For good financial reform, we need more chum
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I heard Llloyd Blankfein was having an affair with a staff person

I have seen evidence that GMAC Mortgage sold off suspect mortgages in July 2008 just as they were becoming a bank and preparing to undergo the "stress tests". They bought them back in October 2008 after the bailout was finalized. Just something I picked up researching loan modification.

Here's one piece of "chum" I am curious about. Why was this announcement made, of all days, late morning, Friday, on the monthly day that options close, tanking the market, and making untold gazillions for anyone who knew the announcement was coming, as some options went from pennies to dollars in a matter of minutes as the overlying stocks tanked, and then recouped? Perhaps even Goldman profited on that one !! And I haven't heard anyone raise the "coincidental" timing.

Some of the larger institutions, which did receive bailout money, threatened some of their clients thatif they ever, ever asked them for a "cleared swap price" they would lose liquidity in every other asset class......that behaviour single-handedly pushed reform back 6 months........that's what should be investigated

I was on the short side during this period 2006-07 with Michael Bury. Two of the things I found out which have not been disclosed, to the best of my knowledge, in any of the books or comments were rather shocking. The first is that the bankers set the price of the derivatives and in some cases they sold them at par and a couple of months later marked them up 5-10 points, so the person who was short was under water pretty quickly, which was true of Michael Bury. The other piece of chum was that the investment bankers could freely swap collateral as long as it was at the same dollar amount, which was done without appraisals, so they could swap Toledo for Tampa. The last bit of chum is the fact that these products were sold so rapidly that lots of people, even to this day, have no idea where the original documents are. The administrative side of this was a real mess and to the best of my knowledge still is.

Here's one I heard. It seems there was a company in trouble that had arranged a financial restructuring that would save lots of jobs but that needed the approval of the debt holders. Goldman decided to sell packages of the bonds bundled with lots of CDS insurance on the bonds with instructions to the buyers that they should vote against the restructuring so that the company would then go under but these new bondholders would then make lots of profit on the CDS insurance when their bonds became worthless. I don't know the details but maybe you can find out. I think eventually Goldman may have been shamed into backing down.

Chum Defined
  1. Cut or ground bait dumped into the water to attract fish to the area where one is fishing.
  2. The stuff that funny-looking guy threw over board in Jaws right before he realized they were going to need a bigger boat.
  3. Goldman Sachs v. SEC.
shark chum shark chum

Financial reform finally has what every really critical issue needs. Chum.

Let's just hope it keeps on coming. As anyone in politics knows, today's chum is tomorrow's trash wrapped up in yesterday's news. If we're not careful, it will be back to Bubble Boy faster than a bell clapper in a goose's ass.

Because of this, those of us who care about financial reform -- those of us who really, really, really care in a not-at-all obsessive but totally healthy way -- have one job and one job only to do.

Find more chum.

Keep that bloody smelly fish gut chum coming, keep the sharks circling, and we can keep media attention where it should be. Maybe just maybe, then we can then make something happen.

No Chum = No Action. We need more chum.

You see, nobody cares which derivatives are cleared on exchanges and which ones are exchanged at clearinghouses. They don't care if off-balance sheet transactions go on-balance sheet, or if risk-weighted capital requirements include illiquidity surcharges that assume a decline in collateral values. They admittedly care a little bit about aiding and abetting (but only because it sounds cool). And let's be clear, nobody cares about Fannie and Freddie (provided they keep the baby).

Nope, what they care about is chum.

So I'm asking you, nay begging you, if you know anything that seems even the tiniest bit fishy, please let me know immediately by emailing me at chum@morechum.com. If you don't know anything but are willing to try to find something (after all, you aren't working) there are plenty of places to look.

But time is drawing short. Debate on the Senate bill is moving fast. To keep the focus where we need it, on the people who screwed up the laws in the first place, we need the sharks to keep circling.

Let’s go fishing.