Market crashes have always been good for the oligarchs, without fail. Thank God they don't have the incentive nor the mechanisms to orchestrate them! Back in 06', 07', and 08' I was a small business consultant working in the San Francisco Bay Area and interacted with several real estate and mortgage businesses throughout the region. I saw first hand the ease with which people were getting no-documents and no-down-payments mortgage loans; it was obvious that if you had a pulse, you were going to get a loan or two.
I've been following Wall Street shenanigans for years and had determined long ago that it was basically operating as a financial racketeering criminal cartel, so when I saw that latest scam in the late 2000's, I wasn't surprised at all.
I was doing a lot of reading about the situation by 06' and 07', at a point where not only there have been some attempts by insiders to blow the whistle about the scam, but knowledgeable people were already writing about the dangers of collateralized mortgage obligation (CMO) securities based on a large number of low-quality loans.
In a nutshell, what was happening was that large Wall Street investment banks had hired some of the best minds in science, statistics, and finance to come up with so-called "complex financial products" that would generate a steady stream of profits mainly through fees, while transferring all risks to the public.
And so when the ponzi-type scam was ready to be deployed, it spread throughout the financial system like a virus. At the front end, mortgage companies would bundle millions of loans (including very low quality, high risk do-doc, zero down-payment loans) into investment securities. Those securities would then be sold to unsuspecting investors (pension funds, universities, cities, etc.) all over the world. The more securities were sold, the more fees everybody collected along the food chain, with the biggest share going to the very top (like a pyramid scam). Rating agencies, who received most of their funding from the very banks conducting these scams, participated in the crimes by giving these investment instruments AAA rating.
This stuff was all happening in the open. I remember debating with apologists of the time, arguing that what was going to end up happening is that eventually the house of cards was going to collapse because of the obvious real estate bubble, and that the public was going to be left holding the bag. And that millions of people were going to lose their homes, ruin their credit scores in the process, and that that would lead to the spread of unemployment, poverty, and homelessness. By-the-way, there were many other people arguing along those lines as well. And there have been some whistle-blowers who tried to come forward but were retaliated-against and silenced.
So after the Wall Street Criminal Racketeering Cartel executed that first phase of the scam, how did they fare? Were the criminal banks broken down? Did anybody (of the top executives) went to prison? Nah, that's so 1980's.
Mother Jones: How Wall Street Has Turned Housing Into a Dangerous Get-Rich-Quick Scheme—Again
Hedge funds and private equity firms have quietly bought 200,000 cheap, mostly foreclosed houses in cities hardest hit by the economic meltdown.
You can hardly turn on the television or open a newspaper without hearing about the nation's impressive, much celebrated housing recovery. Home prices are rising! New construction has started! The crisis is over! Yet beneath the fanfare, a whole new get-rich-quick scheme is brewing.
Over the last year and a half, Wall Street hedge funds and private equity firms have quietly amassed an unprecedented rental empire, snapping up Queen Anne Victorians in Atlanta, brick-faced bungalows in Chicago, Spanish revivals in Phoenix. In total, these deep-pocketed investors have bought more than 200,000 cheap, mostly foreclosed houses in cities hardest hit by the economic meltdown.
Wall Street's foreclosure crisis, which began in late 2007 and forced more than 10 million people from their homes, has created a paradoxical problem. Millions of evicted Americans need a safe place to live, even as millions of vacant, bank-owned houses are blighting neighborhoods and spurring a rise in crime. Lucky for us, Wall Street has devised a solution: It's going to rent these foreclosed houses back to us. In the process, it's devised a new form of securitization that could cause this whole plan to blow up—again.
This story first appeared on the TomDispatch website.
Here's what Occupy Wall Street is reporting about this, also:
Tens of thousands of people are still being evicted each month through foreclosure, and now private equity firms and hedge funds are executing a massive land grab in cities across the country. In some cities, like Phoenix, there are already Wall Street-owned homes on every single block by the hedge fund Blackstone.
And one would hope that Wall Street would have learned their lesson about risky investments, right?
These Wall Street hedge funds and private equity firms are pretending to help by renting out these vacant houses -- but we know that they are just trying to make more money off the banks of the 99%. One of these private equity firms has even released a new risky security backed by rental payments -- which is just like the mortgage-backed securities that destroyed the economy in 2008.
Oh wait, that doesn't seem right! It doesn't make sense that the richest people in the country would benefit from market crashes, right? Well, let's see:
Yet others say the policies have mainly juiced asset prices—and the wealthy hold most of the assets. There is no reliable data on the wealth of the top 1 percent for the past two years, when markets have surged. But as of 2010, the mean and median net worth of Americans was still down 50 percent from the precrisis peak, mainly because of the decline in home values, according to Edward Wolff, an economics professor at New York University.
By contrast, the number of millionaires—households worth $1 million or more, including homes—hit an all-time record in 2010, according to Wolff. Separate studies of millionaire populations from Spectrem Group and Capgemini also show that the population of millionaires hit an all-time record in 2012.
~Snip~
A stream of new data on inequality also suggest that the gap between the wealthy and the nonwealthy is growing, largely becaue of rising stock markets. New data from Emmanuel Saez, an economist at the University of California at Berkeley, found that the top 1 percent captured 95 percent of the gains during the recovery.
According to the Census Bureau, incomes for the middle class have largely remained flat while the wealthy have gained. The income top 10 percent earns nearly 12 times as much as the bottom 10 percent, up from a little more than 10 percent in 1999.
[The emphasis is mine]
I really hope to God that the rich don't figure out that they can increase their wealth exponentially by crashing the economy. Imagine the damage they could do with that knowledge!
Read More
