Mr. Finance
NEW YORK - The dark of the 'FBI descends on the crisis of the calculator, assuming the dimensions of a real raid on Wall Street, considered by most' parties responsible for the crisis in the mortgage subprime. The operator 'malicious mortgage', launched March 1 by the authorities 'and the federal Department of Justice, led to the arrest of 283 people, of which 173 are already' ordered out of a total of 406 indicted. Only in the last twenty-four hours the arrests were 60. To finish handcuffed, in another survey whose object always calculator subprime, were also two former managers of Bear Stearns, accusing them of fraud, conspiracy and insider trading. Ralph Cioffi and Matthew Tannin, managers of hedge fund failures that were owned by Bear Stearns were taken from their homes in Manhattan and New Jersey and now are having to answer before the authorities' of the failure of hedge funds that have sparked the fuse of crisis subprime. The data released by the Justice Department and FBI do not leave any doubt about the will 'of the authorities' Love us to see clearly on a crisis that has devastated the economy and U.S. markets. "The fraud on mortgages and related securities represent a threat to our economy, to the stability 'of the housing market and tranquility' of millions of Americans," says the Deputy Prosecutor-General, Mark Filip, stressing that the operation proves "commitment and determination of the Justice Department in combating crime patterns and help the restoration of stability 'and confidence in housing markets and credit. The operation has revealed 144 cases of fraud, with losses of 1 billion dollars, with arrests only in the last 24 hours to 60 people in Chicago, Houston, Miami and dozens of other location 'USA. "The operation aims to destroy individuals and groups involved in fraud on mortgages. The FBI - said Robert S. Mueller, director of the sub-combination Bureau of Investigation - continue 'to direct the investigation, and combat fraud that threaten our economy. " In another survey, more focused on mortgages subprime, ended up in handcuffs Cioffi and Tannin on which weighs on charges of deception at the expense of investors from the investigation would be revealed that the two former managers were fully aware of poor state of health of the funds, even if publicly expressed the opposite at the same time providing reassurance and deceiving investors. A nail Ciotti and Tannin is an exchange of e-mail: Tannin from his private e-mail address Ciotti suggested to discuss the closure of hedge funds. Cioffi proposal accepted invitations to her home in New Jersey. Both were aware of difficulties 'funds, but despite this, four days later, during a conference call, Cioffi, while stating that the results of hedge funds were declining, openly stated that there were liquidity problems' and that the portfolio was solid. The failure of funding and 'cost investors $ 1.6 billion. "His background and 'was the first to fail and this makes him an easy prey, but does not mean that he did something wrong," said Cioffi's attorney, Edward Little, stressing that "losing money is not' a crime . "My client and 'innocent and e' the scapegoat for widespread market crisis," says one of the lawyers instead of Tannin, Susan Brune. "There 'a lot of political pressure to move ahead in surveys in this area," notes Dan Richman, a former prosecutor and now a professor at Columbia Law School. Illustrating the preliminary results of 'survey and explain the reasons for the' arrest of Cioffi and Tannin, the authorities' stated that "the arrests of former managers of Bear Stearns gives a sign of the huge 'and the coarseness' of poor conduct. Have seriously violated the public trust, "betraying the investors who were not regularly made aware of the 'actual development of their investments. Cioffi and Tannin are not the first to slip on an exchange of e-mail: first of them had driven into trouble with e-mail Henry Blodget (Merrill Lynch), Jack Grubman (Citigroup), Frank Quattrone (Credit Suisse First Boston) .
2 Responses
Paul Weber
June 20th, 2008 at 5:03 am
1The fact that * should * be thinking is that the "regulator" or asleep, or his sleep was somehow paid, or was not quite up to his role.
It was in late 2005 when my Bloomberg spent the first news of the "creative mortgage financing," which would have generated the famous NINJA loans (no income, no jobs, no assets "), or permission to so-called" investors "of the brick obtain up to 120% of capital with the purchase of new "condos."
If you think about these investors were operating lever on the rates in a manner not unlike a hedge fund that does "carry trades" - the party is fine As long as rates remain sufficiently compressed, but if rates go live are trouble.
I began to do and discover the index HGX (Philadelphia Housing Index) - which also contains options listed. For me, the rest is history :-)
What is also impressive is the number of banks that still last year, specifically in July, they were quite unable to imagine what could be the potential devastation that was caused by the crisis, then in its infancy. Any definition of that, in terms we know today, was greeted with skepticism, sarcasm, disbelief (I speak from personal experience disconcerting).
Euro more than 1:50? Gold over $ 1000? Paralysis of the interbank market?
"She is so little macro catastrophe in his vision ...."
The year 2008 - year Bisesti, disastrous years, as well as election year in the U.S. - is getting ready then to see the light of a "pogrom" against the U.S. financial system (but the long wave is also coming on the Old Continent), both as unnecessary and populist late.
It would be enough for a little 'common sense a priori.
Were it not that that English reads (correctly): "Common sense is never common" ....
JW
October 7th, 2008 at 4:23 pm
2Genesis of the subprime mortgage crisis in the U.S. and possible evolution
I agree that low interest rates, expectations about house prices euphoric poorly regulated financial innovation have contributed to the crisis in the subprime mortgage market, but I do not understand how it is possible that the functions of risk management at all U.S. financial institutions involved in the crisis, rating agencies and supervisors USA have not noticed anything. The securitization of subprime mortgages and their subsequent placement on the market as derivatives (CDS, ABS, MBS) were still at the highest level AAA credit rating (investment grade) by the rating agencies, which suggests a conflict of interest. What about policies and procedures of all the issuing banks involved, from increasingly expert in preventive monitoring and proactive approach to risk portfolios of mortgage credit (mortgage loans) through early warning indicators such as vintage analysis, the aging of the portfolio, the credit scoring, the risk and the roll rates, the classified accouts and other models. Impossible to think that all together have lost the plot and the rating agencies also convinced of the goodness of their portfolios of loans processed in derivatives and then placed in the portfolios of investment funds around the world as a low-risk securities. The deterioration of the portfolios of subprime credit profiles also do not occur overnight. Everything is very strange and hard to believe, especially for operators of credit and finance experts and "surf" as American ones.
And after the subprime mortgage crisis what we can expect maybe even a negative fallout on the market for credit cards, personal loans and other forms of lending. " In the U.S. and UK market rata ratio / median income and therefore exposure to risk of default (default) for the people that have sparked a mortgage or other technical forms of credit / expectations and the 100% -130% compared to 40% -50% Italy. Certainly, a client at high risk of insolvency and bankruptcy (individual - provided the U.S.) that can not repay a loan, which can lose the house where she lives or who lost their jobs in the U.S. or elsewhere will eventually find it difficult to repay any form of credit exposure. Moreover, the overall decline in consumption and spending will impact further on the portfolios of the banking sector, particularly retail banking and consumer finance / consumer credit not only in the U.S.
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