Danny Schechter - ColdType

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you might have seen an opportunity and bought as many policies
as you could afford on the homes in New Orleans before
the hurricane Katrina wiped out the city. You’d have made a
lot of money off the misery of those residents. So much for the
Big Easy.
That is exactly what happened with credit derivatives.
Savvy hedge fund managers heard the weather report, knew
which way the wind was blowing, and took out an incredibly
large number of insurance policies on mortgage-backed
securities.
When a 50-state-Katrina blasted through America, with the
poorest in the country defaulting on mortgages in the millions,
those policies paid out in the trillions for hedge fund investors,
already some of the richest people in the world. As millions of
Americans went deeper into debt, as inequality grew, a small
class of financiers prospered.
The Village Voice called it a “scheme that smacks of securities
fraud,” asking, “how could they not have known they
were putting at risk the largest insurer in the world and all the
businesses and individuals that it covered?”
Was this criminal? Again, it depends on to whom you speak.
To John Coffee, “the real fraud in my mind, or the primary
fraud, are the victims who were sold these worthless securities
that were presented as utterly safe.”
Economist Loretta Napoleoni who worked on Wall Street
went further, “I would even say that this is racketeering
because it took place between a group of real estate agencies
and banks together.”
“And don’t forget the role of the ratings agencies.” adds
Coffee: “Wall Street relaxed its due diligence standards, but it
did not exercise any kind of scrutiny. He [an investor on Wall
Street] was willing to buy almost any portfolio of mortgages
because it found that in global markets it could sell these portfolios
to a global audience based on credit ratings that were,