Comments on: A Look At Wall Street's Shadow Market

60 Minutes: How Some Arcane Wall Street Financial Instruments Magnified Economic Crisis

[dellafaymenn]

CRIME! CRIME! CRIME!! Top C.E.O,s of these banks, that would not interview,that made millions every year to put us trillions in debt! Along with the Fannie Mae and Wallstreet THIEVES!!!!! That''s what "WE OF THE PEOPLE" call IT! All "THIEVES" need to be held accountable."GO TO JAIL" "LONG TIME"... I am a hard working tax payer!! I do not own a home because I knew I my self couldn''t afford it down the road. I can''t stand people who wine about losing thier homes either! The majority of people bought homes for the same reason as C.E.O''s. "GREED" in hopes of tripling their homes value...Yes! I do know what the bailouts for... "IT''S PATHETIC"...

[bipshah]

Mr. Kroft story was superb. It also scares the hell out of you. We allowed few thieves to steal from all of us. The world looks up to this country. What show we are putting for them.
The part of the story still bugs me is - if 94% of Americans are paying mortgage then how only 6% craeted this mortgage mess. How many billions are we talking about.

[davidcomora]

Excellent job of explaining a complex financial tool. I only wish you had taken the time to point to how these credit swaps became unregulated. Phil Gram deserves a good deal of the credit, through the Commodities Modernization Act which he sponsored in 2000.

[annaf87]

I left Wall St because of the unethical principles underlying swaps & derivatives. Merrill Lynch and other Street firms hired Physics PhD''s because their statistical magic ran rings around most CFO''s and Investment officers. *It''s unethical/immoral to sell financial instruments that profit on the ignorance of the purchaser-whether John Doe buys an adjustable mortgage sold at a teaser rate without understanding its risks and implications, or CFO Bigwig thinks s/he%u2019s just hedging a risk but can%u2019t understand the legalese and financial implications of the cascading effects of [unstated] "insurance" upon debt upon assets. *It''s fundamentally unethical that *any* financial transaction is unreported and unregulated on the public books and accounting records of a publicly held co. Swap agreements aren%u2019t and never have been regulated, nor reported and tracked, AFAIK. Opacity in financial deals is the recipe of our current disaster.
Pickel contradicted himself regarding investors%u2019 understanding. If you dress a loser in fancy legalese and financial wizardry to make a loser look to be wearing fancy winner''s regalia, it''s still a loser.
We need solid regulatory measures, financial transparency by all institutions who bought/sold these instruments, sound accounting regulations that fully disclose all transactions, track and measure risk, and legislation that won%u2019t permit financial pirates to conduct their business under the cover of "legal"/"accounting" darkness.

[inketolstoy]

Is that the way it works when someone does not want to address the subject at hand... Just change it?

This is a common logical fallacy known as a red herring. For those of you that do not know what a logical fallacy is, it is something that resembles logic but is not. There are plenty of examples of that here such as ad hominem (attacking the speaker rather than addressing the issues), hasty generalization, and card stacking.

[annaf87]

I left Wall St because of the unethical principles underlying swaps & derivatives. Merrill Lynch and other Street firms hired Physics PhD''s because their statistical magic ran rings around most CFO''s and Investment officers. *It''s unethical/immoral to sell financial instruments that profit on the ignorance of the purchaser-whether John Doe buys an adjustable mortgage sold at a teaser rate without understanding its risks and implications, or CFO Bigwig thinks s/he%u2019s just hedging a risk but can%u2019t understand the legalese and financial implications of the cascading effects of [unstated] "insurance" upon debt upon assets. *It''s fundamentally unethical that *any* financial transaction is unreported and unregulated on the public books and accounting records of a publicly held co. Swap agreements aren%u2019t and never have been regulated, nor reported and tracked, AFAIK. Opacity in financial deals is the recipe of our current disaster.
Pickel contradicted himself regarding investors%u2019 understanding. If you dress a loser in fancy legalese and financial wizardry to make a loser look to be wearing fancy winner''s regalia, it''s still a loser.
We need solid regulatory measures, financial transparency by all institutions who bought/sold these instruments, sound accounting regulations that fully disclose all transactions, track and measure risk, and legislation that won%u2019t permit financial pirates to conduct their business under the cover of "legal"/"accounting" darkness.

[annaf87]

I left Wall St because of the unethical principles underlying swaps & derivatives. Merrill Lynch and other Street firms hired Physics PhD''s because their statistical magic ran rings around most CFO''s and Investment officers. *It''s unethical/immoral to sell financial instruments that profit on the ignorance of the purchaser-whether John Doe buys an adjustable mortgage sold at a teaser rate without understanding its risks and implications, or CFO Bigwig thinks s/he%u2019s just hedging a risk but can%u2019t understand the legalese and financial implications of the cascading effects of [unstated] "insurance" upon debt upon assets. *It''s fundamentally unethical that *any* financial transaction is unreported and unregulated on the public books and accounting records of a publicly held co. Swap agreements aren%u2019t and never have been regulated, nor reported and tracked, AFAIK. Opacity in financial deals is the recipe of our current disaster.
Pickel contradicted himself regarding investors%u2019 understanding. If you dress a loser in fancy legalese and financial wizardry to make a loser look to be wearing fancy winner''s regalia, it''s still a loser.
We need solid regulatory measures, financial transparency by all institutions who bought/sold these instruments, sound accounting regulations that fully disclose all transactions, track and measure risk, and legislation that won%u2019t permit financial pirates to conduct their business under the cover of "legal"/"accounting" darkness.

[ok9otj]

In reading an article in Time Mag, it''s pretty clear that no one in gov''t or banking understood derivitives & CDOs & all the other gobbledegook hedgy lingo that''s been tossed off as Expert Advice. Voelker can''t explain it. EXperts & pundits don''t understand it. The real question is What did the Chairman & the Secretaries know & when did they know it? Always the same ol'' same ol'' Follow the Money.

[puh-lease]

Leftyintexas,
Is that the way it works when someone does not want to address the subject at hand... Just change it?

Do all Texans think your way?

[sk_w]

The people that we should really be mad at those that buy more than they can afford. If people would just live within their means, none of this would have happened.

All those greedy (ex) homeowners that wanted a house they couldn''t afford. Now their stupidy has become our problem...

Stop borrowing more money than your can afford to pay off.

[whistleblow4]

STEVE CROFT''S 10/5 SEGMENT WRONGLY MENTIONED "PHYSICISTS", BUT THE MAJOR CULPRIT TO BLAME FOR: DERIVATIVES, HEDGES, LEVERAGES, CHUTZPA "DEALS" AD NAUSEUM, ARE MATHEMATICIANS(WITNESS: WEBSITE WWW.AMS.ORG, LOCATE UNDER MEETINGS "JOINT MEETING", SEARCH ON "MATHEMATICS OF FINANCE" OR "FINANCIAL MATHEMATICS", A NEW DESIGNATION THAT HAS INCREASINGLY DOMINATED ANY/ALL MATHEMATICS DEPARTMENTS AND CONFERENCES AD. NAUSEUM!!! CHECK OUT MATHEMATICS DEPARTMENTS CIRICULUM ANY/ALL UNIVERSITIES. THERE IS WHERE THE TRUE FAULT LIES!!! (JUST LIKE TSTUPID MBA GLUT OF LAST BUBBLE!!!) FANCY SHMANCY THEORETICAL "MODELS" WITH NO EXPERIMENTAL DATA NOR REAL EXPERIENCE!!! CHECK OUT DON BAUDER''S COLUMN "QUADRILLION" AT:
www.sandiegoreader.com/news/2008/sep/17/city-light-1/ WHO HAS BEEN PREDICTING THE CURRENT DEBACLE FOR AT LEAST HALF A DECADE, IF NOT LONGER!!!

MANY OF THE GAMING HEDGEFUNDS VIA DERIVATIVES AND LEVERAGES DERIVE FROM GAME-THEORY WHOSE PERPETRATOR OF THIS WAS THE ECONOMICS NOBEL-PRIZE WINER UND NAZI GRUEPENFUEHRER JOHN NASH, "A BEAUTIFUL MIND"??? AN ANTISEMITIC NUTCASE WHOSE THEORIES'' SPAWN WHAT WE ARE ALL NOW STUCK WITH FOR A VERY VERY LONG TIME.
YOU MIGHT WANT TO READ THROUGH A BOOK "STABILITY AND PERFECTION OF NASH EQUILIBRIA" BY ERIC VAN DAMME(SPRINGER (1987)), THE TECHNICAL BIBLE OF THESE GAMING HEDGEFUNDS VIA DERIVATIVES AND LEVERAGES. YOU MIGHT WANT TO LOOK INTO HOW PREVALENT JOHN NASH''S CRAZY THEORIES WERE EMBRACED BY ALLEN GREENSPAN, LEADING TO OUR CURRENT CALAMITY!!!

[leftyintexas]

Posted by PUH-LEASE at 03:14 PM : Oct 06, 2008

Yeah PLEEEEESE, TELL US THE REST OF YOUR STORY. DON''T LEAVE OUT THE GOOD PARTS EITHER. TELL US ABOUT ALL THESE WALL STREET BOYS WHO SUPPORTED THE DUMBYA AND BUTTHEAD ADMINISTRATION ALL ALONG. TELL US THE NAMES OF ALL THE REPUBLICON EXECUTIVES WHO GOT RIDICULOUS BONUSES FOR JUST BEING STUPID. WE ARE WAITING!

[puh-lease]

FRANKLIN RAINES - Obama Campaign Chief Economic Advisor. Raines was Chairman and CEO of Fannie Mae. forced to retire when auditing discovered irregularities in Fannie Mae''s accounting. Raines received a $240MM golden parachute. The Court ordered Raines to return $50MM he received in bonuses based on the mis-stated Fannie Mae profits. Net windfall.. $190 million!

TIM HOWARD - Chief Economic Advisor to Obama. He was the Chief Financial Officer of Fannie Mae. Howard was a strong internal proponent of using acct strategies, ensuring a "stable pattern of earnings" cooking the books). Government Investigation determined that, CFO, Tim Howard, failed to provide adequate oversight to key control and reporting functions within Fannie Mae." Howard''s Golden Parachute was estimated at $20 Million!

JIM JOHNSON - Senior Obama Finance Advisor and was selected to run Obama''s Vice Presidential Search Committee. JOHNSON is a former executive at Lehman Brothers and who was later forced from his position as Fannie Mae CEO. Investigators found that Fannie Mae had hidden a substantial amount of Johnson''s 1998 compensation from the public, reporting that it was between $6MM and $7MM when it fact it was $21MM. Johnson is currently under investigation for taking illegal loans from Countrywide while serving as CEO of Fannie Mae.

Johnson''s Golden Parachute was estimated at $28 Million.

[cibercore]

Politicians who caused the crises should be voted out of office. After viewing these two videos, apply common sense and doo the right thing.
http://www.youtube.com/watch?v=nRmB93McZeI
http://www.youtube.com/watch?v=_MGT_cSi7Rs
Cybercorrespondent
http://cybercorrespondent.blogspot.com

[beano08-2009]

60 Minutes - If you really want to have some fun, go to the real foundation of the derivatives mess: the top-major US law firms who for over 10 years took in huge legal fees from clients of derivatives brokers, insurance companies, investment companies, pension funds, etc., peddled their wares with unintelligible gobbly-*** and when questioned about inevitably responded "well, you just dont understand them." And perhaps most ironic is that these firms will again score tons of fees in unwrapping or creating exceptions to get around this mess.

[sirenvixen]

The " WILL" OF THE PEOPLE stopped Congress from passing the Bailout unless the people were included in it!!! THE "WILL" OF THE PEOPLE will prevent the collapse from happening again!! THE "WILL" OF THE PEOPLE will replace all those politicians who made and allowed,"And Encouraged" the meltdown!!!!!! to "Happen"!!!!!!

[ursula62-2009]

Do we know who wrote the Wikipedia article people are referencing? Does anyone know who the author is? Since it is a "wiki", that means anyone could have written it so I''m curious about the source of this information. Anyone?

[jship1]

Your show is the first one I have seen try to explain what a credit default swap is. BRAVO!!!, however would you like to look into a plan by Shah Gilani that could establish some protocols to evaluate these instraments. Until this is done the credit markets will not soften.

[cbsisafraid]

hozdaddy
he number is not bogus. the number is derived from the potential liability incurred by writing multiple swaps (insurance policies) one one individual mbs. it''''s like if you bought a new corvette for $50,000 and 10 people in your neighborhood bet your insurance company that you would total it in 5 years. the insurance company''''s liability would be 500,000 on one $50,000 car.
Yes but there is only one asset worth $50,000! The liability isn''t $500k but $50K. The layoff of the liability is not $500k. The biggest problem is just determining who would receive the $50k and the other 9 investors didn''t spend $50k a piece for the liability.
Sorry your analogy doesn''t work.

[ursula62-2009]

Do we know who wrote the Wikipedia article people are referencing? Does anyone know who the author is? Since it is a "wiki", that means anyone could have written it so I''m curious about the source of this information. Anyone?