Expert:Rampant Fraud and Ponzi Scheme Caused Crisis
October 4, 2009 by admin
Janet Tavakoli is one of the foremost experts on structured finance and derivatives. Tavakoli made an outstanding presentation to the IMF last week on the fraud which led to the financial crisis.
Making many of the same points that William K. Black (senior S&L regulator and professor of law and economics) has made about fraud and the big picture of what has occurred in the current as well as the S&L crisis – see this and this – Tavakoli told the IMF:
Wall Street gave mortgage lenders large credit lines (similar to credit card debt) and packaged the loans into private-label residential mortgage backed securities (RMBS). Most of the RMBS was rated “AAA” … But many RMBSs were backed by portfolios comprising risky fraud-riddled loans. Most of the “AAA” investment was imperiled, and subordinated “investment grade” components were worthless. Wall Street disguised these toxic “investments” with new value-destroying securitizations and derivatives.
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