Tett's revelation

james armstrong james36armstrong at hotmail.com
Mon Jan 9 08:37:57 GMT 2012


House prices need to be wildly and constantly inflated 

And mortgages sold irresponsibly for which repossession is a
disregarded consequence 

To serve the  needs of
shadow banks to sell, resell, insure and bet against in a phantom  unregulated untaxed market which threatens
the  integrity of  currencies and real banking systems. 


‘Fools Gold’ is Gillian Tett’s book (of the FT)  explaining the  a b c of the 
finance/ banking/economic  crisis.

Damningly she forgets to mention any one of the dozens
of  mega fines  of £1million, 

$1million  and
1million Euros.on Goldman Sachs, UBS, Merrill Lynch , Barclays…etc


THE STARTLING LESSON OF THIS BOOK IS NOT  the answer to the questions  she asks             “Were the bankers blind? Evil? Grotesquely  greedy?

I would answer to that , “Criminally crooked, high rollers  secretly gambling  with other peoples’ money ” and add “but
exempt from conviction because corporations cannot be put in jail. “

 Not this. The
startling lesson to me (who thought I knew some of  the chicanery surrounding the housing crisis)
is that the misery accompanying the huge number of repossessions are a
disregarded  aside and the direct
consequence of mortgages offered at low and sometimes unrepayably high rates of
interest not in order to get people housed but sold so that they  can then be resold by another branch of the
same bank  ,  repackaged as 
‘assets  SIV’s and CDS’s  etc , by traders  in the back office urging the front office mortgage
lenders to   do more  deals and at any price  so as to boost the company’s  fees and leveraged profits on the deals .

In other words not bricks or demand or even landbanks nor
empty houses nor falling house building programmes are the  only causes of the UK
housing crisis but devaluing the central role of houses  for homemaking  and sacrificing the  needs and welfare of families  to the 
appetites for greed of financiers characterizes our scandalous  housing programme .  

I would add that this is our currency , our standards of
integrity  and  the value of productive employment  that  they are devaluing. .   




Here’s Tett’s  a b c. 


Credit Default Swaps 
options CDS/CDO   (synthetic
collateral debt obligations)

(two mortgages at different interest rates and maturity
dates bundled together and sold on- the  mortgageee being unaware.

Credit derivatives 

A derivateive is a contract 
whose value derives from some other product. 

Leverage uses investment techniques to  magnify a market trend.

EBRD European bank for Reconstruction and Development 

   Shadow banks eg
hedge funds  set up by the real banks to
avoid regualtiomns in US and in UK etc    (somethmes 
in off shore tax havens)

Glass  Seagall   the mother of All regulations  in US – an Act to keep retail banking and
investment banking separate. And hated by  financiers.


Multi tiered bundling of different products top spread the risk.

BTSTRO Broad Interest second trust olfferings 

  ROE return on equity

CDO 2 squared  CDO3

ABX  an exchange for
tracking mortgage packages

F9model (named after the computer key for calculations)

SIV’s savings and investment vehicles

BIS bank of International Settlement

 ESF European securitisation

ABS Asset based securities

SIV standard investment vehicles 

iTRAXX  credit default
swapos index

LEDX   TABX  CMBX  ‘other’
exchanges used by shadow banks

ABCP Asset backed credit paper 

SIFMA   ? 

 M-LEC Master
Liquidity enhancement conduit 

Gaussian copula  - a
mathematical  model for predicting risk 

Mark to market-  a way
of pricing assets when there are no actual markets to consult


She talks of  ‘computing
power’ and ‘high order mathematics’ 



“Mervyn King knows little about  the finer details of the credit market”

“ Few of the bankers knew how the securities machine worked



In the first half of 2007,  
Goldman Sachs calculated that UK
would spend £120bn rescuing its banks  or
8% of GDP


HER characterization 

“Taking banking into the 
order of  cyber  finance.” 


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