothers (9/16/2008 8:11:42 AM)

quote:

ORIGINAL: Mercnbeth

There is no fraud. There can not be fraud if the underlying collateral is not fixed in value or has value contingent on market conditions.


High risk debt was being sold as AAA debt. The equivalent in any other industry would be fraudulent but then, other industries are regulated and it is lack of regulation that has allowed fraudsters to walk away with vast profits while everyone else pays the price for their greed and banker's gullibilty of thinking they can get something for nothing. The reason for the economic crisis is that money was making money with no underlying foundation. It was always going to end in tears and it was predicted in the 90s when deregualtion took place.



Slavehandsome -> RE: Fed doesnt bail out Leman brothers (9/16/2008 8:18:43 AM)

Don't leave it up to our corrupt law enforcement system to put those criminals in jail.  The judge certainly isn't going to do it.  Its up to the taxpayers to find these criminals and bring justice.  In Israel, when a Palestinian is suspected for a terrorist activity, they round up his wife, mother, children, and as many relatives as they can, and put them in jail, to wait as collateral for the suspected terrorist to turn himself in.  The Israeli government considers it a successful tactic, and we'll probably start seeing that practice here domestically in the states before too long.  Remember, real change never happens from the top down.  Its up to the taxpayers to push change up to the top levels, and that goes not only for politically, but also financially. 



Mercnbeth -> RE: Fed doesnt bail out Leman brothers (9/16/2008 8:29:42 AM)

quote:

High risk debt was being sold as AAA debt


MC,
When it was sold it may have been AAA - now is a different story. Do you know how much research goes into making that determination, under how many eyes? The analysis is a snapshot, accurate for that particular moment in time.

As a lender, as well as a borrow; I'm only 100% accurate on yesterday's business. At the point of loss, I can always tell you what was wrong with my analysis that I thought made the risk 'AAA'. Then again, when I've made more than anticipated on a C rated risk, I can also understand why that 'bad risk' turned out good.

Being right for yesterday based on today's information is no trick, any 'bean counter' can accomplish that, wag his/her finger and say "I told you so!".  Being right tomorrow based on today makes you a successful businessman. You have the ability and confidence to make a decision which could be wrong. People make an independent choice to invest in your decisions. When they were wrong to invest based on you being wrong in your decision; you both suffer a loss. It wasn't a result of fraud. 



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