Nearly one year after its original date of publication, my video, Hedge funds and the global economic meltdown has finally received its first bit of serious criticism, and I can’t express how pleased I am about it.
So far, at least as far as bloggers and YouTube commenters are concerned, response to the video has come in five flavors:
- Approval
- Nutty approval (“This makes me so angry I want to take to the streets in bloody revolution! It’s all [insert political party or current/past president]’s fault! ”).
- Tentative approval (“You’ve got part of the story right, but the real problem is…”)
- Random and unaware (“I’ve got a puppy named Patches. He has a wet nose.”)
- Nutty disapproval (“[Insert anything Gary Weiss would say]”)
What’s been missing is educated criticism based on the hard facts presented in the video. And believe it or not, this has bothered me, because it suggests that not enough smart people are paying attention.
As I mentioned, that changed this week when Mike “Mish” Shedlock of SitkaPacific Capital Management analyzed the video on his blog and managed to make a compelling contrary case. Though compelling, Mike misses the mark on a few key points and his analysis requires a rebuttal, which I’ve decided to offer here as it would probably be of interest to DeepCapture.com readers. I’ve also invited Mike to respond, and will print whatever he offers at the end of this post.
(If you’ve not seen the video yet, I encourage you to watch at least the first five minutes now, otherwise nothing that follows will make much sense.)
Shedlock frames his criticism of the video in terms of what he identifies as three assumptions (printed verbatim in black, with my response in blue italics).
1. That whoever bought way out of the money Bear Stearns PUTs “knew” something and illegally acted on it. I agree with this.
2. The same institution that bought the PUTs was illegally shorting shares. I think this is a safe assumption.
3. There is a conspiracy to protect those evil doers. I do not agree that there is a conspiracy to protect the short sellers who attacked Bear Stearns any more than there was a conspiracy to protect Bernard Madoff before his scheme blew up. What “protects” them is Wall Street culture, and it’s no conspiracy…it’s common knowledge.
Shedlock then attempts to explain how the market really works via four statements of fact which he expects will undo my arguments, but which in reality only support them.
Here again, I present Shedlock’s facts verbatim, followed by the information he apparently did not have when he originally wrote them, in blue italics.
Fact #1: When someone buys PUTs the market maker or counterparty who sold them is short those PUTs. This is a mathematical statement of fact. This is 100% truth.
Fact #2: The market maker who sold the PUTs, shorts stocks as a hedge against those short PUTs.
This is also 100% truth, and an indispensible component of illegal naked short selling, which requires the options market maker to sell the stock naked short to the fund buying the puts. This is part of the married put strategy we’ve claimed from early on facilitates illegal short selling. As far back as 2003, the SEC expressed concern about married put strategies as a means of circumventing multiple market regulations. In this 2007 paper, an economist explains how a combined strategy of married puts and reverse conversions provided the engine that powered the naked shorting epidemic that grew unabated until changes were finally made in the wake of Lehman’s demise.
Fact #3: The lower the share price, the more shares the market maker has to short to stay delta neutral. Also true.
Fact #4: Market Makers are not governed by naked shorting rules. Again, Shedlock steals my line. Prior to the repeal of the options market maker (OMM) exception of Regulation SHO, OMMs were not bound by the locate and delivery requirements of that rule. So, it’s entirely predictable that options trading would play a key role in any effort to circumvent Reg SHO.
The existence – and illegality – of these kinds of tactics are documented in this November 2009 administrative action brought by the SEC against Rhino Trading and Fat Squirrel Trading (one of only two enforcement actions specifically alleging naked short selling filed in the Commission’s history). In it, you’ll learn how reverse conversions and “resets” (the call-based alternative to the married put) were used to illegally manipulate other stocks down.
At this point, Shedlock has spelled out the entire philosophical foundation for his disagreement with me, and yet we’re apparently in the awkward position of not disagreeing about any of the parts that really matter. The actual disagreement seems to be based on our interpretations of the implications of these facts, in my case informed by a slightly more detailed (though not very broadly-applicable) knowledge of the tactics used by illegal stock manipulators. That Shedlock is not familiar with these tactics speaks very well of him as an investment manager, in my opinion.
So, while Shedlock claims, “the [options] market makers shorting Bear Stearns did so for purely mathematical reasons, to remain delta neutral” I assert that this necessity, combined with their exemption from Regulation SHO’s locate and delivery requirements in place at the time, made them the perfect counterparty to a short-selling hedge fund seeking to warp the market for Bear Stearns stock through the generation of artificial supply.
Shedlock further asserts that Bear’s demise was the inevitable product of its own greed and toxic balance sheet. I respond by agreeing that Bear probably was destined to go under, and in capitalism, that’s ok. However I further point out that Bear had $18-billion in cash on hand when the assault began, and so the process should not have taken just one week. In a civilized world, even when someone is on their deathbed, it’s not ok to hasten death through forceful application of the pillow; and particularly not when the incentive for doing so is pecuniary.
As promised, the space to follow is reserved for Mr. Shedlock to offer his rebuttal.
==============================================================
.
John Carney Clusterstock), Felix Salmon (Reuters) have joined the Milken Institute (founded by Michael Milken) as speakers:
MilkenInstitute
1. . @MilkenInstitute Global Conference free pass offer for recently unemployed: http://bit.ly/9DDlzG Great networking opportunity LA 4/26-4/28 about 17 hours ago via TweetDeck
2. Frank Luntz, Founder & President, The Word Doctors added to @MilkenInstitute #GC2010 line up. http://bit.ly/4pgYMT about 18 hours ago via TweetDeck
3. New speaker added to #GC2010: Felix Salmon of Reuters http://bit.ly/TOIUy about 18 hours ago via TweetDeck
4. New speaker added to #GC2010: Heidi Moore, contributor to The Big Money, New York Mag, Marketplace http://bit.ly/ay83eu http://bit.ly/bNQOpB about 18 hours ago via TweetDeck
5. New speaker added to #GC2010: Stacy-Marie Ishmael of the Financial Times: http://bit.ly/9sFBjh about 18 hours ago via TweetDeck
6. New speaker added to #GC2010: John Carney, Managing Editor of The Business Insider’s Clusterstock . http://bit.ly/or9JV about 18 hours ago via TweetDeck
7. Don’t miss this panel @MilkenInstitute #GC2010! @carney @s_m_i @moorehn @felixsalmon discussing financial journalism. http://bit.ly/4pgYMT about 18 hours ago via TweetDeck
8. Kevin Johnson, Mayor of the City of Sacramento joins @milkeninstitute #GC2010. 2:14 PM Mar 19th via TweetDeck
9. Eugene Kandel, Head of the National Economic Council, Israel Prime Minister’s Office also joining @MilkenInstitute #GC2010. 2:13 PM Mar 19th via TweetDeck
10. Pierre Beaudoin, President and CEO, Bombardier Inc. joins line up @MilkenInstitute #GC2010. http://bit.ly/4pgYMT 2:10 PM Mar 19th via TweetDeck
11. @TNYJohnCassidy joins @MilkenInstitute #GC2010 to discuss Do Our Financial Models Still Work? http://bit.ly/4pgYMT 11:09 AM Mar 19th via TweetDeck
12. @UFCW EVP William McDonough joins @MilkenInstitute #GC2010 for State of the Unions: Labor’s Role in Today’s Economy 11:05 AM Mar 19th via TweetDeck
13. Lewis Bernstein, EVP of Education, Research & Outreach, Sesame Workshop speaking on Health Diplomacy as a Foreign Policy Tool @ #GC2010. 11:00 AM Mar 19th via TweetDeck
14. SEC’s Richard Ferlauto, Deputy Dir of Policy, Office of Investor Education and Advocacy coming to @MilkenInstitute #GC2010. 9:41 AM Mar 19th via TweetDeck
15. John Engler, President & CEO, National Association of Manufacturers joining line up for @MilkenInstitute #GC2010. http://bit.ly/4pgYMT 9:39 AM Mar 19th via TweetDeck
16. RT @Vistage members that still need to register for Milken Institute Global Conference, DM @loisatvistage to assist w/registration #GC2010 7:16 AM Mar 19th via TweetDeck
17. California First Lady Maria Shriver added to @MilkenInstitute #GC2010 line up: http://bit.ly/4pgYMT 10:30 AM Mar 18th via TweetDeck
18. Paid research intern opening @MilkenInstitute . Be a part of the #GC2010 team: http://bit.ly/9q0w7Q 10:09 AM Mar 17th via TweetDeck
19. Robert Kleine, Michigan State Treasurer added as speaker to @MilkenInstitute #GC2010 lineup: . http://bit.ly/4pgYMT 9:25 AM Mar 16th via TweetDeck
It really is repulsive. To watch dishonest liars, thieves, act like leaders and honest people as they perform like actors and actress in a porn movie.
The mental game is sick. If greed does this to sane people. Laugh, make fun, call names. Feel like a helpless child who loves and respects his or her parents when the actions are deplorable.
Call them friends as you get pleasure from cutting others into pieces.
As kicking, beating your dog keeps coming back wagging the tail.
The money is spent. Toxic paper.
Is the moral principle of our society spent too? Is the team of honest strong enough to expose truth?
Little Stevie Cohen’s gonna wrap himself in the flag:
http://www.finalternatives.com/node/11825
Thanks for the link on Thomas Lawson.
I’ve been going through the NY times. They used to call naked short selling and failing to deliver “watering stock” the way cheating dairy farmers would add water to milk.
http://query.nytimes.com/search/sitesearch?query=watered+stock&more=date_all
They knew it was theft and market manipulation back then.
These old articles are very illuminating.
http://query.nytimes.com/mem/archive-free/pdf?res=9501E1D71230E433A25753C2A9619C94629FD7CF
If the return on investment on a telephone company is 50% and you don’t want the customers to see a 50% dividend, push the dividend rate to 7%.
How does this work exactly? Is this a stock split? That doesn’t make sense, as a split wouldn’t change the dividend rate as the share price would fall.
You’d have to raise the share price to lower the dividend rate, which is different than naked shorting.
Does “watering the stock” have more than one meaning?
Apropos century-old New York Times articles about fraudulently adulterated milk and securities…
Just the other day I had a chance to look up the source of the “sunlight is the best of disinfectants” quotation. Imagine my surprise when it turned out to be Louis Brandeis, who wrote a series of articles for Harper’s Weekly in 1913 that were published the following year in book-form under the title, “Other People’s Money — and How the Bankers Use It.” Like Walter Baghout’s “Lombard Street” from the 1870s, Brandeis’ book is both dated and highly relevant. (Oh, and _free_ at the University of Louisville law school website.)
Reading back through those articles, show a different time. They thought dividends should be tied to the capital invested, with maximum dividends of 20%.
If you build a railway for a million dollars, you shouldn’t be able to charge more than required to make a maximum 20% profit.
What we call “goodwill” on financial statements now, they called “watered stock”. By selling stock at inflated prices, you lowered the effective return and could get away with charging monopoly profits.
Could you imagine if Microsoft were limited to a 20% return on the capital actually invested on a product like Windows 7 or Office?
Anyway, I’ve also heard the term, in later years, used to refer to stock printed by short syndicates who would run the shares up, sell into the volume, then run them back down again with IOU’s.
I’m reading articles from 1929 right now. My, the similarities.
Hey Anon,
Try 1820’s, 1700’s [England /France economys] and, what eventually DID happen to the ‘new worlds’ gold.
The bunch behind the fleecing are artists of old they have a longstanding ability to end up on the winning side somehow.
Look into how the ‘news’ of England losing at Waterloo caused a panic and who ,suprise, ended up ‘winning’ there.
Circles going around.
The SEC must be investigating Einhorn or he is doing the bidding of Cohen et al..
chit is deep @ sec..
http://www.zerohedge.com/article/david-einhorn-slams-sec-says-its-culture-lawlessness-allowed-allied-capitals-fraud-cannot-co
Deep needs to post something in tribute to Ms. Helburn.
Why, is she okay? She’s a hero as is bunny.
http://blogs.barrons.com/stockstowatchtoday/2010/03/23/gasparino-einhorn-may-testify-on-lehman/?mod=yahoobarrons
uhh, um, humm, I’m regulating, regulate me baby!
http://www.businessinsider.com/sec-employees-were-masturbating-to-kiddie-porn-while-your-economy-tanked-2010-3?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+businessinsider+%28Business+Insider%29
uhh, um, humm, I’m regulating, regulate me baby!
http://tinyurl.com/y8t7alf
‘Nice Work If You Can Get It’ department:
http://www.nytimes.com/2010/03/24/business/24corzine.html?hpw
Chances of real reform diminish exponentially when the revolving door is so nicely greased and spinning off its axis.
I wonder what Mr. corzine was able to do as a Senator and a Governer for wallstreet oh, sorry I mean we the people.
‘Wee’ the People – as in ‘piss on’.
Clearing should be run by the government or a non profit owned by investors.
I like this article on a state owned bank.
“Florida political leaders consider state bank: 2% mortgages, 6% credit cards, no state debt costs”
http://www.examiner.com/x-18425-LA-County-Nonpartisan-Examiner~y2009m10d29-Florida-political-leaders-consider-stateowned-bank-2-mortgages-6-credit-cards-no-state-debt-co
The banksters are parasites on the productive working class.
http://www.thenation.com/doc/20100329/nichols
http://www.fiercefinance.com/story/time-state-owned-banks/2010-03-22
Or state-run credit unions!
Cut the banksters off at the knees.
Kevin,
The government is no better.
Re: Einhorn
If Einhorn is vulnerable for naked shorting, attacking the SEC might make some sense. He could claim that any investigation is “retaliatory”. I only know that Einhorn is vilified on this site, but I have no way of knowing if he participated in massive naked shorting (as opposed to legal shorting).
Re: DTCC data
I suggested a few days ago that we need the total longs/shorts showing on the monthly account statements, and the total shares in “street name” Cede & Co. registered with the transfer agent. A response mentioned that the DTCC do not have visibility out to the individual account holder. True enough. But each “participant” broker/dealer at the DTCC has an account, and the DTCC could report the totals of their accounts. Presumably this would accomplish the same purpose, right? The data for any given B/D would reflect the totals of their accounts, right? And this could be verified by audit as well, right?
ANY data can be obtained, IF people are forced to deliver it.
To say it can’t be obtained is ridiculous.
There’s always some way to get it, though that may not be apparent to willfully deaf, dumb, and blind SEC/DTCC staffers and ‘management’.
Companies can purchase a DTC position report and it will always show no short position at all. The reason is that is the DTC participant’s actual position. They take up the shares belonging to Cede & Co. and they allocate them among the participants on a daily basis.
What it doesn’t show is what the participant is supposed to have. Someone like Bear Stearns had dozens of accounts with DTC and their positions could be moved from one account to another. There is no SHO failure as long as the failure in any one account is less than a certain threshold.
Imagine a participant clears for brokerages representing 50,000 customers and 100 brokerages.
The DTC wouldn’t know how many shares that clearing house is supposed to own, so from there point of view, there is no failure. The clearing house wouldn’t know how many shares each brokerage is supposed to own.
You’d have to subpoena the clearing house and each of the hundred brokerages, spread all across the country in different jurisdictions.
This could all be fixed by forcing the DTC to keep track of ownership of the final beneficial owner instead of their clearing brokerage.
They’ve spread the information across tens of thousands of entities to frustrate regulators when it would have been trivial to centralize it.
Remember, when they say trades settle and naked shorting is minimal, they are talking about trades between participants, who are usually clearing brokerages.
The company has full access to the transfer agent and would know how many shares are registered to Cede. In most cases, it is most of the shares outstanding as few people typically hold certs.
Here are two links about what Senator Kaufman thinks about Reforming Wall Street Regulations:
– Sen. Kaufman: Bring Back Glass-Steagall, Break Up ‘Too Big to Fail’ Banks – Video Interview
http://finance.yahoo.com/tech-ticker/sen.-kaufman:-bring-back-glass-steagall,-break-up-%27too-big-to-fail%27-banks-yftt_449989.html
– Sen. Kaufman: Lehman Accounting Just Tip of Wall St. Fraud Iceberg – Video Interview
http://finance.yahoo.com/tech-ticker/sen.-kaufman-lehman-accounting-just-tip-of-wall-st.-fraud-iceberg-449812.html?tickers=bac,c,gs,ms,jpm,xlf,skf
Let’s break up the hedgefunds, too.
Seventh Arrest In U.K. Insider-Trading Sting
Mar 24 2010 | 2:35pm ET
British authorities arrested a seventh person in connection with the insider-trading case that ensnared a Moore Capital Management trader.
The Financial Services Authority, which organized the U.K.’s largest insider-trading sting with the country’s Serious Organised Crime Agency, would not identify the individual arrested this morning. It has also not officially identified the six people arrested yesterday, but media reports indicate that they include Julian Rifat, an execution trader at Moore’s London office.
Gamestop Corp Rumor Writer Fired by Business Insider
By Perry H. Rod, Published: March 25th, 2010 9:26 AM PDT
Managing editor of Clusterstock.com and former editor-in-chief of Dealbreaker.com John Carney was fired by Business Insider’s Henry Blodget yesterday. There is no official word on the reason for his termination.
Two weeks prior, Carney had written an article stating that retailer GameStop Corp [NYSE:GME] “might be an acquisition target,” according to “rumors”. The article started off with, “When the rumor began circulating this week,” and included a link directed to an article that was written by his colleague that same day, not earlier in the week. Carney and his writing partner Vince Veneziani persisted with the unsubstantiated rumor, by suggesting that GameStop’s Merger and Acquisition lawyers appeared to be preparing for a GameStop buyout. GameStop stock rose dramatically as a result.
According to his biography, Carney believes that insider trading should be legal (perhaps he also believes that spreading false rumors should be a-ok). On the subject of naked short selling, where short sellers bet down stock without actually borrowing any stock, he has actually defended the practice, stating “cracking down on naked short selling would damage shareholders by making the markets less efficient and penalizing the best corporate watchdogs around.”
The firing may not have anything to do with spreading rumors or believing that unethical practices should be legal, but nevertheless, it may be a sign that Business Insider is attempting to move back into the world of journalism and away from dangerous false rumor spreading outfits such as dealReporter.com, theflyonthewall.com and writers like John Carney.
Henry Blodget merely didn’t like the guy’s underwear. Don’t impute pure motives to Hank, please…
http://www.businessweek.com/news/2010-03-25/lehman-examiner-s-report-misleading-lawyers-say-update1-.html
and my blog post on that:
http://mindbodypolitic.com/2010/03/25/lehman-lawyers-claim-report-is-misleading/
Bloomberg reports:
“Lehman Brothers Holdings Inc. lawyers said the examiner who reviewed the firm’s collapse included misleading statements in his report about Barclays Plc’s purchase of the Lehman brokerage.
Examiner Anton Valukas’s March 11 report quoted a Lehman lawyer, Weil Gotshal & Manges LLP partner Thomas Roberts, as saying Barclays’s purchase of the brokerage unit was intended to be a “wash,” with neither gains nor losses for the buyer, according to letters filed today in U.S. Bankruptcy Court in New York.
The law firm wrote that Valukas omitted statements that “the wash” was merely theoretical and there was no provision for a break-even deal in the sale agreement.
Lehman is seeking to recover $11 billion from Barclays, claiming the bank received a secret discount when it bought the brokerage. Barclays disputes that claim….”
I’ve thought for a while that the Valukas report was being hyped, and sure enough, Bloomberg, which has been a lot better than the other accounts, has got some evidence to back that up.
Here’s what I wrote in a comment at Deep Capture, just a few days ago about the Valukas report:
LILA:
**************
The writer [the Bloomberg reporter] actually undermines [Michael] Lewis at every turn, calling his story loaded and one-sided and ending with this intriguing additional evidence that Lewis somehow doesn’t “get” it – a point I made in my post “Jim Rogers Tells Greeks To Go Bust” [Lila: Lewis, with Einhorn, have been using the Valukas report as an endorsement of their trader-activist-good-guy thesis]
http://mindbodypolitic.com/2010/03/09/rogers-tells-greeks-to-got-bust/
And Markopoulos having Einhorn write the foreward to his new book….
Now that’s a head-scratcher!
Judd,
Any word from Mr. Shedlock? I’m anxious to read his rebuttal.
Not a peep from Mr. Shedlock. I sent him a reminder a few days ago, but no response.
Manipulating silver prices.
http://www.gata.org/node/8466
Gold.
http://www.youtube.com/watch?v=e9bU0r6JP4s
A London trader walks the CFTC through a silver manipulation in advance
Submitted by cpowell on Thu, 2010-03-25 23:41. Section: Daily Dispatches
Additional Statement by Bill Murphy, Chairman
Gold Anti-Trust Action Committee
to the U.S. Commodity Futures Trading Commission
Washington, D.C., March 25, 2010
On March 23, 2010, GATA Director Adrian Douglas was contacted by a whistleblower by the name of Andrew Maguire. Maguire is a metals trader in London. He has been told first-hand by traders working for JPMorganChase that JPMorganChase manipulates the precious metals markets, and they have bragged to how they make money doing so.
In November 2009 Maguire contacted the CFTC enforcement division to report this criminal activity. He described in detail the way JPMorgan Chase signals to the market its intention to take down the precious metals. Traders recognize these signals and make money shorting the metals alongside JPM. Maguire explained how there are routine market manipulations at the time of option expiry, non-farm payroll data releases, and COMEX contract rollover, as well as ad-hoc events.
On February 3 Maguire gave two days’ warning by e-mail to Eliud Ramirez, a senior investigator for the CFTC’s Enforcement Division, that the precious metals would be attacked upon the release of the non-farm payroll data on February 5. On February 5, as market events played out exactly as predicted, further e-mails were sent to Ramirez while the manipulation was in progress.
It would not be possible to predict such a market move unless the market was manipulated.
And two days later someone attempts to kill them:
London metals trader Andrew Maguire, who warned an investigator for the U.S. Commodity Futures Trading Commission in advance about a gold and silver market manipulation to be undertaken by traders for JPMorgan Chase in February and whose whistleblowing was publicized by GATA at Thursday’s CFTC hearing on metals futures trading was injured along with his wife the next day when their car was struck by a hit-and-run driver in the London area.
According to GATA’s contact with Maguire, board member Adrian Douglas, Maguire and his wife were admitted to a hospital overnight and released today and are expected to recover fully.
Maguire told Douglas by telephone today that his car was struck by a car careening out of a side road. When a pedestrian who witnessed the crash tried to block the other driver’s escape, the other driver accelerated at the pedestrian, causing him to jump out of the way to avoid being hit. The other driver’s car then struck two other cars in escaping. But the other driver was caught by police after a chase in which police helicopters were summoned.
http://www.zerohedge.com/article/former-goldman-commodities-research-analyst-confirms-lmba-otc-gold-market-paper-gold-ponzi
C’mon, guys! We’re getting a little thirsty for some new juice! When can we expect something?
I’m aiming for this weekend for the first of what will be a four post blitz.
I want MNKD predictions, Judd.
Also, the shortseller as oracular investor crap:
http://www.nytimes.com/2010/03/28/business/28stra.html
This gives new meaning to the phrase, Nigerian scam:
http://mindbodypolitic.com/2010/03/25/goldman-executive-in-nigerian-cabinet/
Soros is playing these boys like a fiddler on the roof:
http://allafrica.com/stories/200902210010.html
From EconomicPolicyJournal
http://www.economicpolicyjournal.com/2010/03/does-george-soros-want-to-get-cut-out.html#comments
Does George Soros Want to Get a Cut Out of the Entire U.S. Housing Mortgage Market?
George Soros is out with a new commentary on the housing market. Some of his observations are accurate:
The business model of Fannie Mae and Freddie Mac is fundamentally unsound. These public-private partnerships were supposed to serve the public interest and the interest of shareholders. But this was never properly defined and reconciled.
Management’s interests were more closely allied with those of shareholders. They had an incentive to lobby Congress — both to expand homeownership and to protect and use their government-sponsored duopoly status.
The GSEs extended their activities from insuring and securitizing mortgages to building highly leveraged portfolios of securities by taking advantage of their implicit government backstop. They profited from the growth without bearing the risk of collapse: Heads they win, tails you lose.
The GSEs already had a checkered history, riddled with accounting irregularities. Eventually, they blew up — at a huge loss to taxpayers that may exceed $400 billion
As I was reading this, though, the questions kept running through my head, “What’s the angle?”, “Why is Soros promoting this understanding?”
It didn’t take me long to find out. Instead of recommending that the housing mortgage market be returned to the free market, Soros has a scheme that would micro-manage the mortgage market, the Danish model:
There is a proven mortgage financing system already up and running. The Danish model has been in use, continuously, since the aftermath of the Great Fire of Copenhagen in 1795. It has not prevented housing bubbles, but it has never broken down. And it proved its worth again in 2008.
In the Danish system, homeowners do not borrow from either a mortgage originator or a GSE. They borrow from the bond market, through a mortgage credit intermediary. Every mortgage is balanced by an equivalent amount of an identical, and openly traded, bond…Mortgage Credit Intermediaries operate the POB system. They help homeowners understand and navigate the process. Most important, MCIs bear the credit risk of the mortgages — they remain “on the hook” in the event of delinquency or default.
In other words, this one type of mortgage issuance method is one that might emerge in a free market. There is really nothing that makes this superior to the old fashioned bank that raises funds long term and them makes housing loans with the funds. So why is Soros promoting this one specific financing method? The answer doesn’t come until the short bio at the end of Soros’ article, but it is a whopper, and if you know Soros, it is not unexpected. It reads:
George Soros, philanthropist and financier, pioneered the introduction of the Danish mortgage finance system in Mexico with the support of then-Treasury Secretary Paul O’Neill. He now participates in a joint venture with the Danish financial system that helps countries use this approach.
He’s in a damn joint venture running the Danish method. Which sounds to me like Soros has turned the Danish method into a way for money to be pumped into his pocket every time someone gets a mortgage using the Danish method. And now he wants that to include the entire U.S. housing mortgage market.
Soros’ greed knows no bounds:
http://www.businessinsider.com/soros-battling-to-buy-ownership-of-indias-stock-exchange-2010-3
Jim,
The one thing he can never buy himself is Immortality. There is only so much money can buy you and he will never amass enough to live to deal for indefinitely. He is no spring chicken.
More of a rotten egg, actually.
http://mindbodypolitic.com/2010/03/29/soros-to-buy-stake-in-bombay-stock-exchange/
the bse is introducing all those kinds of changes that led to the gaming of the nyse
http://mindbodypolitic.com/2010/03/29/make-sense-not-war/
Quoting Peter Canelo, the US investment strategist at Morgan Stanley Dean- Witter in New York. “One must realize that the market may create wealth but it doesn’t create new money. The money is always there, only the pockets change.” he says “For every buyer there’s a seller, for every borrower there’s a lender. What Wall Street giveth, Wall Street taketh away.”
http://www.cfoss.com/wall.html
That was a decent little video. Very interesting. Good to see you’re still at this, Judd.
Also, yes, Once is totally awesome.