Danny Schechter - ColdType

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one point it perforates the whole structure. Anyone who buys
it loses and, worse, there was no market for them way before it
was publicly known that there was a crisis. These things were
not selling. It didn’t matter if they were triple-A. It didn’t matter
whether the defaults were higher or lower than expected. They
were not moving so therefore they have no value.”
And then they also insured these investments. Tell us about
these credit default swaps. What were they, and how did this contribute
to the problem?
“The other thing that was going on is you would take a
bunch of subprime loans, you would package them up into
something called a CDO and you would also write something
called credit default protection against pieces of the CDO. So a
bank for example like Goldman Sachs would create a CDO. It
would stick all kinds of subprime loans and packages – packages
and packages of them into a package and then it will
go off to AIG which has spectacularly failed since then – and
AIG had a triple A rating which was an insured ID, a pristine
impact, pristine credit rating – and Goldman would say, ‘you
know what? You take this package of junk we just created and
kind of insure it. You basically write a default swap to us. You
basically credit insure it. You’ve got a much better rating than
we do so investors will buy it from you without insurance. You
make money. We make money. Everybody’s happy …”
We are talking trillions here aren’t we?
“We’re talking trillions of dollars. So it’s $14 trillion worth of
asset backs with subprime and other types of mortgages and
CDOs created between 2003 and 2007. $14 trillion were created.
On that, investment houses and hedge funds and private
equity funds could leverage 30, 40 times. Banks could leverage
15 to 20 times. On average they could only leverage 13 times
on certain securities …”
My mind was spinning as I tried to decode this secret Bankster
lingo. My next interviewee was clearer: