http://www.nytimes.com/...ml?src=me&ref=general



Lulz. And some people still blame teh government for all this mess?

Too Much Regulation!

??

I don't see the problem.

When it comes to financial assets, it is very much a "buyer beware" market.

It is up to you to do your own market research and determine whether an investment is worth the risk, what its expected returns are etc.

You can't blame Citigroup for trying to get rid of assets that they considered too risky, anybody in the same position would do the same. If the buyers felt that they bought assets that were riskier than they expected, than they should have looked into the asset more before they agreed to buy it.

the main thing shady I found in the whole thing was placing AAA status on the loans knowing they were doomed assets.

But as H4 says, everyone that invests needs to do their own research. The ratings you get even just on Stocks. If it says Strong Buy from your bank, however your bank is the one funding them or is incharge of their new stock placement. Maybe go to another source. :)

H4, there's very specific laws governing the sale of all securities. Citibank violated them.

It's not a "buyer beware" market at all. It's a highly regulated market. We rely on those regulations in order to ensure that trades are fair. Citibank side-stepped those regulations. In doing so, the broke the law (and cost a lot of people a lot of money).

So yes, I can blame Citibank for doing what they did. And if you think "anybody would do the same" in their position, then you clearly have no knowledge of the industry what-so-ever.

-Fooglmog
Guy with no clue.

Short Selling should not be legal. That would help with a lot of our problems. Also, Banks who borrow money from the gov or fed reserve for almost 0 interest should not be allowed to buy gov bonds for 3% interest. Its a scam keeping interest at 0. It allows Banks to borrow for 0 interest and then buy gov bonds making 3% at no risk. So a bank borrows one bill and makes 33 mill a year at no risk. Thats why money is not moving around. Raise interes rates over 3% and you will see banks lending money smartly and quickly.

Silver makes a good point.

I am in the industry and preach that to clients. Buy business you know, stay away fron businesses you dont.

1

bankers !

*licks PG*

yes it is a heavily regulated industry, but not with the intent to protecting investors from risky investment.

In that sense, it is very much so a "buyer beware" market.
Rating agencies are private companies that perform a service that isn't gauranteed to be reliable.

All analysts recommend doing your own research...

Yes, it has lots of regulations and is a buyer beware, however when the business uses its postion to screw (in violation of the law) one customer for its own interest, Goldman Sachs and any of the others did. then Someone needs to hang and not by being bailed out , given large Bonus (do we call them NOT-PERFORMING BONUSES), or worse put in charge of the government offices responsible for overseeing / regulating / or interacting with the industry.
If anything should be learned is the Fiduciary Laws or whole concept of Fiduciary is a Joke.

Citigroup 285 million
Goldman Sachs 550 million (http://www.sec.gov/news/press/2010/2010-59.htm)
JPMorgan 156 million (http://www.sec.gov/...s/press/2011/2011-131.htm)

In the case of JPM and GS they allowed outside hedge fund managers to select the sh*tty mortgages bundled together to make the CDOs (collaterized debt obligations). Those same hedge fund managers had hundreds of millions of dollars bet against the CDOs. The CDO packages (all backed by horribly risky mortgages) were sold as highly rated debt by the banks to pension funds and charity funds, among others. The banks selling the CDO investments hid the involvement of the hedge fund managers who helped put together the packages.

There was no way to know that the highly rated debt was bunk. It was not public that the sleezebags who created the CDOs had their money aligned against the buyers of the CDOs. Maybe within big banking circles it was known through connections - who knows.

I don't even know what kind of shinanigans these are comparable to.

But the crazy thing. Many of the CDOs were 'bet' against (I use that loosely) through the CDS mechanism (credit default swaps). The banks and hedge funds purchased the CDS as a form of insurance for in case a 'credit event' occured with the CDOs. A credit event is a loose term. The ISDA (Intl Swaps and Derivatives Ass.) determines if a credit event takes place. If a credit event takes place then the party that sold the CDS pays the buyers the face value of the derivative insured. Who composes this ISDA that determines if something is a credit event? Yea, go figure, the same banks that would make huge payoffs if a credit event occurs and triggers the CDS.

So the US government was responsible for many of the CDS because they held Fannie/Freddy. Fannie/Freddy were CDS brokers.

This is the biggest conflict of interest I've ever seen. Amazing. And how does it end? The banks get all their money back, the US govt gives them that money, and then they line their pockets with the biggest bonuses ever gifted. It's like giving everyone in the US a dirty guido. And what's the penalty? A few hundred million of fines.

And H4 claims that somehow 'buyers' are supposed to do their own research and find 'misstated and omitted key facts about a financial product'?

Since when can a business misrepresent their product and then blame the buyer for not finding the information the seller hid?

I cannot imagine any way for you to argue that in these cases it is the buyer's fault (working with the assumption the buyers didn't have insider/hidden information). There needs to be some amount of responsibility held by anybody who sells anything. If it's open season to lie and cheat nobody wins, nobody trusts anyone, and no one buys things. And, if it's open season for such a thing, then it's equally backwards that the liars and scammers are forcibly backed by the people they are defrauding.

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+1 Oats.

H4 - It wasn't about selling a risky investment, it was about selling a risky investment with the knowledge that it would fail. If a company has an adverse interest to their client - in this case, having bet against the very security it was selling - they have a requirement to disclose that to the client. Again, this isn't about simply selling a risky investment. It's about selling an investment that they themselves bet against.