Wednesday, November 16, 2011

@SenatorBurr : Why you and your Senate friends are clueless dolts

Three years ago,  our economy came very close to a total meltdown.  To this day,  we continue to investigate, speculate, study,  and debate the cause(s) of this scary period in our history.  I had a front row seat to this mess,  trading my own capital,  day in and day out,  through the meat of the terrible pin action created by the near economic collapse.  I have my own opinions and assessments as to what caused the near meltdown.  The list is extremely long.  But at the very top of the list is the creation of the monster gambling casino of derivatives trading - particularly, credit default swaps (CDS).

The primary problem was that we allowed securities traders to enter into CDS transactions in amounts that far exceeded the underlying value of the assets the CDS securities were meant to insure.   And we kept this market in the dark to the point that not a single individual on our planet had a clue how much CDS was outstanding,  and who held what.  Cut to the chase - we allowed something like $25 Trillion in CDS insurance to be traded on only $2 Trillion of total sub-prime debt outstanding.  And no one had a clue who sold the CDS,  and who owned the insurance on the other side of that transaction.

Why is this bad?  Imagine that 10 of your neighbors were allowed to buy and sell $2.5 Million in home owner's insurance against your $250,000 home.  A number of your neighbors are going to have a tremendous incentive (buyers of the CDS insurance) to burn down your home in order to pocket $2.5 Million.   Other of your neighbors have the incentive (sellers of the CDS insurance) to protect your property.   But,  you don't have a clue who to be leery of,  and who to treat as an ally.  So, you don't allow anyone near your home.

To this day,  we have failed miserably in solving the CDS problem.  We sit here right now with one hell of a f*$@ing mess in Europe.  Some countries over in Europe are in debt past their eyeballs.  Some financial institutions in our world have sold insurance on this debt.  Traders have bought insurance on this debt.  We don't know who sold and who bought.  We don't know how much risk is out there.   And just like in the fall of 2008,  when there is so much uncertainty and a total lack of transparency,  we don't let anyone near our home, we take our money off the table and run for the exits.   Watch.  That is what we face soon - panic and plunging securities markets around the world.  And this coming crises will make 2008 look like a picnic on a sunny afternoon.

It's been 3 years.  We have made no progress on this problem.  We need to instill come common sense.  We should only allow the owners of the underlying assets to purchase insurance - just like only the owner of a home can buy insurance on his home.  And,  we should make sure that the sellers of the insurance are tightly regulated.  Most of all,  there should be total transparency in this market.  Everyone should know exactly how much risk is on the books of the sellers.   Everyone.  Total transparency.  But,  we still have a mess on our hands.

Senator Burr - you and your buddies in the Senate need to get off your lazy asses and get this problem addressed ... head-on and immediately.  But even as I type this,  I know better.  You're a lawnmower salesman.  You are a clueless dolt when in comes to issues of our financial markets.  You have allowed the bankers and traders in our world to pull the wool over your eyes for so long now,  that we are helpless in being able to put in place any sensible controls over this run-away freight train.

What are you doing Senator?  You are running in the opposite direction.  Every single time I hear a Republican politician, including yourself,  addressing financial issues,  you are bitching and moaning about Dodd-Frank.  Republicans, like you, want less regulation of our banks. You want to block any and all efforts to apply common sense.

We are screwed,  because you are clueless.  We are screwed, because you are in the pockets of the bankers.  We are screwed,  because you are on the side of greed.

North Carolina deserves better than our lawnmower salesman of a US Senator. 

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