basics: the key word is leveraged securisation.
banks and financial institutions securitise mortgages and
sold it to the markets. a lot leveraged securisation = CDS
repackaged into senior, junior, equity tranches. rating
agencies then rated the senior tranches as AAA etc. the
bottom line is that a CDS could be sold on a mortgage or corporate
bond more than once.
banks' exposure to CDS is trillions, a major worry for Alan
Greenspan when he testified last year.
ultimately, the more bailouts for these derivatives losses, the
more bankrupt the tax payers become and the bucks end up in the
hands of those few who bought the protection.
if there is no bail out, at least the tax payers are not
bankrupt...only those involved the buying and selling ie trading of
derivatives.
Obama is screwing the country big time.
For over the decades, during it good times, the US fed/govt had
taxed both corporation and its citizens multi billions of dollars.
USA has one of the highest taxation countries in the world.
Currently the bailing out by the govt is only taking these old
reserve out to help...the current taxes is not included. If
the current taxes was used to bail out banks out of it derivatives,
the tax will had increased to sky rocket condition. But it is not
the case, USA still had multi billions of reserve to deal with. So
dun worry. Just like the British, their colonials time earning from
those colonies like singapore, india etc etc is still perserved in
their treasury.
