USA & WHY THE financial CRASH

USA FED JUST KEEPS ON PRINTING MONEY ----

USA GETS

FURTHER INTO DEBT but the blame for the crash was foreseen

Who will finance a US budget deficit forecast to swell to $23 trillion this year 2019? The bankers kept their winnings, the giovernments stay in the red, the average person loses his home and job & the Bankers go out and buy bigger homes and jets and life goes on till the next crash. The Banks made the crash happen as there were no restrictions and the FED with guys like Greenspan, Bernanke & Paulson etc also must take the blame.

The Securities and Exchange Commission's fraud charges against Goldman Sachs have already put Wall Street's derivative dealers under greater scrutiny.SEC's case alleges that Goldman misled investors buying into a package of bonds and loans called a collateralized debt obligation. So what about the other big ones like CITIgroup sold $32.6 billion in asset-backed CDOs in 2007 & Bank of America sold $32.6 billion in asset-backed CDOs in 2007 as well as UBS with $18.9 billion.

Goldman allegedly failed to tell investors that the hedge fund Paulson & Co selected the mortgage bonds to put in a CDO portfolio it then bet against using credit default swaps, a form of bond insurance. The SEC's fraud charges relate to how the CDO was packaged, and what investors were made privy to, not simply when it was sold as at April 2010 but will other Bankings groups be held responsible.

Goldman called the SEC's allegations "unfounded" and said it lost $90 million on the deal.

THESE ARE SOME OF THE ONES TO BLAME:

GREENSPANS FED & BAD MOVES

As chairman of the Fed, Greenspan took the federal funds rate down to 1% in 2003 and left it there for a year. Even as the Fed began raising rates, Greenspan's exceptionally low interest rates "planted the seeds for the housing bubble," says Robert Rodriguez, a money manager at First Pacific Advisors who saw the emerging subprime mess early on and has managed to dodge most of it so far. He encouraged the use of adjustable-rate mortgages in a 2004 speech, which was "an insane, idiotic recommendation,". The following year he endorsed subprime loans to help marginal borrowers get into houses. Greenspan dismissed calls for more oversight of the mortgage business. This gave free rein to our next culprits: greedy mortgage brokers who had no problem pushing inappropriate loans on borrowers so that they could reap lucrative fees. Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke were also using deaf ears and are to blame for slow responses. Paulson, whose Paulson & Co. made $15 billion betting against subprime mortgages in 2007, said better supervision of home loans by the central bank would have helped prevent the crisis. “Demanding that proper underwriting guidelines be followed, not allowing ‘no doc’ loans, requiring a down payment, even if it’s just 5 percent,” would have gone a long way toward preventing the crisis, he said. Soros, chairman of the $27 billion Soros Fund Management LLC, said the Fed should have saved Lehman Brothers Holdings Inc. from collapse in 2008.

Countrywide CEO Angelo Mozilo

None of this would have been possible without the help of mortgage lenders willing to go along with the charade.Mozilo acknowledged potential risks in the subprime market early on, but he continued to compete to maintain market share, even though the only way to do this was to water down loan underwriting standards like everyone else.Mozilo made more than $20 million a year in salary and bonuses in 2004 and 2005, he wanted to book more profits, mainly by selling stock options, as Countrywide was riding high on the bubble. He took advantage of a special rule to set up an automatic selling program in his company's stock. Company documents show he realized $310 million in the three fiscal years ending in June 2007. If his agenda was to cash out personally, he had a good motive to play along with the subprime charade.

Christopher Ricciardi

An investment banker named Christopher Ricciardi helped turn Merrill Lynch into the "Wal-Mart of the CDO industry" between 2003 and 2006, according to The Wall Street Journal. He started the DCDOs lobbied for himself and his company for AAA ratings and was at the forefront of CDO collapses. Ricciardi "lobbied both credit-rating firms and investors, talking up the safety and juicy returns of CDOs,". Ricciardi left Merrill took some of the staff & started his own company Cohen & Co. Merrill reported a $7.9 billion write-down related to its collateralized debt obligations.

Ralph Cioffi and Jim Kelsoe

The masters of the CDO universe on Wall Street had willing investors who stood ready to buy the repackaged subprime debt. There was no shortage of buyers because these instruments offered a tempting higher yield. Some of the biggest casualties so far happened at Bear Stearns where two hedge funds run by Ralph Cioffi collapsed, costing investors in those funds an estimated $1.6 billion.

The biggest subprime-related disaster in the mutual fund world was at Regions Morgan Keegan Select High Incom. The fund, run by Jim Kelsoe, Numerous lawsuits have been filed against the company, alleging it misrepresented high-risk funds tied to the volatile mortgage bond markets as “safe” or low-risk investments.  As a result, lawsuits allege investors lost huge portions of their funds almost overnight. It is estimated that losses top $2 billion.So their values are based on models projecting future cashflows.Money managers may have been blinded to problems with debt instruments backed by subprime mortgages because of their hunger for higher yields. But in missing the cues, they also got a hand from the credit-ratings agencies, which get paid to evaluate debt products and make a call on the likelihood of default. The three big ones are Standard & Poor's, Moody's Investors Service and Fitch Ratings.

RATING AGENCIES:

Yes t he three big ones are Standard & Poor's, Moody's Investors Service and Fitch Ratings. Rating agencies was also part of the problem, as rating these debt instruments was big business, and the ratings agencies were often getting paid for the ratings by the same people who were creating the debt instruments. They all wanted AAA ratings and for a price they got it. As far back as 2004-2005 there was questionable underwriting, potential fraud and limited documentation" in the home-mortgage industry. Home buyers should have known better than to get into adjustable-rate loans they couldn't afford when interest rates reset higher. But I'd single out another party in the industry for the most blame: the mortgage brokers.

MORTGAGE BROKERS:

For mortgage brokers -- many of whom were independent operators - the real-estate bubble was a real bonanza, and their greed got the better of them. There was a race to lower standards to generate more loans. A merely "good" mortgage broker could easily take home $250,000 a year. But most of them were bringing in $500,000 to $750,000 as long as they cranked out enough loans -- and damn the consequences. There were basically no guidelines, no restrictions and no oversight, no equity in some cases & they even falsified bank requirements for customers. People bought up extra homes with little equity but it didn't matter as they got greedy as well thinking they could then resell at a profit the same as in NZ.

The USA can collapse as the Bankers look for other ways to make $$$

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