Wow...derivatives on credit card debt and auto loans??

[socialize_me]

I was going back through some old YouTube videos and I picked up on something I wasn't aware of. Peter Schiff was talking about the banks securitizing credit card debt and auto loans--exactly what they did with home mortgages which is making this process so painful for Americans. Now this is pretty scary stuff. I thought the financial derivatives were tied only to home mortgages, many of which were subprime, but to hear banks were trying to make money literally off of debt--and of all things credit fucking card debt?--is ridiculous and very troubling.

October just had around 250,000 job losses. Home mortgage defaults are one thing as buyers and banks usually negotiate, but folks the way I see it this mess is going to get really, REALLY bad especially as unemployment goes up. Why? Because people will begin defaulting on auto loans and credit cards if they don't have a job. Most of these people will not be the ones who took out these ARMs and tried to make money speculating in housing. Now millions of people defaulting on their debt is one thing, but when the financial industry used derivatives and leveraged up on these things as some have reported over 40 times--yikes!--then we're in for one hell of a ride. The derivatives amplify the problem even more and I honestly don't see how we can make it out of this even with the Bretton Woods-type meeting happening this weekend. We're looking at a massive depression where I can't see the major banks sticking around even with the Federal Reserve pumping money in and in.

Any thoughts on this??

[dannno]

http://frontier.cincinnati.com/blogs/borgman/uploaded_images/borg-wed-071205-736451.gif

[aravoth]

I was going back through some old YouTube videos and I picked up on something I wasn't aware of. Peter Schiff was talking about the banks securitizing credit card debt and auto loans--exactly what they did with home mortgages which is making this process so painful for Americans. Now this is pretty scary stuff. I thought the financial derivatives were tied only to home mortgages, many of which were subprime, but to hear banks were trying to make money literally off of debt--and of all things credit fucking card debt?--is ridiculous and very troubling.

October just had around 250,000 job losses. Home mortgage defaults are one thing as buyers and banks usually negotiate, but folks the way I see it this mess is going to get really, REALLY bad especially as unemployment goes up. Why? Because people will begin defaulting on auto loans and credit cards if they don't have a job. Most of these people will not be the ones who took out these ARMs and tried to make money speculating in housing. Now millions of people defaulting on their debt is one thing, but when the financial industry used derivatives and leveraged up on these things as some have reported over 40 times--yikes!--then we're in for one hell of a ride. The derivatives amplify the problem even more and I honestly don't see how we can make it out of this even with the Bretton Woods-type meeting happening this weekend. We're looking at a massive depression where I can't see the major banks sticking around even with the Federal Reserve pumping money in and in.




Welcome brother, we've been expecting you for sometime now.

Seriously dude, haven't you been reading the forums for the past year and a half?

[socialize_me]

Welcome brother, we've been expecting you for sometime now.

Seriously dude, haven't you been reading the forums for the past year and a half?

Seriously dude, did you read what I wrote? When the fuck has anyone here mentioned credit card debt derivatives, let alone spend time to explain them? Could you do it for me? You probably don't even know how the hell to trade a stock option--let alone understand the mathematics behind them.

Everyone here has been talking about the Federal Reserve, low interest rates, some bits about Fannie Mae and government intervention, and the bailouts. Very little has been posted on mortgage derivatives, and I haven't seen anyone write about the credit card problems. Maybe credit card defaults, but I'm making a point that banks actually are creating financial instruments on credit card debt which I haven't read anywhere on these forums.

[torchbearer]

Seriously dude, did you read what I wrote? When the fuck has anyone here mentioned credit card debt derivatives, let alone spend time to explain them? Could you do it for me? You probably don't even know how the hell to trade a stock option--let alone understand the mathematics behind them.

Everyone here has been talking about the Federal Reserve, low interest rates, some bits about Fannie Mae and government intervention, and the bailouts. Very little has been posted on mortgage derivatives, and I haven't seen anyone write about the credit card problems. Maybe credit card defaults, but I'm making a point that banks actually are creating financial instruments on credit card debt which I haven't read anywhere on these forums.

I've seen some threads with Peter Schiff tubes talking about this info.
I watched one today. Let me see if I can find it for you.

[torchbearer]

maybe this one: http://www.youtube.com/watch?v=2I0QN-FYkpw

[socialize_me]

maybe this one: http://www.youtube.com/watch?v=2I0QN-FYkpw

Yep, that's where I heard/saw it. He didn't explain it at all though--that's why I thought it was good to post this thread.

Sorry I didn't have a warning for Einsteins like aravoth so he could avoid wasting time reading this. Obviously he could enlighten all of us on financial matters. Probably just another know-it-all that uses nothing more than talking points.

Even mises.org doesn't instruct you on financial derivatives. The calculations are intense and the concepts are anything but easy to understand. All they talk about there is the potential danger, but unless you actually study them for yourself, you're going off of what some article on a website says which does very little to explain to you the structure of these financial instruments.

[surf]

"credit card receivables" have been around for years - a derivative security, true, but one that could offer investors a high yield with a certain amount of safety (i.e. a pool of $100 million in credit card receivables as collateral could generate $95 million for the card issuer w/$5 million available to cover default risk).

Picture an 18% credit card "receivables" pool being sold to investors at a 7% yield and you can see how this would "benefit" the issuer as well as the investor.

This is not meant to imply that this concept of pooled receivables can't be mangled and cut-up into several different sets of cash flows ("tranches") w/investment bankers - eg Wall Street pimps - taking a cut every step of the way. The problem occurs - as with mortgage backed securities - when credit worthiness and/or collateral standards are not analyzed or adhered to.

does this help?

[dannno]

Seriously dude, did you read what I wrote? When the fuck has anyone here mentioned credit card debt derivatives, let alone spend time to explain them? Could you do it for me? You probably don't even know how the hell to trade a stock option--let alone understand the mathematics behind them.

Everyone here has been talking about the Federal Reserve, low interest rates, some bits about Fannie Mae and government intervention, and the bailouts. Very little has been posted on mortgage derivatives, and I haven't seen anyone write about the credit card problems. Maybe credit card defaults, but I'm making a point that banks actually are creating financial instruments on credit card debt which I haven't read anywhere on these forums.

I remember a thread a while back that featured a bar graph that showed the sub-prime derivatives with the credit card derivatives next to them. It looked like the World Trade Center towers......AFTER the first tower fell...