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View Diary: Anonymous To Release Document Proving BOA Committed Fraud on Monday (244 comments)

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  •  There are legit uses for derivatives.... (1+ / 0-)
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    virginislandsguy

    ...it becomes a problem when you game one side of the system (the whole subprime loans and subsequent securitization of the loans) and then take out a bunch "insurance" on something that is almost certain to happen (the credit default swaps on those loans and securities). Derivatives themselves are not the problem, its the lack of regulation of them that creates messes.

    KStreetProjector is partially right, Goldman was the one that got a majority of that CDS money but shrike is right also....they didnt do anything illegal, they just bought an instrument available for sale. Whether the whole Wall St/Vegas style of investment vehicles is the right thing for the economy is a different discussion from the root cause analysis of "Who is tanking our country". It was AIG that put up the rediculous amount of capital on the betting block, and were too stupid to see what was going on because they were buying into the flawed statistical analysis that gave these securities and loans a AAA rating in the first place....either that or they figured that with all of these loans being bought up by Fanny and Freddie that government backing would guarantee the loans and they wouldn't have to pay on the CDS's either way.  

    If you regulate these derivatives properly, get them on the company books and run them all through clearing houses, they wont be able to cause the damage they did in '08. It was truly the wild west with these things before the crash.

    "The pen devils set the stage for the war at home, locked without a wage....ya standing in the drop zone..."

    by Diggla on Sun Mar 13, 2011 at 09:48:46 AM PDT

    [ Parent ]

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