Steve Kroft examines the complicated financial instruments known as credit default swaps and the central role they are playing in the unfolding economic crisis.
Finger pointing. In the end, the oversight of Freddie and Fannie was congress's responsibility, for the $7 trillion dollar CMO mortgage pools. Congress laughed when they failed to create financial reports for years. We are talking billions, that brought down the market. Say A 4 percent default on a 7 trillion dollar portfolio. The breakdown, was not the fault of Credit Default Swaps, but a fault of congress. When mortgages started defaulting, judges took the sides of the homeowners, and not the investors, and thus, damaged the funds even worse. Yet, there it is, someone underwrote $50 trillion in credit default swaps, in a $7 trillion dollar pool. Yup, even a bookie knows to have both sides of a bet covered. Again, congress, where were you.
Wrong, it was ENRON and Phil and Wendy Gramm that mostly wrote CFMA of 2000, they are Enemies of the People. it was all of the policies of the right, the deregualtions from CFMA of 2000 allowed the banks to do whatever, no mortgage checks, just get the loans out, people defaulted, and more and more foreclosures, CFMA also made legal again betting on Wall st and a few in the know bet that foreclosures would rise, they bet billions, and they won, now assholes Phil and Wendy Gramm and ENRON who wrote the law had no regulations on the betting, and Wall st did not have the money to cover the bets these peope won, so they raided our 401ks etc and said it was lost, everything started to crash, In order to prevent what Federal Reserve Chairman Ben Bernanke referred to as a “global financial meltdown,” the Bush administration authorized a massive federal intervention to mitigate the worst effects of the crisis, in February 2008, President Bush authorized a $168 billion economic stimulus package, which consisted largely of income tax rebates. The Emergency Economic Stabilization Act of 2008 included $700 billion to fund the Troubled Assets Relief Program (TARP), which provided loans to troubled banks. At the same time CFMA had also deregulated the commodities market so big oil could then and still does set it's own prices and they artifically raised prices for Cheney and Halliburton because fracking isn't profitable when oil is below $90 barrel. The legalized betting on Wall st was legal in the 1800's up to the crash in 29, they were called Bucket Shops then and were the cause of the crash, actually several. Now they are called credit default swaps or derivatives
@@905Alive Bill Clinton removed the insurance that would have kicked in if the CMO failed. Period. Blaming it on Enron, which was a disaster, 7 years previously is a clown of an argument. And the Politicians blamed the Banks, because the Banks cannot defend themselves. Our politicians were the ones tasked with oversight, and they joked about not seeing a financial statement from Freddie in years. b.t.w. I worked as a peon, with CMO's. I have paperwork, that's been revised after the crash, but I have the copies before it was revised, from government agencies. But..no one really cares. The next housing crash will happen 25 years after the last. Nothing is fixed. It's just a kicked can.
Who wrote the amendment to the commodities futures martlet Act? Why is 60 minutes not finding this out and asking questions to these companies and institutions?
Ok, this is completely misleading. CDS (Credit Default Swaps) were the derivative used to profit off the failure of the housing market. But the cause of the collapse of the housing market was caused by the CDOs (Collateralized Debt Obligation). A ton of people were buying CDOs because they thought that the housing market is stable and a safe bet and they caused major instability in the market. CDS (credit default swap) was just a tool to essentially short the market (bet against CDO). This article shows the fundamental misunderstanding of the subject and doesn't differentiate the causality. They see the effect as a cause instead of the other way around. In a perfect market, at any given time there should be equal amount of CDOs and CDSs, because one contract represents the buyer and the other represents the seller. In that case, if one wins, the other one pays the bill (which is fair). But in this case, there were tons of CDOs and only few CDS sold to people who called the bubble. That made it impossible to find the capital to cover all the obligations.
Companies like AIG were selling CDDs without owning the funds to honor them, they could do this because CDS aren't regulated like insurance. So yes, they DID in fact make the Financial Crisis that started as the Subprime Crisis with MBS, CDOs etc failing. The CDS (and by that also synthetic derivatives like Synthetic CDOs based on CDS) blew up the market of CDOs, MBS, etc EVEN MORE. You don't have to have a stake in actual MBS/CDOs to speculate on CDS/Synthetic CDOs, so the bubble that burst got "synthetically" bigger by these "side bets" and "insurers" who did not have the money to pay out at credit events. CDS in itself aren't all bad and they have their place in the market but they should be better regulate.
@@Hamboarding Unfortunately I didn't write that part here but basically my point is that regulation is actually the root cause of the problem. The only reason why someone would trust this investment are the ratings. When things are regulated, people get into a false sense of security. This provides them with enough bias to ingore some obvious problems. Those who are critical can see it immediately. However, those who are blind are usually in the majority and the majority still has a lot of purchasing power so even being smart isn't easy.
Essentially, had the government regulated CDS; Dr. Burry, M. Bulm, Charlie and Jamie (whose story was told in the movie “The Big Short”) wouldn’t have made hundreds of millions of dollars.
If the credit bubble didn't exist, no one would have wanted CDS in the first place. This video makes it seem like CDS were the problem instead of the credit bubble. The banks got over confident is what happened. If they knew what was in those MBS, no bank would have issued CDS.
Nah they still would have probably. The regulation here is making sure the banks have the general ability to pay off CDSs that default, meaning money should be set aside when selling CDSs to do so in that event, or at least put in unrelated relatively risk less investments. The banks sold them wildly to anyone who wanted to buy, and got burned for it
@@Hamboarding were you alive in 2008? They actually had technology to film things clearly. Crazy I know. This, was filmed with a potato, as I said two years ago.
Well,,, it WAS the bush admin. Who had the "Bright Idea" to loosen the rules and allow Wall St. To "Self Regulate" . So,, yeah,, blame them.. that being said, we can/should put the blame also on the Gteed and Stupidity of the people.
6:43 Clinton and Greenspan pushed it. The Senate is so corrupt it was a unanimous vote that doomed millions of Americans to years of financial hardships and grief. Bill Clinton was President, the Republican's were majority in Senate and Democrats were the majority in the House. There is one guy at AIG who ran their London office who made 480 Miliion in 10 years in salary and bonus and cost that company over 40 Billion dollars to date. He's living free as a bird drawing 338,000 a year in retirement from AIG. The American taxpayers own the majority of AIG.
Which pixel is the host at?
I prefer margot robbie in a bubble bath explaining this to me
Mmm. This is some damn fine 480p
Regulation is needed to deal with basic human nature. That's why we have laws in almost every aspect of our lives.
CDS is not always a side bet, many times it’s a form of insurance in the event that the underlying security it insured goes into default
They were loose with a few of their descriptions.
Yeah they always explain it only in context of the '08 crisis
Technically speaking, all insurance is a form of gambling
@@LIONTAMER3D it can be used as gambling tool but it can also be used to hedge lol
5:43 Oh, wow, I did not know that they had to exempt them from "Bucket Shop laws". 😮
Finger pointing. In the end, the oversight of Freddie and Fannie was congress's responsibility, for the $7 trillion dollar CMO mortgage pools. Congress laughed when they failed to create financial reports for years. We are talking billions, that brought down the market. Say A 4 percent default on a 7 trillion dollar portfolio. The breakdown, was not the fault of Credit Default Swaps, but a fault of congress. When mortgages started defaulting, judges took the sides of the homeowners, and not the investors, and thus, damaged the funds even worse. Yet, there it is, someone underwrote $50 trillion in credit default swaps, in a $7 trillion dollar pool. Yup, even a bookie knows to have both sides of a bet covered. Again, congress, where were you.
Wrong, it was ENRON and Phil and Wendy Gramm that mostly wrote CFMA of 2000, they are Enemies of the People. it was all of the policies of the right, the deregualtions from CFMA of 2000 allowed the banks to do whatever, no mortgage checks, just get the loans out, people defaulted, and more and more foreclosures, CFMA also made legal again betting on Wall st and a few in the know bet that foreclosures would rise, they bet billions, and they won, now assholes Phil and Wendy Gramm and ENRON who wrote the law had no regulations on the betting, and Wall st did not have the money to cover the bets these peope won, so they raided our 401ks etc and said it was lost, everything started to crash, In order to prevent what Federal Reserve Chairman Ben Bernanke referred to as a “global financial meltdown,” the Bush administration authorized a massive federal intervention to mitigate the worst effects of the crisis, in February 2008, President Bush authorized a $168 billion economic stimulus package, which consisted largely of income tax rebates. The Emergency Economic Stabilization Act of 2008 included $700 billion to fund the Troubled Assets Relief Program (TARP), which provided loans to troubled banks. At the same time CFMA had also deregulated the commodities market so big oil could then and still does set it's own prices and they artifically raised prices for Cheney and Halliburton because fracking isn't profitable when oil is below $90 barrel. The legalized betting on Wall st was legal in the 1800's up to the crash in 29, they were called Bucket Shops then and were the cause of the crash, actually several. Now they are called credit default swaps or derivatives
@@905Alive Bill Clinton removed the insurance that would have kicked in if the CMO failed. Period. Blaming it on Enron, which was a disaster, 7 years previously is a clown of an argument. And the Politicians blamed the Banks, because the Banks cannot defend themselves. Our politicians were the ones tasked with oversight, and they joked about not seeing a financial statement from Freddie in years. b.t.w. I worked as a peon, with CMO's. I have paperwork, that's been revised after the crash, but I have the copies before it was revised, from government agencies. But..no one really cares. The next housing crash will happen 25 years after the last. Nothing is fixed. It's just a kicked can.
Who wrote the amendment to the commodities futures martlet Act? Why is 60 minutes not finding this out and asking questions to these companies and institutions?
Senate gave them an inch, and wall street took a mile!
Ok, this is completely misleading.
CDS (Credit Default Swaps) were the derivative used to profit off the failure of the housing market.
But the cause of the collapse of the housing market was caused by the CDOs (Collateralized Debt Obligation). A ton of people were buying CDOs because they thought that the housing market is stable and a safe bet and they caused major instability in the market. CDS (credit default swap) was just a tool to essentially short the market (bet against CDO).
This article shows the fundamental misunderstanding of the subject and doesn't differentiate the causality. They see the effect as a cause instead of the other way around.
In a perfect market, at any given time there should be equal amount of CDOs and CDSs, because one contract represents the buyer and the other represents the seller. In that case, if one wins, the other one pays the bill (which is fair). But in this case, there were tons of CDOs and only few CDS sold to people who called the bubble. That made it impossible to find the capital to cover all the obligations.
Very true
Companies like AIG were selling CDDs without owning the funds to honor them, they could do this because CDS aren't regulated like insurance. So yes, they DID in fact make the Financial Crisis that started as the Subprime Crisis with MBS, CDOs etc failing. The CDS (and by that also synthetic derivatives like Synthetic CDOs based on CDS) blew up the market of CDOs, MBS, etc EVEN MORE. You don't have to have a stake in actual MBS/CDOs to speculate on CDS/Synthetic CDOs, so the bubble that burst got "synthetically" bigger by these "side bets" and "insurers" who did not have the money to pay out at credit events.
CDS in itself aren't all bad and they have their place in the market but they should be better regulate.
@@Hamboarding Unfortunately I didn't write that part here but basically my point is that regulation is actually the root cause of the problem. The only reason why someone would trust this investment are the ratings. When things are regulated, people get into a false sense of security. This provides them with enough bias to ingore some obvious problems. Those who are critical can see it immediately. However, those who are blind are usually in the majority and the majority still has a lot of purchasing power so even being smart isn't easy.
a certified hood classic
6:23
Look at this DUUUUUUUUDE
LOoK AT HIS HAIR
OJNONONO LMAFO
so... where did the 50 trillion go???
Pockets of the executives as bonus
Paulson rocks!
Essentially, had the government regulated CDS; Dr. Burry, M. Bulm, Charlie and Jamie (whose story was told in the movie “The Big Short”) wouldn’t have made hundreds of millions of dollars.
If the credit bubble didn't exist, no one would have wanted CDS in the first place. This video makes it seem like CDS were the problem instead of the credit bubble. The banks got over confident is what happened. If they knew what was in those MBS, no bank would have issued CDS.
Nah they still would have probably.
The regulation here is making sure the banks have the general ability to pay off CDSs that default, meaning money should be set aside when selling CDSs to do so in that event, or at least put in unrelated relatively risk less investments. The banks sold them wildly to anyone who wanted to buy, and got burned for it
that doesn’t make any sense, there were many different ways to express that same bet without CDS
You don't have to own 100 shares of a stock either to profit off options. An option is a basic kind of derivative. Somewhat misinformed reporting.
They are talking about CDOs here now right?
No, Credit Default Swaps, CDS. They are a part of Synthetic CDOs though and they were used to "insure" CDOs.
"It is a betting game, folks, it's a betting game." "This is casino capitalism, that's what it is, casino capitalism."
1:36 "every week, the New York Giants take the field with hopes to getting back to the Super Bowl" yeah the FUK they do =/
Pay attention everyone , it's called greed.
Filmed with a potato
It's been uploaded 15 years ago…
@@Hamboarding were you alive in 2008? They actually had technology to film things clearly. Crazy I know. This, was filmed with a potato, as I said two years ago.
Wow! So crypto is like credit default swaps but worse!
this fuckin report is 11 yrs old. It's "WORTHLESS" wake up !
I should have bet trump loss
sure blame the conservative and not the democrat in the white house.
lmao obama wasn't even elected yet when this video was posted
@@superpiguy314 i'm not talking about obama. it's clinton in the white house. didn't you watch the video?
stupidminotaur Uh? Hello? Do you not SEE who the conservative have become? Or are you on the Trump train?
Well,,, it WAS the bush admin. Who had the "Bright Idea" to loosen the rules and allow Wall St. To "Self Regulate" . So,, yeah,, blame them.. that being said, we can/should put the blame also on the Gteed and Stupidity of the people.
6:43 Clinton and Greenspan pushed it. The Senate is so corrupt it was a unanimous vote that doomed millions of Americans to years of financial hardships and grief. Bill Clinton was President, the Republican's were majority in Senate and Democrats were the majority in the House. There is one guy at AIG who ran their London office who made 480 Miliion in 10 years in salary and bonus and cost that company over 40 Billion dollars to date. He's living free as a bird drawing 338,000 a year in retirement from AIG. The American taxpayers own the majority of AIG.