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Originally Posted by goober
Yes I know how rates are set, it's based on the demand for mortgages in the secondary market. When Wall Street needs mortgages to turn into derivatives they pay a premium for the product, and they ignore the details about the actual product because they only need it to hold up for a few days while they transform that turd into a gold plated derivative.
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Or, they are set by the margins the lenders need in order to produce a profit based on the yield of the 10 year US Treasury.
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started with the sub prime market, but the canary in the coal mine, the first thing that collapsed, the main problem was and still is the massive losses caused from writing Credit Default Swaps.
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Goob, you have the cart before the horse. The mortgages started to go bad, that's what caused the rest of the market to get F***ed. As I said, those derivatives returns and insurance products were based on historic default rates. We set the record for historic defaults so the pricing models fell apart, losses ensued and those markets collapsed. But they all collapsed because the investments they held (mortgages) didn't perform. Just remember that these problems started almost 4 years ago. CDSs just got hammered in the last year and a half or so.
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Now trying to blame an economic crisis on people who don't actually control very much in the way of money is a very appealing story to the racist wing of the GOP base. If you can't see that, it's not because it isn't there.
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I'm not a racist Goob so you need to back off on that. As explained above, and previoulsy, those mortgages started the mess. Once again, you seem to ignore that fact that
Obama said it. So besides incompetent, he's a racist also? The only one that is racist here appears to be you because, for some reason, you think if someone is sub prime they must be black or hispanic or blue. I hate to break it to you but that market knows no race.
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If it was just mortgages it would be a much smaller problem, it was Credit Default Swaps, an unregulated "insurance like" instrument that concentrated huge amounts of risk and promised huge rewards.
That risk factor was not understood by some, and understood too well by others, it was a scam, wrapping turds in gold foil and selling them as bullion.
What happened to Bear Stearns, AIG, Citi, etc.
They got wiped out by Credit Default Swaps.
That's what sucked all the liquidity out of the economy, that's what stalled the economy.
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I agree with you about the CDSs. Although they were not specifically and wholly unregulated, there certainly was not enough oversite and like everything else, there are so many govt agencies involved, no one knew what the other was doing.