Re: OT Politics Re: Three Body Problem

Titus G wrote:

On 23/08/24 08:37, William Hyde wrote:
snip

>
Having just reread "The Big Short" I am convinced that there is no limit
to human stupidity when greed is a factor.
>

 I have not read that but am aware that the Global Financial Crisis of
2008 is a euphemism for FRAUD having read Matt Taibbi's version in
Rolling Stone.
 

Oh, there was a lot of fraud.  But the fraud wouldn't have worked without stupidity.  Or rather, the stupidity magnified its effects.
Take one example:
The head of bond trading at one of the major banks (IIRC JP Morgan) recognized that the lower rated mortgage-backed securities were going to collapse.
He knew that they were so weak as to be essentially fraudulent.  So far so good, smart guy.
So he bought insurance on a few billions worth of these. Excellent.
Has he stopped there, he'd have been a hero. JPM would have profited by a few billion when things collapsed two years later and his bonus would have been huge.  He'd have been on talk shows around the country, someone would have suggested he enter the senate.
But in those two years there were the insurance premiums, which ate into the bond departments profits, and hence the bonuses for bond traders would be reduced somewhat.
Now, we can't have that, can we?
So he sold insurance on the AA+ rated versions of these bonds. Insurance on AAA rated is cheaper than on BBB, so he had to sell a lot more insurance than he bought, so that the insurance premiums would balance the insurance payments, and those bonuses would be safe.
It never occurred to him that the corruption and/or incompetence in rating  these bonds did not stop with the BBB bonds.  Mesmerized by those bonus payments, he did not see that if BBB bonds were overrated, perhaps the BB were also. And the A, the AA and the AAA.  And by a lot. As indeed they were. Most AA and AAA bonds were repackaged BBB- bonds (there's that fraud again).
So when the world came to its senses, JPM made billions on the insurance it bought, but lost far more on the insurance it sold, for a net loss of nine billion.
All to protect two years of bonuses for a small subgroup of the bank's employees.
How happy the bank's shareholders and laid-off employees must have been that those bonuses were protected.
William Hyde