Headline, March23, 2014



WHEN Andy Fastow tried to get investment banks interested in 1995, he didn't even get a hearing. But by  1999,  Enron had become one of the largest payers of investment-bank fees in the world:

Working with more than 70 banks, all of which were dong securitisation deals. ""They were the vanguard of the debt market we're dealing with now.""

In 2000, the idea went global. "You had a situation where investment banks, which operate on very tight margins, were seeing the rivals making twice the profits and asking, "If Enron is doing it, why aren't we?"  explains Joel Hills, Sky News business correspondent:

"And securitization was a good thing. it made credit cheaper. "It allowed people to buy homes who couldn't buy before". it created the buy-to-let market. soon everything was bundled up from car loans to corporate loans, payments on leases, property rents:

Utility bill payments, sports seasonal ticket renewals, even royalties from music sales  -David Bowie's music being one example. it's as ex-President Bush says, "Wall Street got drunk."

The Banks that had organised debt departments to service Enron found that by bundling up their exposure  -the financial risks gained by dealing with Enron- into those self same SPVs, they could avoid being taken down by Enron losses.

They had learned how these SPVs could make money and they know the market had previously been so insignificant that it was entirely unregulated. They suddenly realised that they stood on the brink of a fiscal gold rush. And they bundled in.

Banks that once sold mortgages or loans and held them on their books started pooling and selling them in similar SPVs. It you have taken in the last eight years, the chances are the banks has created a company   =let's call it Esky Investments:

Stuffed your mortgage and a bunch of  other loans into it, then sold shares of Esky investments as if it was a normal company.

Selling the debts on meant they were no longer owned by the bank, so it could lend again. And again. And again. Overnight the debt nerds became the golden boys of Wall Street and the Square Mile

"There was a guy who joined the debt department at my bank at the same time as me,  a graduate,  and I swear within two years he was driving a Porsche 911," says Adam Wilson, an equities trader who used to work for Lehman Brothers.

"Back in the  Nineties, these departments were the dull geeks who,  who never made any money. Suddenly  -and especially post 9/11 when equities stalled for a bit-  they were striding around like they owned the place."

Wilson was incredibly wary of the debt market and constantly turned down offers -especially from French Banks-  to join it. "They would scratch their chins and come over all French," he grumbles:

"Saying  'Why you want stay in equities?  Zees equities are  'istory. Come and work in our debt department. Ees big money."

Wilson resisted  because it went against his basic training  -there was no official market for the SPVs banks were dealing in. He was practically alone in his suspicions. Between  2001  and  2006,  the debt market was making millionaires and billionaires out of investors, hedge fund managers and the board members of the investment banks.

As the Royal Bank of Scotland, NatWest's new owner, tried to unpick the web of deals the trio had created,  one manager sent a chilling prophetic message:

The scale of financial period manipulation is exceedingly worrying," he wrote.

"'I don't yet understand it, nor I am sure that anyone in the bank does>"'

"Everyone was chasing the next new idea,"  Bermingham narrates in 2006. "It was very exciting. We were involved in identifying and packing a bunch of different risks.

A lot of this stuff was brand new and cutting edge. It felt very good to be part of that."

But didn't it feel slightly.........dodgy?!  I mean,  how happy would one be to own a company  that operated that way?

"Well let me answer that by reference to the British government,"  Bermingham said smoothly: 

The British government has more 0ff-balance-sheet  debt by a factor of 20 than Enron ever did : the new Channel Tunnel Rail Link, all the private finance initiative stuff   -you name it.

Gordon Brown has been the single greatest off balance-sheet financier in the history of this country. That doesn't make it illegal. There's nothing illegal about what Enron were doing in terms  off-balance-sheet financing:

It's been a very dirty context because Enron went spectacularly bust. But the thing that it does do,"  he conceded:

Is to obscure to a high degree the full picture!!! "

The honour and the Post continues, so don't miss the next one:

With respectful dedication to all the Stock Exchanges in the world. See Ya all on -!WOW!  -the World Students Society Computers-Internet-Wireless:


Good Night & God Bless!

SAM Daily Times - the Voice of the Voiceless


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