356 replies to this topic

[Tony Matthews]

Or you wouldn't be so stupid as to stand in front of a speeding train even if you knew it would eventually derail.

I just can't get over the fact that all the people are still in place running everything even after the WEC showed just how little just about all of them know about true economics.

They don't make nearly so much money out of 'real' economics, and they will always keep their jobs. That's why we are back on the same track after only a few months - these people know what they are doing.

[McGuire]

As I said earlier, I'm not interested in having this debate with you. You made it clear earlier in this thread that you have no idea what insurance is, what financial derivatives are, and what the crucial differences between the two are.

You don't dispute anything I say, you just say you can. Any time you're ready. Obviously, you can't.

Credit default swaps were developed in the insurance industry, introduced and popularized by the insurance industry (namely AIG) and marketed and sold by the insurance industry as insurance -- credit insurance. The only problem was they were not regulated as insurance, producing a tremendous potential for abuse, fully realized as it turned out. Much of it by AIG, at that time the largest insurance company in the world. Credit swaps were designed to escape both insurance and futures regulations and reap the loopholes. For AIG, no reserve requirements.

And then you determine that credit swaps can't be insurance because they don't require a reserve or material interest. Face palm. We can't blame the crash all on the insurance industry -- there's plenty to go around -- but it's a little rich to state that credit swaps aren't technically insurance just because they don't meet the regulatory requirements. A tobacco lobbyist might come up with that.

You are also mistaken that credit swaps were marketed only by AIG's financial division. For example: AIG's life insurance division, the American Life Insurance Company, did over $1.5B in credit swaps.

[McGuire]

Sort of...there was still the underlying issue at the retail level. Thousands of loans managers, who knew nothing of CDS instruments in any meaningful fashion, gave away ninja mortgages as quickly as they could (ninja - NoIncome NoJob or Assets). THAT bubble was there irrespective of CDS - CDS just became the exit point for the pressure.

Well, where did that huge flood of investment capital come from that drove down the loan requirements to virtually none?

[McGuire]

Incredible how many experts there is after the fact, the same experts who didn't see it/caused it and how all of those experts are still in the same positions today both in business and in Governrment.

We go through this same deal every few years, almost like clockwork, because these geniuses invent yet one more new and foolproof way to print money. LBOs, junk bonds, savings and loans, the dot-coms...live long enough and you learn to see them coming. The man on the street is too busy making his own living and caring for his family to ride herd on these idiots, so they get away with it.

This fiasco is complicated by the fact that the doomsday machine they created this time around is so vast, intricate, and undocumented that only the maniacs who built it can dismantle it, or so the theory goes. At the end the subprime mortgage market amounted to around $600 Billion. The entire U.S. mortgage market in its totality was around $7 Trillion. The CDS market, $60-70 Trillion. The forensic accounting will take decades.

[Dmitriy_Guller]

You don't dispute anything I say, you just say you can. Any time you're ready. Obviously, you can't.

As I said, it's easy for you to pull something out of Google, without knowing or caring about the context. All you need to do is create the appearance that "reasonable people can disagree". I, on the other hand, have to debunk everything you find, to someone who knows so little that he doesn't even know when his argument is being destroyed. And the whole reason for the debate is that you made a gratuitous insult at actuaries, to take a shot at me, and are now trying to make it look like you didn't swing and miss by a mile. No, thanks, I don't want another torque-horsepower "debate", where I do the arguments, and you do the stupidity.

[gruntguru]

I just can't get over the fact that all the people are still in place running everything even after the WEC showed just how little just about all of them know about true economics.

Classic example HERE. Harry Markopolos reported Bernie Madoff's $65 billion Ponzi scheme to the SEC in 2000 - eight years before Madoff turned himself in. The SEC were unresposive to countless approaches by Markopolos. Nearly two years later, every one of those same morons at the SEC still has their job.

Edited by gruntguru, 22 August 2010 - 04:07.

[McGuire]

As I said, it's easy for you to pull something out of Google, without knowing or caring about the context. All you need to do is create the appearance that "reasonable people can disagree". I, on the other hand, have to debunk everything you find, to someone who knows so little that he doesn't even know when his argument is being destroyed.

I am amazed to read that reasonable people cannot disagree on the question of credit default swaps as insurance. Congress debated that very point when crafting the Commodities Futures Modernization Act of 2000. How should credit default swaps be regulated: As futures, as securities, or as insurance? But in the end the lobbyists won. Congress declined to regulate them at all and it was off to the races. By 2007 the CDS market had swelled to over $60 Trillion only to collapse like a house of cards in a matter of months -- days, really, once the extent was exposed.

For whatever it's worth, the former insurance commissioner of the state of New York, Eric Donallo, has expressed the view that CDS are indeed insurance and should have been regulated as such. He testified to that effect in the congressional hearings following the meltdown of the credit markets.

So I can sympathize with your problem. To make your argument, you need to "debunk" hundreds of pages of congressional minutes and the sworn testimony of the insurance commissioner of the state of New York. Good luck with that.