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RussellEbertHandball

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Welcome to the clique comrade REH
I don't know what the clique is comrade but reality is democracy and social compacts are fleeting when you look at history.

Here is a stat for you. During the 20th century ie 1st Jan 1901 to 31st Dec 2000 - as defined by the experts - only 6 nations were democracies for the full 100 years, Canada, USA, UK, Sweden, Switzerland and Australia. Colonies / dependencies on 1/1/1901 don't count as nations eg NZ, India, Jamaica etc.
 

RussellEbertHandball

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CDOs only became a problem because interest rates were raised 17 times, which is why people started defaulting on loans.
Nah it was a lot more than that. Interest rates were always going to go up in a growing economy so they would have been factored in when CDO's were set up as financial instruments. Well regulated and controlled CDO's are fine.

But the sheer greed and corruption had more to do with their collapse than rising interest rates. The BS NINJ loans - no income, no job, and no worries with mortgage brokers / sellers getting fat commissions up front, everyone taking profits, lying on loan application forms etc had more to do with it. There was near NINJ loans where huge loans were given to people who couldn't afford them and there was no chance of paying them were also issued.

Then there is the no moral hazard situation in the US that if you default on your housing loan, you just hand the keys to the bank, and walk away. You may never get a loan again, maybe not even a credit card, but you aren't saddle with having to pay off the debt like in Oz.

Even in Oz where the housing market involves a lot less securitization than the US ( after the depression US banks couldn't be national banks and to help boost housing finance the feds set up Fannie Mae as small regional banks struggled to provide adequate housing finance) the Royal Commission exposed this BS NINJ type loans here and the forging of documents and straight out lying, by people getting paid commissions rather than loan applicants.

Michael Lewis in his book The Big Short, interviews and articles gave many example of BS loans that were made and were mixed in with the AAA stuff to make it look as if the CDO was sound. The wiki page on CDO's quotes one;


Journalist Michael Lewis gave as an example of unsustainable underwriting practices a loan in Bakersfield, California, where "a Mexican strawberry picker with an income of $14,000 and no English was lent every penny he needed to buy a house of $724,000".[68] As two-year "teaser" mortgage rates—common with those that made home purchases like this possible—expired, mortgage payments skyrocketed. Refinancing to lower mortgage payment was no longer available since it depended on rising home prices.[69] Mezzanine tranches started to lose value in 2007, by mid year AA tranches were worth only 70 cents on the dollar.

Bringing this back to Greensill and therefore Gupta indirectly, when Lex Greensill left the family sugarcane and sweet potato farm in Bundaberg his first job in finance in London was with Morgan Stanley in the late '00's. They are as voracious as any investment bank when it comes to making money however way they can. That's where he picked up his tricks.

It looks like Lex learnt about dodgy CDO's very well whilst at Morgan Stanley and packaged up something similar but added an extra level of coverage the CDO's never had, an insurer. But just like a lot of the CDO's were a house of cards, so are Lex's debt instruments and when insurers Tokio Marine pulled their insurance last week, history repeated and the house of cards came tumbling down.
 
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Janus

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Nah it was a lot more than that. Interest rates were always going to go up in a growing economy so they would have been factored in when CDO's were set up as financial instruments. Well regulated and controlled CDO's are fine.

But the sheer greed and corruption had more to do with their collapse than rising interest rates. The BS NINJ loans - no income, no job, and no worries with mortgage brokers / sellers getting fat commissions up front, everyone taking profits, lying on loan application forms etc had more to do with it. There was near NINJ loans where huge loans were given to people who couldn't afford them and there was no chance of paying them were also issued.

Even in Oz where the housing market involves a lot less securitization than the US ( after the depression US banks couldn't be national banks and to help boost housing finance the feds set up Fannie Mae as small regional banks struggled to provide adequate housing finance) the Royal Commission exposed this BS NINJ type loans here and the forging of documents and straight out lying, buy people getting paid commissions rather tha loan applicants.

Michael Lewis in his book The Big Short, interviews and articles gave many example of BS loans that were made and were mixed in with the AAA stuff to make it look as if the CDO was sound. The wiki page on CDO's quotes one;


Journalist Michael Lewis gave as an example of unsustainable underwriting practices a loan in Bakersfield, California, where "a Mexican strawberry picker with an income of $14,000 and no English was lent every penny he needed to buy a house of $724,000".[68] As two-year "teaser" mortgage rates—common with those that made home purchases like this possible—expired, mortgage payments skyrocketed. Refinancing to lower mortgage payment was no longer available since it depended on rising home prices.[69] Mezzanine tranches started to lose value in 2007, by mid year AA tranches were worth only 70 cents on the dollar.

Bringing this back to Greensill and therefore Gupta indirectly, when Lex Greensill left the family sugarcane and sweet potato farm in Bundaberg his first job in finance in London was with Morgan Stanley in the late '00's. They are as voracious as any investment bank when it comes to making money however way they can. That's where he picked up his tricks.

It looks like Lex learnt about dodgy CDO's very well whilst at Morgan Stanley and packaged up something similar but added an extra level of coverage the CDO's never had, an insurer. But just like a lot of the CDO's were a house of cards, so are Lex's debt instruments and when insurers Tokio Marine pulled their insurance last week, history repeated and the house of cards came tumbling down.
CDOs (and their partner Credit Default Swaps) are still around. Actually, the newest ones are centred around credit card debt. Now tell me that isn’t a ticking time bomb.
 

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RussellEbertHandball

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CDOs (and their partner Credit Default Swaps) are still around. Actually, the newest ones are centred around credit card debt. Now tell me that isn’t a ticking time bomb.
Congress wouldn't / couldn't outright ban certain financial instruments, the investment banks were some of Obama's biggest financial backers, so a sh*t load of complicated legislation was written around regulating their issuing and monitoring of them, but as time goes by, people forget and new people push the barriers.
 

Ray Nolan

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Fair bit of water to go under the bridge before the application / court case is concluded.
If only The Advertiser understood that, their headline is screaming that winding up orders have been made. This matter is nowhere close to that stage. From personal experience though, journalists' understanding of insolvency matters is rudimentary at best.
 

StrappingTape

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"Journalists" having a clue about anything these days is rare, worst profession in the world these days.

I'm not sure if this will work in his favour but he might actually get the government to pay for everything like he needs because of this. I don't think the SA gov will want Whyalla to fall over coming into an election.
 

RussellEbertHandball

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If only The Advertiser understood that, their headline is screaming that winding up orders have been made. This matter is nowhere close to that stage. From personal experience though, journalists' understanding of insolvency matters is rudimentary at best.
This is an ABC story. Will have to watch their news sevice to see if they have a more detailed story.
 

RussellEbertHandball

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Was lead story on SA ABC News.

Looks like Citibank is acting for Credit Suisee who lent / invested in Greensill Capital and it would have been Greensill that took out security on GFG assets. Could be very long winded and messy process.
 

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Ford Fairlane

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"Journalists" having a clue about anything these days is rare, worst profession in the world these days.

I'm not sure if this will work in his favour but he might actually get the government to pay for everything like he needs because of this. I don't think the SA gov will want Whyalla to fall over coming into an election.
Especially after the latest Newspoll which showed SA as the worst performing state for the national Coalition, 55-45.
 

StrappingTape

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Especially after the latest Newspoll which showed SA as the worst performing state for the national Coalition, 55-45.
I've not seen any polling but I'd be surprised if that held. Not exactly sure what they've done wrong, maybe governing as labour lite but not like it will make a difference here both have the same plans to ruin us more.
 

raptalia

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This is an ABC story. Will have to watch their news sevice to see if they have a more detailed story.
The problem with high fliers like Lex Greensill is when they fall they bring others down. Early days yet but this does not look good for the people of Whyalla or the PAFC.

 

RussellEbertHandball

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Gupta has an open letter to South Australians on AdelaideNow behind the paywall.

What does it say?

Firstly, can I thank the people of Whyalla for the support they’ve shown GFG Alliance over the past five weeks.
Whyalla has long played an important role in Australian manufacturing, providing high-quality steel that has shaped much of the country’s infrastructure for many decades. I care deeply about continuing this legacy and building upon it to ensure a sustainable future for industry and society.

I also care deeply about my people, their futures and their communities; rest assured my team and I are working tirelessly to refinance the business away from Greensill’s creditors.

Meanwhile, our team is continuing to do what we do best; supplying high-quality, Australian-made steel to projects which are critical to nation building.

Through their hard work and determination, we have turned the business around to a point where the integrated operations are profitable and performing the best they have for many years. I’m very proud of this team and this remarkable achievement. Because of this effort, we are in a much stronger position.

We have already received multiple offers for refinancing from large lenders for our integrated mining and steelworks business in Whyalla and Tahmoor. We are now in advanced stages of due diligence.

This shows we are moving in the right direction.

In summary, we are maintaining operations as usual; we’re benefiting from strong tailwinds in steel and iron ore markets and high demand for our products in Australia, and our refinancing discussions are progressing very positively.


Whyalla will always be a special place for me; I have said before it is my spiritual home, I’ve made many friends since I acquired the business, both in the community and among our workforce. And from the beginning what I have admired most is their resilience.

I remain committed to our GREENSTEEL transformation vision. And I can’t wait to be back in Whyalla again with you all.
 

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