More than once in this space, I’ve said that derivative financial products set up a perverse incentive where investors have more to gain from the failure of companies and homeowners than their success. If you haven’t seen it yet, take a look at the longer version of my description of the causes and consequences of the current crisis to understand how failed financial innovations, like credit default swaps, contributed to the meltdown of 2008. I wrote that article back in November.
Once again, only Bloomberg.com is out front on this story. More hedge funds are catching onto the casino-like qualities of betting against America’s economic success. Reporters Salas, Harrington and Paulden could have quoted my NewGeography writings directly: “companies [have] more credit-default swaps outstanding than the bonds the contracts protected…” and, referring to Clear Channel Communications, “some of its creditors stand to profit from its failure.”
Told ya’ so!
Email this Blog entry
Really eye-opening stuff
Hi Susanne,
I am new to this blog and surfed back to the earlier pieces you wrote. Wow! Thanks for finding the missing piece of the puzzle for me (the puzzle being, why are banks and servicers failing to modify millions of failing loans?).
I am awaiting word on whether my lender will modify our family's loan. Will let you know of their decision.
Two months ago I had no idea about any of this. Now I am an avid reader of the "blogs of doom" like zerohedge, mish, calculated risk and naked capitalism. I even started my own.
At last I think I understand what is going on, and I am more thoroughly depressed than ever.
Thanks for your efforts at enlightening the general reader.
re: eye-opener
Kelli, Please let me know when you get that worked out with Thornburg. Informing yourself is the best thing you can do at times like this. I get down, too, but when I hear that someone is helped by the information I get inspired again. I'm Tweeting (susannetrimbath) daily on the technical aspects of our economic problems, blow-by-blow summaries of Congressional Hearings, etc.; and then I summarize events into a blog here at NewGeography.com. There's a lot going on and any or all of it can have a significant impact on your and your family's well-being.
I understand everyone has to focus on those issues most relevant to their personal situation, so I am grateful for your note and your following.