by Massimiliano Fanni Canelles
“Dear Madam and Sir, due to the failure of LEHMAN BROTHERS its obligations not make promises and not coupons will be repaid the capital. This communication has come to millions of savers in the world after the announcement of the largest bankruptcy in U.S. history. It was 15 September 2008. Some of us have been ‘woken up’ with a cold shower, others have not understood anything, many do not know what ‘has happened and what can still happen. To understand the reasons for the ongoing financial crisis is perhaps best proceed in an orderly manner. Until ten years ago, everyone wanted to get a mortgage was to demonstrate that it guarantees a suitable cover the amount. In the U.S., however, in a economy increasingly unscrupulous, where everything is bought and disposable as garbage, people, families, businesses, are no longer able to guarantee coverage of the debts with material goods.
So banks and financial institutions have had to find a way to keep alive the market most of their profit to the loan. It was “invented” the division, of the concealment of the risk of loans, the bank granted a loan to those who could not provide adequate guarantees issued simultaneously selling the securities market in order to cover the risk of insolvency of the user. These securities, “stuffed” debt to be purchased were to be mixed with structured bonds: the CDO (Collateralized Debt Obligations). The end result was that for years, pieces of debt “unsanitary” were a combined titles virtuous and resold on financial markets of the entire planet.
It was created the system of loans deletes. The supervisors, rating agencies and banks themselves who should monitor and evaluate the degree of risk of these financial products have pretended not to see. Perhaps the heavy conflict of interest or the power of money and who owns it. In any case, these speculative seriously have never been blocked. So much so that, until the day before the bankruptcy, LEHMAN BROTHERS was considered a reliable!
And it is here that came the scoop: “The financial engineering”, precisely to circumvent the risk of these products, develop the Credit Default Swap or CDS. Other financial products that allow you to transfer to third parties the credit risk on a transaction between two parties. Banks and other financial actors, through CDS, we are mutually re-sold the risks associated with the possibility that U.S. citizens could not pay the instalments of the loan. Namely applying of the insurance policies to securities sold or exchanged. A parallel financial system, unreal, unchecked, a new market that can generate money from other debts.
The title of highest risk was not reported by ‘credit rating agency that controlled the company that issued it, hear hear, had a more expensive insurance policy! So, anyone know work in this absurd “creative finance”, considering the titles of CDS was able to understand the risk and therefore the reliability of the company that issued them. But not only that, nobody has taken the trouble to warn consumers. Why? Perhaps because the volume of CDS has risen in just seven years, from 2,000 to 45,000 billion dollars, a figure comparable to the PIL of the entire planet? Of course, but also because the huge liquidity has resulted in the reinvestment in gold and oil or feed: money born from nothing is transformed by magic money in safe and practical! A process that resulted, as we know, the soaring prices, the block of business, mistrust of banks and financial agencies, the failure of many companies that do not sell more (primarily automobile factories, such as General Motors) and the collapse of 100 million people below the poverty line.
And we were told that was the fault of China!
Meditate, people. Meditate!
Translated by Martina Delser