I can has subprime mortgage plz? OK thx bai!

Today in the swashbuckling world of high finance: an explanation of how the whole subprime mortgage crisis thing works for people who don't speak Business, which points out that this whole crisis came about fundamentally because the idiots who run these things don't understand basic logic.

Mark Chu-Carroll presents: The Total Stupidity of Crowds: Bad Mortgages and Circular Solutions.

So - the insurance company is guaranteeing the value of the banks mortgage loans, using money that it borrowed from the bank, which the bank had to borrow because it's got these bundles of leans insured by the insurance company. In other words, the banks are insuring their loans themselves, using the loans to pay for the losses on the loans. It's circularity on circularity on circularity - cycles within cycles of stupidity, relying on stupidity to prop it up.

The running-dogs of capitalist oppression who run the financial sector seem to have forgotten the #1 rule of running a scam, which not coincidentally is also the #1 rule of gambling: get out before anyone notices you're rolling them. Even I know that one...

Posted by aloysius at December 20, 2007 03:11 PM |