12-19-2011, 03:05 AM
(This post was last modified: 12-19-2011, 05:05 AM by Tenet Nosce.)
Now mind you this all went down back in 2003, so if you look back at the graph, you will see this was right about the time that the value of derivative contracts floating around cyberspace actually eclipsed the total value of all the real assets in the world. As you can see, the situation wasn't nearly as dire as it is right now.
But back to the story. Needless to say I wasn't interested in taking the job. But I thought- what the heck- I am going to go back in and talk to this jerkoff in the fancy suit and see what he has to say for himself. So I walked in, briefcase in hand, and sat down in his office. He wanted to know how excited I was about this "opportunity" I had been offered. I said I've got a few questions if you don't mind...
So I started laying everything out on the desk. Charts and graphs. Listings of AIG holdings in developing nations. The whole nine yards. He stared at me with this sort of half-blank half-s***-eating-grin look on his face. Clueless. I asked him- why would a company like AIG, whose charge it is to be safeguarding the assets of their clients, be turning around and investing their money in political hotspots and areas of civil unrest. He just sat there like a blithering idiot. But he sure looked great in that suit!
Well anyway, at that point I suppose any normal person would have just happily continued on with their life. But not me. I'm not one of those normal types. The information I had come across kept nagging me in the back of my mind. Why? What were they up to, anyway?
I mean- think about it. These jerkoffs have more money than God. It can't really be about the money, can it? And besides... what good is an account with ten zeroes in it if there is nothing real you can actually buy with it? Assuming that only a small portion of the world's assets are for sale at any given time, what would be the point of having all this idle money sitting around?
And then it hit me. All I had to do was open my eyes and look around. See, at the time I did a lot of driving around the city. To and fro from home to work. Visiting friends, and whatnot. I started to notice a couple of odd things.
The first was that Clear Channel seemed to be buying up all the billboards. Whereas before there were about four or five companies, in a very short time nearly all the billboards had this Clear Channel sticker on them. Well as it turned out, they weren't just buying up billboards, but also radio stations and concert venues all across the country.
So who the heck is Clear Channel, I wondered? (And who or what, exactly, are they wanting to channel so clearly?)
Well at that point, I suppose a normal person would have just concluded is was just Bush cronyism as usual. Nothing to be surprised about. But see there was this second thing that I started to notice as well. It started right about the same time. There were all these office buildings starting to put up "For Lease" and "For Sale" signs. Even brand spanking gorgeous new buildings. Totally empty. Month after month.
So I thought to myself- well that sure is idiotic. Why would all these construction companies build these brand new office buildings if there wasn't anybody willing to rent the space? Surely they would do their research before starting new projects?
Well the answer I found was... yes... they were doing their research. Only instead of good old fashioned supply and demand economics, these guys were buying into the "new math" being churned out by Wall Street. That "new math" was called subprime loans. And it was all made possible by... yup you guessed it! G.W. Bush.
With subprime construction loans, a company could essentially borrow the money to start building a new office building, and by the time they finished, it would be worth more than total of what they borrowed PLUS the interest. Then what they could do is take out a NEW loan based on the inflated value of the finished building, pay off the original loan and interest, and then pocket the difference.
But wait, you say, something like this clearly couldn't go on forever! Eventually there would be such a glut of commercial buildings on the market that the values would start to implode. Well if you said that, you would be right. But these dingbats really didn't care about that. They knew they were playing a game of hot potato, but of course every dingbat thinks he is the smartest kid on the block, and so nobody thought they would be the one who got caught holding the potato when the music stopped.
But wait, you say, what about the banks? Why in the heck would they loan out good money after bad when all these development projects failed? Well, the answer is because they didn't really care either. They had a virtually limitless (and growing) supply of funds available to them from tapping into the derivatives market. Writing bad loans is of no concern when one can hedge against default with a quick flick of a pen, and an instrument known as a "credit default swap".
This is when things really started to go down the rabbit hole. See, what I did was I started to look up all these banks and insurance companies and look their Board of Directors and major shareholders, as this is all public information available from SEC filings. Turned out the same names kept popping up all over again. Some of them I recognized, others I didn't. But the point is that it seemed to be the same dudes pulling the strings on both sides of the equation through their derivatives instruments.
Well at any rate I guess I was kind of naive because I thought to myself that certainly the gig would be up soon. The game had gone on as long as it could. Boy was I ever wrong. What happened next was that the construction boom simply shifted from the commercial sector to the residential sector.
Next thing I knew, vast swaths of track homes were sprouting up everywhere. I am not kidding- whole neighborhoods appeared where there was previously nothing but undeveloped land. Crappy houses too. I got a chance to look at a few of them. All the infrastructure was cheap as all hell. The plumbing work was cheap. The electrical was cheap, and so on. But nobody seemed to care. They were happy that they were getting "more house" for their money... i.e. a bigger floorplan with vaulted ceilings and crap like that. That corners were cut on other, more important, aspects of the buildings seemed unconcerning to most. Freaking money pits waiting to happen. But those expecting newlyweds didn't care. They felt safe and secure, reassured by their good friends at AIG that all was well in the world, and that the money would just keep freely flowing forever. And with that new mall down the street, courtesy of Simon Property Group, there was no shortage of places to spend all those greenbacks!
And of course the banks were there to lend a helping hand. In many cases they were willing to lend out 120% of the home's value at the time of purchase. Whoever heard of a bank doing that?! Well they did, and again people just pocketed the change and went on with their merry take-the-check-and-stick-my-head-in-the-sand lives. Such is life.
Well as you can imagine, there were those who weren't satisfied with only a few extra Gs in their pocket. They had to push the issue. So people started networking. Putting their heads together. Homeowners, agents, brokers, appraisers, loan officers, all "working together" for the common good, you know.
This is when the concept of "flipping" homes was born. How does one "flip" a home, you ask? Well it is really quite simple. Basically you buy it at one price, and then resell it a short time later at a sizeable profit. In a normal economy, things like this aren't really possible, but in an economy undergoing a massive inflation of the money supply along with a hefty dose of collusion and looking the other way, things that were once the stuff of fairy tales start become possible. Oh, it was a magical time indeed.
Take the example of my little condo. Nothing special really. I bought it in 2001, just before the Twin Towers incident. I had actually felt like a sucker for a while because I thought I had locked in a pretty good rate at 7.5% but when the economy started to implode after 9/11, the insurance companies and banks settled everything down by injecting massive sums of money into the economy. This drove interest rates practically down to zero. Really, this is how the derivatives thing started to get out of hand.
I actually remember when this shift started. You know how after 9/11 for a while all you got on the news was updates on death tolls? Then suddenly that stopped? That's when the message shifted. I remember it was toward the end of November because all of a sudden all of the major news outlets changed their tune in lock-step fashion. It was so abrupt that for the first time I really started to consider that all the media companies were actually answering to the same people.
Well anyway. One day it was death tolls. The next it was how everything was "getting back to normal". And how, pray tell, did we know that everything was "getting back to normal"? SHOPPING! Yes, that's right it was getting well nigh into the holiday season, and Americans were back in the malls shopping their cares away. And OH was it ever a great season for retailers! There was so much holiday cheer spewing from everybody's lips that it was all I could do not to puke on myself.
But wait. Where did all this money suddenly come from? Did everybody get a raise at work? Nope. Tax breaks? Nope. No my friends, in Christmas 2001 it was your friendly "neighborhood" bank that threw on the Santa Suit and started spraying everybody with cash. 120% loans? No problem! Here's a little something extra "for the kids"! I remember I was getting at least one new offer for 0% on my credit card purchases per week. Zero percent?! O! What a joyous season it was! And everybody was more than happy to put that nasty 9/11 stuff behind ourselves. After all, we knew who dunnit and we knew that Iraq was where we were gonna find 'em. We're gonna smoke 'em out of their caves! But we won't let those Muslim terrorists rob us of our Christmas spending frenzy. Oh no, we're gonna fight back. With an army of plastic cards with little magnetic strips. SPEND SPEND SPEND! It's the "American" thing to do! Let G.W. and his cronies take care of that little "terrorist problem" and we will do our part by SPENDING MORE MONEY!
And spend we did. Nobody really stopped to think too much where all of this money was coming from? Did it just appear out of the ethers? Did Santa just pull it out of his magic bag? Hey, who cares? Have another cup of Christmas cheer and leave all that "fear-mongering conspiracy crap" behind.
But something in me just couldn't let it go. I just had to get to the bottom of it...
But back to the story. Needless to say I wasn't interested in taking the job. But I thought- what the heck- I am going to go back in and talk to this jerkoff in the fancy suit and see what he has to say for himself. So I walked in, briefcase in hand, and sat down in his office. He wanted to know how excited I was about this "opportunity" I had been offered. I said I've got a few questions if you don't mind...
So I started laying everything out on the desk. Charts and graphs. Listings of AIG holdings in developing nations. The whole nine yards. He stared at me with this sort of half-blank half-s***-eating-grin look on his face. Clueless. I asked him- why would a company like AIG, whose charge it is to be safeguarding the assets of their clients, be turning around and investing their money in political hotspots and areas of civil unrest. He just sat there like a blithering idiot. But he sure looked great in that suit!
Well anyway, at that point I suppose any normal person would have just happily continued on with their life. But not me. I'm not one of those normal types. The information I had come across kept nagging me in the back of my mind. Why? What were they up to, anyway?
I mean- think about it. These jerkoffs have more money than God. It can't really be about the money, can it? And besides... what good is an account with ten zeroes in it if there is nothing real you can actually buy with it? Assuming that only a small portion of the world's assets are for sale at any given time, what would be the point of having all this idle money sitting around?
And then it hit me. All I had to do was open my eyes and look around. See, at the time I did a lot of driving around the city. To and fro from home to work. Visiting friends, and whatnot. I started to notice a couple of odd things.
The first was that Clear Channel seemed to be buying up all the billboards. Whereas before there were about four or five companies, in a very short time nearly all the billboards had this Clear Channel sticker on them. Well as it turned out, they weren't just buying up billboards, but also radio stations and concert venues all across the country.
So who the heck is Clear Channel, I wondered? (And who or what, exactly, are they wanting to channel so clearly?)
Quote:Corporate governance
Current members of the board of directors of Clear Channel Communications are: Alan Feld, Perry Lewis, Lowry Mays, B.J.(Red) McCombs, Phyllis Riggins, Theodore Strauss, J.C. Watts, and John H. Williams.
Tom Hicks and Vernon Jordan were formerly members of Clear Channel's board of directors. Jordan was a close friend and advisor to President Bill Clinton and was accused of lying to investigators during the investigations into perjury and obstruction of justice charges against Clinton. Hicks, Clear Channel's former vice-chairman, is a past donor to George W. Bush's political campaigns and a close associate of the Bush family. Hicks is the founder of Hicks, Muse, Tate & Furst, the private-equity firm which funded many of Clear Channel's antecedent companies, including most significantly CapStar, Chancellor Media and AM-FM, Inc..
Well at that point, I suppose a normal person would have just concluded is was just Bush cronyism as usual. Nothing to be surprised about. But see there was this second thing that I started to notice as well. It started right about the same time. There were all these office buildings starting to put up "For Lease" and "For Sale" signs. Even brand spanking gorgeous new buildings. Totally empty. Month after month.
So I thought to myself- well that sure is idiotic. Why would all these construction companies build these brand new office buildings if there wasn't anybody willing to rent the space? Surely they would do their research before starting new projects?
Well the answer I found was... yes... they were doing their research. Only instead of good old fashioned supply and demand economics, these guys were buying into the "new math" being churned out by Wall Street. That "new math" was called subprime loans. And it was all made possible by... yup you guessed it! G.W. Bush.
With subprime construction loans, a company could essentially borrow the money to start building a new office building, and by the time they finished, it would be worth more than total of what they borrowed PLUS the interest. Then what they could do is take out a NEW loan based on the inflated value of the finished building, pay off the original loan and interest, and then pocket the difference.
But wait, you say, something like this clearly couldn't go on forever! Eventually there would be such a glut of commercial buildings on the market that the values would start to implode. Well if you said that, you would be right. But these dingbats really didn't care about that. They knew they were playing a game of hot potato, but of course every dingbat thinks he is the smartest kid on the block, and so nobody thought they would be the one who got caught holding the potato when the music stopped.
But wait, you say, what about the banks? Why in the heck would they loan out good money after bad when all these development projects failed? Well, the answer is because they didn't really care either. They had a virtually limitless (and growing) supply of funds available to them from tapping into the derivatives market. Writing bad loans is of no concern when one can hedge against default with a quick flick of a pen, and an instrument known as a "credit default swap".
This is when things really started to go down the rabbit hole. See, what I did was I started to look up all these banks and insurance companies and look their Board of Directors and major shareholders, as this is all public information available from SEC filings. Turned out the same names kept popping up all over again. Some of them I recognized, others I didn't. But the point is that it seemed to be the same dudes pulling the strings on both sides of the equation through their derivatives instruments.
Well at any rate I guess I was kind of naive because I thought to myself that certainly the gig would be up soon. The game had gone on as long as it could. Boy was I ever wrong. What happened next was that the construction boom simply shifted from the commercial sector to the residential sector.
Next thing I knew, vast swaths of track homes were sprouting up everywhere. I am not kidding- whole neighborhoods appeared where there was previously nothing but undeveloped land. Crappy houses too. I got a chance to look at a few of them. All the infrastructure was cheap as all hell. The plumbing work was cheap. The electrical was cheap, and so on. But nobody seemed to care. They were happy that they were getting "more house" for their money... i.e. a bigger floorplan with vaulted ceilings and crap like that. That corners were cut on other, more important, aspects of the buildings seemed unconcerning to most. Freaking money pits waiting to happen. But those expecting newlyweds didn't care. They felt safe and secure, reassured by their good friends at AIG that all was well in the world, and that the money would just keep freely flowing forever. And with that new mall down the street, courtesy of Simon Property Group, there was no shortage of places to spend all those greenbacks!
And of course the banks were there to lend a helping hand. In many cases they were willing to lend out 120% of the home's value at the time of purchase. Whoever heard of a bank doing that?! Well they did, and again people just pocketed the change and went on with their merry take-the-check-and-stick-my-head-in-the-sand lives. Such is life.
Well as you can imagine, there were those who weren't satisfied with only a few extra Gs in their pocket. They had to push the issue. So people started networking. Putting their heads together. Homeowners, agents, brokers, appraisers, loan officers, all "working together" for the common good, you know.
This is when the concept of "flipping" homes was born. How does one "flip" a home, you ask? Well it is really quite simple. Basically you buy it at one price, and then resell it a short time later at a sizeable profit. In a normal economy, things like this aren't really possible, but in an economy undergoing a massive inflation of the money supply along with a hefty dose of collusion and looking the other way, things that were once the stuff of fairy tales start become possible. Oh, it was a magical time indeed.
Take the example of my little condo. Nothing special really. I bought it in 2001, just before the Twin Towers incident. I had actually felt like a sucker for a while because I thought I had locked in a pretty good rate at 7.5% but when the economy started to implode after 9/11, the insurance companies and banks settled everything down by injecting massive sums of money into the economy. This drove interest rates practically down to zero. Really, this is how the derivatives thing started to get out of hand.
I actually remember when this shift started. You know how after 9/11 for a while all you got on the news was updates on death tolls? Then suddenly that stopped? That's when the message shifted. I remember it was toward the end of November because all of a sudden all of the major news outlets changed their tune in lock-step fashion. It was so abrupt that for the first time I really started to consider that all the media companies were actually answering to the same people.
Well anyway. One day it was death tolls. The next it was how everything was "getting back to normal". And how, pray tell, did we know that everything was "getting back to normal"? SHOPPING! Yes, that's right it was getting well nigh into the holiday season, and Americans were back in the malls shopping their cares away. And OH was it ever a great season for retailers! There was so much holiday cheer spewing from everybody's lips that it was all I could do not to puke on myself.
But wait. Where did all this money suddenly come from? Did everybody get a raise at work? Nope. Tax breaks? Nope. No my friends, in Christmas 2001 it was your friendly "neighborhood" bank that threw on the Santa Suit and started spraying everybody with cash. 120% loans? No problem! Here's a little something extra "for the kids"! I remember I was getting at least one new offer for 0% on my credit card purchases per week. Zero percent?! O! What a joyous season it was! And everybody was more than happy to put that nasty 9/11 stuff behind ourselves. After all, we knew who dunnit and we knew that Iraq was where we were gonna find 'em. We're gonna smoke 'em out of their caves! But we won't let those Muslim terrorists rob us of our Christmas spending frenzy. Oh no, we're gonna fight back. With an army of plastic cards with little magnetic strips. SPEND SPEND SPEND! It's the "American" thing to do! Let G.W. and his cronies take care of that little "terrorist problem" and we will do our part by SPENDING MORE MONEY!
And spend we did. Nobody really stopped to think too much where all of this money was coming from? Did it just appear out of the ethers? Did Santa just pull it out of his magic bag? Hey, who cares? Have another cup of Christmas cheer and leave all that "fear-mongering conspiracy crap" behind.
But something in me just couldn't let it go. I just had to get to the bottom of it...
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