“We refused to touch credit default swaps. It would be like buying insurance on the Titanic from someone on the Titanic.”
- Nassim Taleb.
It’s not just what you know, it’s who you know. And it’s not just who you know, it’s who you pay off. As the Center for Public Integrity reports (as cited in last week’s Financial Times), the largest US originators of subprime mortgages spent roughly $370 million on lobbying and campaign donations in Washington during the past decade in attempts to stave off tighter regulation of their industry. The study
“shows that most of the top 25 originators, most of which are now bankrupt, were either owned or heavily financed by the nation’s largest banks, including Citigroup, Goldman Sachs, Wells Fargo, JP Morgan and Bank of America,”
who collectively originated $1
trillion in subprime mortgages (almost three quarters of the total) between
2005-2007. That $370 million was money well spent though, given that it was
followed, in turn, as the mortgage market imploded, by $700 billion – so far –
in troubled asset relief funds – otherwise known as taxpayers’ money. Who said
crime doesn’t pay ? That’s a return on capital some 1,891 times bigger than the
original “investment”. Now that’s leverage. Strangely enough,
US politicians have been largely silent about their own complicity in the theft
of the century.
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