Wednesday, January 13, 2016
Totally off subject (i.e., this post has nothing to do with reprographics!)
A couple of nights ago, I went to see the movie, “The Big Short”. Although the movie was, I think, very well done (and Steve Carrell’s performance was absolutely terrific), the movie – well, the subject matter covered – made me very angry. To think that there were a huge number of people involved in the enormous fraud (the fraud that caused a huge financial collapse and the Great Recession) and to learn that only one person was convicted of committing a crime – made me very angry, upset, yes, totally pissed me off. (How anyone can trust a ratings agency is beyond my imagination.) JFC!
During the Great Recession, there was lots of stuff written about:
-CMO’s (Collateralized Mortgage Obligations)
-MBS’ (Mortgage-Backed Securities)
-CDO’s (Collateralized Debt Obligations)
… and we also heard the words “tranche” and “tranches”
And, we learned about Credit Default Swaps (CDS) which, basically, were bets that obligations would fail (i.e., become worthless or become worth a lot less than what they were originally sold for)
We learned that junk mortgages (shit mortgages) were packaged into securities, securities which were fraudulently rated AAA, and sold to investors (all around the world).
Not only did most of the investment banks package and sell CMO’s, MBS’ and CDO’s, they also, when they realized that those packages were going to fail, began making bets (CDS’) so that they could earn huge profits on the junk they packaged and sold. MF’ers!
At the end of the movie, a statement appeared on the screen that said that, within the past couple of years, a new type of “bet” has been created by Wall Street firms….. “Bespoke Tranche Opportunities”
I sat there thinking, “WTF is a “Bespoke Tranche Opportunity???!!!”
Here are a couple of articles I found that explain that:
High Risk Investment That Brought Down The U.S. Economy Returns, With A New Name
When a restaurant fails a health code inspection, sometimes the easiest thing to do is to close up shop, let people forget what happened, then slap a new sign on the door and reopen under a new name. That’s essentially what the world’s biggest banks are doing with a complex, high-risk investment product that helped destroy the global economy less than eight years ago.
Goodbye, “collateralized debt obligations.” Hello, “bespoke tranche opportunities.” Banks including Goldman Sachs are marketing that newfangled product, according to Bloomberg, and total sales of “bespoke tranche opportunities” leaped from under $5 billion in 2013 to $20 billion last year.
Read the complete article at this link:
And, here’s another article to read:
Posted by Joel Salus at 2:07 PM