HOW THE CASINO BANKS DESTROYED THE AMERICAN DREAM OF OWNING A HOME
and how TRUMP's FRIENDS picked up all the foreclosed homes for a song and now rent them out to the homeless, foodless and jobless at 3x the right price.
To the very same poor suckers who put their life savings into a family home.
Aaron Glantz knows that he’s living the dream — the good guy who does well in the morality play of American real estate. A journalist and a third-generation San Franciscan, Glantz has been able to live affordably in the outrageously expensive city of his birth by dint of a savvy investment in a foreclosed home 10 years ago, after the housing market went bust. You don’t even have to feel too sorry for the tenants he evicted from the house, which included the previous owner who was foreclosed on; they turned out to be grifters, having spent years flipping that house and others between themselves, defaulting on the mortgages and then selling to one another to reap the windfall of inflated prices. Glantz and his wife, then pregnant with their first child, received an $8,000 check as part of the Obama administration’s stimulus package; they used the money to remodel their new home, effectively putting people to work while building their nest egg. Now he has written a book on the engineered crash of 08.
Stories of Financiers Profiting From Real Estate While Homeowners Go Belly Up
NOW, buy two vintage books used at ABEBOOKS. Knowledgeable insider MICHAEL LEWIS covered the WALL STREET end of this phenomenon of greed.
FROM THE GUARDIAN: "Michael Lewis: 'Liar's Poker was a comedy. The Big Short is a tragedy'
When Michael Lewis wrote his 1989 book about Wall Street, he thought he was chronicling a vanishing system. In his latest work, he found investors still making a killing, with much more serious consequences:
Michael Lewis: 'Banks benefit from socialism, while everyone else has to live under capitalism.'
Former Wall Street trader (SALOMEN BROS, he wrote THEIR OBITUARY in LIAR'S POKER.Michael Lewis has made a mint out of writing books about the dark art of investment banking. He took the market by storm with Liar's Poker, which chronicled the testosterone-fuelled world of Salomon Brothers in the mid 1980s.
His latest offering, The Big Short: Inside the Doomsday Machine, is about a handful of renegade and largely eccentric investors who bet against the financial system by shorting the sub-prime mortgage market, and made a killing along the way.
Actually, the book is about more than that, because it tells the story of how the international banking system came off the rails in 2008, not least because of the crass stupidity of people running some of the biggest banks on the planet. But, as with Liar's Poker, it's the colour, and the real-life characters in the book, that make it both a riveting read and an eye-opener about life at the heart of a dysfunctional Wall Street.
Lewis, who lives in California, is in London to sign copies of the Penguin paperback edition of The Big Short, launched on Friday. In the US, the hardback edition has sold more than 700,000 copies. When I met him at his Mayfair hotel, he jumped at the chance to talk about the findings of the US Financial Crisis Inquiry Commission, which last week blamed the crash on the failings of regulators and policymakers, greedy bankers and "systemic breaches of accountability and ethics at all levels".
"Right, right, right on all counts," says Lewis. "And don't forget about the ratings agencies. They gave high ratings to the mortgage investments that investors were pouring money into like there was no tomorrow, and they screwed up spectacularly."
Lewis says he isn't surprised that the four Republican members of the commission refused to sign off its findings. "There is a big effort by the right wing to carve a narrative out in the public mind. It runs as follows: it was government intervention that created the crisis; Bill Clinton forced the banks to lend money to black people; Barney Frank [former Democratic chairman of the House of Representatives financial services committee] turned a blind eye to what was going on at [mortgage companies] Fannie Mae and Freddie Mac, which then generated demand for these loans.
"A few people have worked on that story, because whenever I speak at lectures, somebody always jumps up to peddle this line. But if you look at the facts, Fannie and Freddie's share of the sub-prime market fell in 2005, 2006 and 2007. The crash happened because of a dramatic failure of free markets and capitalism in general. To top it all, the banks were saved by the taxpayer. In other words, banks benefit from socialism, while everyone else has to live under capitalism. The people who are paid the most live by a different set of rules to everyone else. How absurd is that?"
Did Lewis enjoy writing The Big Short? Not as much as Liar's Poker, by a long shot. "Liar's Poker was almost a comedy: it was about the Wall Street of Gordon Gekko [fictional star of the 1987 film Wall Street], the so-called 'big swinging dicks' who dominated trading floors and the absurd things they used to do" (like broadcasting sex chat lines over the intercom system).
"When I wrote Liar's Poker [published in 1989] I thought it was about a period that was coming to an end. I thought a system that paid a 24-year-old like me money to give financial advice must be crazy, but I never thought it would last."
Writing his most recent book was a less joyful experience: it details an unfolding tragedy that would lead to a global slump and more than 25 million Americans out of work.
It was a challenge because Lewis had to explain credit default swaps and collateralised debt obligations to a potentially lay audience. "I wrote footnotes to readers, thanking them for hanging in there while I delved into the workings of these weird financial instruments. Usually, I laugh a lot when I write, but not this time."
It is not hard to see why. As the book says, the International Monetary Fund would put losses on US-originated subprime related assets at a trillion dollars. One trillion dollars of losses created by American financiers and embedded in the US financial system. It was as if bombs of differing sizes had been placed in virtually every major western financial institution.
The Big Short is a non-fiction page-turner where we enter the world of Steve Eisman, who rails against the fraud he believes is being perpetuated by the big banks when they underwrite loans to poor people who don't read the small print on certificates that say their interest bills will rocket in two years.
Then there is Mike Burry, a former neurologist with Asperger's syndrome who finds value as the market is plummeting, but who memorably says at the end of the book: "This business kills a part of life that is pretty essential. The thing is, I haven't identified what it kills. But it is something vital that is dead inside me – I can feel it."
Lewis knows what it is: "The relentless pressure to produce money at the expense of everything else, perhaps even your soul." (Lewis, by the way, isn't a socialist, because "socialism doesn't work".)
One of his pet themes is that the financial sector is too big and important: "It sucks up a lot of human resource that doesn't give much to society in return. Why have a system shaped by outsized financial incentives, where the top students of Stanford and Harvard all want to go into banking?"
The Big Short is a story about the bond markets, not the equities markets, where investors can go long or short on shares, depending on their view. In the bond markets, the way to short sub-prime mortgages is to buy a credit default swap (CDS), which is an insurance policy against defaults on sub-prime bonds. An investor buying a CDS would pay a premium for as long as the mortgage bond was healthy. But if it failed, the buyer would get a huge payout.
According to the short-sellers in the book – and to many in the world outside Wall Street – all the evidence was that the sub-prime market was going to crash. So it is surprising that the short-sellers were hugely outnumbered by those who went long. Banks such as Merrill Lynch and Citigroup were falling over themselves to issue and invest in mortgage bonds that were also acquired by other banks, as well as by hedge funds.
The truth is that the Wall Street establishment was long on sub-prime because it believed its own lies, says one of Lewis's characters.
Among the short-sellers were Greg Lippmann at Deutsche Bank who, against the advice and leanings of his bosses, shorted collateralised debt obligations – assets linked to pools of sub-prime mortgages – and then advised others to do the same. Given the likelihood of a crash, Lewis calls these bonds "the most mis-priced financial products of all time".
That point wasn't lost on legendary short-seller John Paulson, who made $20bn for his investors and $4bn for himself. Says Lewis: "This was more money than anyone had ever made so quickly on Wall Street. Moreover, he had done it by betting against the very sub-prime mortgage bonds that were sinking Citigroup. Wall Street investment banks are like Las Vegas casinos … and the casino had misjudged badly."
But does Lewis think the banks have learned their lesson? "The banks have become socially risk-averse, and they will be fully risk-averse for a while. But the next set of problems could be within European banking, not on Wall Street."
Mischievously, and with the look of someone who hasn't lost all his trading-floor instincts, Lewis says: "I am hearing people who think betting against French debt could be a very good call. But then what do I know?"
America faces an epic choice...Get the rest at the GUARDIAN site.
or at DEMOCRACY NOW: Homewreckers: How Wall Street, Banks & Trump’s Inner Circle Used the 2008 Housing Crash to Get Rich ---
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Our POSTER is ANITA SANDS HERNANDEZ, Los Angeles Writer, Mother of 4 and career Astrologer. Catch up with her websites TRUTHS GOV WILL HIDE & NEVER TELL YOU, also The FUTURE, WHAT'S COMIN' AT YA! FRUGAL LIFE STYLE TIPS, HOW TO SURVIVE the COMING GREAT DEPRESSION, and Secrets of Nature, HOLISTIC, AFFORDABLE HEALING. Also ARTISANRY FOR EXPORT, EARN EUROS... Anita is at email@example.com ). Get a 35 $ natal horoscope "my money/future life" reading now + copy horoscope as a Gif file graphic! No smarter, more accurate love/$/ career reading out there!
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