photo by psyhiro
The banks can be better than the “magliari” and much better than the mafia. There’s no limit to their creative finance. Or rather, the limit is the crack, the bubble, the crisis in the market. When savers lose everything, then the creativity leaves the space to the analysis by the economists who explain well in great detail, but always later. Whoever has lost everything, while they are reading, always feels the desire to meet them one evening with a sledgehammer.
The banks, especially the American ones, for years have been applying the infernal mechanism to mortgages. It works like this. The bank grants a mortgage to a person who is at risk. “Subprime” mortgages for which there’s no verification of the source of income of those asking for the mortgage. “Alt-a” mortgages given with a simple declaration. The more mortgages, the more the money for the banks. The bank gains on the interest payments on the mortgage, but the risk is high. Because whoever has taken out the mortgage might not pay it back. So the bank packages the mortgages in investment funds, a bit like transforming shit into gold.
The mortgages on sale are called CDO, Collateralised Debt Obligations. In practice what happens is that the banks sell the debts of people who are insolvent. With a treble gain: from the mortgage, from the fund and by eliminating the risk. In theory the CDO can be inserted in any fund. The unknowing buyer could discover that in the next few days. In fact, the value of the real estate market in the United States has been in free fall for months, the Americans are no longer managing to make their payments, the funds are plummeting.
It’s not known where the CDO’s have finished up. In which banks, in which countries, in which funds. If it’s your turn, it’s your turn. It’s the capitalism of debt, beautiful. The one that invents wealth and destroys the savers.
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