If it's legal, is it cheating?
 

Pete's comment made me laugh. Here's another one from the "if it's legal, is it cheating" file.

Imagine this situation. Is it cheating?

Company A is in a bad financial situation. They have a financial audit coming up and need to get some loser deals off their books.

They call Company B and say hey, we are between a rock and hard spot. If we fail our audit then the interest rate increases on our loans. Do you happen to have some good assets you can loan us for a while? Company B does have some good assets in their portfolio and agrees to swap them for Company A's bad assets plus a fee. They also agree to swap the assets back after the audit.

Company A passes the audit and gets a good rating because of the assets they rented from Company B. They use the good rating to borrow more money and pay their executives bonuses for doing a great job. Afterwards they swap the good assets back to Company B as agreed. The economy then turns down slightly and Company A's bad assets tank. They are forced into bankruptcy and the bank that made the last loan gets nothing.

You are the CEO of the bank. Do you feel cheated?

You are CEO Company B and want to keep your fee for loaning the good assets to Company A. If the bankruptcy judge clawed back your fee would you feel cheated?

You are Ayn Rand and don't believe feelings have a role in business. You invested in Company A after a rational analysis of their SEC filings including their Annual Report. Despite that effort you lose all of your investment in Company A. Do you feel cheated?

My old man once told me;

"There are things in life that might be perfectly legal. But, if you do it, you're an ass anyways."

I trust in his wisdom, it has yet to fail me.

Dave

The irony in the example is that the swap process was illegal. The financial community fixed the problem. They lobbied to make it legal. Deregulation FTW! :D

Any half intelligent person maximizes their deductions.

That said in this scenario the bank did not do their job and got burned. If Company B has their fee stripped it too is on them, as they decided to loan the assets.

Pete

So, the answer is to let preditory practices run amuck and blame the victims?

Welcome to the New World Order, eh?

Dave

What are you talking about with regard to deductions?

And what if you invested in Company A and lost your money. Would you feel cheated?

It's amazing how deep the brainwashing has gone. Whenever I see cold logic like Pete's I am reminded of the book "The Closing of the American Mind" and Ayn Rand's taunt -- someday Americans will discover the power of philosophy.

I don't think that she meant that in a good way. :mad:

That woman seriously gives me the creeps. I know how that sounds, but it's true. To be honest, I've never read her books, but I've seen several interviews from the '50 and '60s.

I get the same feeling I get when I'm watching old films of Hitler ranting about "parasites" and "inferior ethnicities". I just don't see how anything good can come from it. It's not the ideologies I am comparing, they are not the same. It's the attitude that human beings are to used up, exploited and cast aside like paper plates by the wealthy and powerful. And the notion that we should accept this as "normal" or "necessary". Slap whatever label you want on it. I call it evil.

Seriously.

Dave

And the GOP wants us all to vote into office as VP a man who actually believes Ayn Rand's muttering.

For me, the question would not be about if it's legal, but rather, is it ethical.

bingo!

How could this not be fraud by both companies A and B ?




Barney

Because it was simply a transfer of assets betweem two companies. Watching the Newshour last night they had a group of undecided Virginians on. One of them kept repeating the "Why have they not brought up some Wall Streeters on charges?" Because no one broke any laws, as Barbara has pointed out what they did was unethical but that is hardly a surprising thing for investment bankers. R&R want to retirn us to that environmet.:rolleyes:

Right. Nothing illegal, but;

The difference I see in basic ideologies is that one seeks to curb unethical and damaging (IMO) behaviour in the financial sector, and the other apparently seeks to encourage it at worst, turn a blind eye to it at best.

Dave

But this was a scheme to qualify for a loan then rob the company and file bankruptcy.

Might be legal just because of the lobbyist watering down any attempt to regulate the Financial services industry.




Barney

With the choices and decisions to be made how can anyone still be undecided?

I thought it was telling when the one women stated paraphrasing now, "Good or bad she felt Romney would get things done in Washington!" Good or Bad! Vote for someone thinking it might be bad but at least there is movement. Stay home and not vote if that is how you feel.




Barney

Yeah, "things". What sort of "things"? And, do we really want all of them to get done?

My favorite place to watch these people in action is at work. There is nothing so precious as to walk into the shop and see some good ol' boy sitting on his ass in there, an hour into his fifteen minute break, bitching that we need ".....get rid of Obama" and "....hire a Republican to get "...all of the lazy ni**ers off of their asses and into a job." Then I walk out out onto the floor where I am surrounded by BLACK PEOPLE WORKING. The same guy will later insist that his views have nothing to do with racism.:confused::rolleyes:

I'm trying really hard to not hate white guys who think they carry the rest of the world on thier backs. For the most part they're full of hooey, and the boss uses this attitude to manipulate them. But, they're so pig headed, they don't see it. Or don't care.

I do not like thinking of my own kind that way, but it's becoming impossible to watch and stay silent anymore.

Sorry for the rant.

Dave

People actually still speak like that in Virginia? I have not heard the N word uttered here, other than by AAs, in a decade or more. I must be overly isolated here in the People's Republic of California.

The example I provided is called a REPO contract. Supposedly the arrangement has legitimate uses but, as the example shows, it is also subject to abuse.

My understanding is that Goldman Sachs sold REPOs to Greece that enabled their government to cook their books and get in the mess they are in. REPOs were also abused by corporations in ways similar to my example.

Here is more info on wiki:

http://en.wikipedia.org/wiki/Repo_105
http://en.wikipedia.org/wiki/Repurchase_agreement

The bottom line is watch out for deregulation. You just might get it.

Here's an example from the Lehman Brothers collapse.

http://www.cbsnews.com/8301-503983_1...41-503983.html

You have GOT to be joking.

No, BH. They're all saintly and proper gentlemen, here in the south. Why who has ever heard of such a thing as bigotry in the Old Dominion? Mercy me, such notions are just plain crazy!!!:rolleyes:

I will grant you that since I moved here in 1986, it has faded considerably. The younger generation here in S.E. Virginia doesn't seem to care about race much at all. (The older generation, my generation, is horrible.) It's now worse in my Ohio hometown than it is here. But, then, those isolated podunks still think it's 1958. And, they've managed to keep "undesirables" out, to a very large degree. Not that it's done them any good, the place is still a high unemployment, meth-lab ridden shithole. But it's okay, 'cuz they're all church goin' caucasian country folk.......well, on the surface anyhow.

Regards,
Dave

We hear about "unintended consequences" in regulation from the right. It would appear that unintended consequence arising from deregulation is best kept under the rug with those guys.:rolleyes:

Dave

The cold (and correct) answer is, I took the chance when I invested my money and events proved it was a bad choice. It doesn't matter how I feel, wouldn't change a thing.

Pete

That's BS and you know it. If you did research prior to buying and trusted the books, you would be livid if you later discovered the books were cooked.

The stupid shit people say just to save face. Jesus age christ.

Cooked books are illegal.

How old was Christ at Jesus's age?

Pete

No, cooked books are not illegal. Deregulation took care of that. That's the point of this thread.

I thought we were discussing the tax code originally and taking what deductions you can being unethical. As far as regulating derivitives etc maybe that could / should have been done by now.

Pete

Earth to Pete. Earth to Pete. Come in please.

A) what does it have to do with deductions; and

B) why aren't derivitives regulated?

Pete

Pete,

You are off in la-la land.

This thread is about REPO contracts.

As for what that has to do with deductions, not a thing. And as for why derivatives aren't regulated, look up a lady named Brooksley Born and who shut her down. But yet again, what do derivatives have to do with REPO contracts? Not a thingthing.

Where are you coming from, mang? If you don't understand this stuff then just say so and I'll slow down. But for FFS don't fake it and just end up making a mess.

If you could spell it out for me I appreciate it.

Pete

10-4.

A REPO contract is when a corporation loans good assets to a company in trouble. The trick is that loan is accounted for as a sale. It's a trick becasue the people that audit the troubled companies books don't know that the company is in trouble and that the good assets have to be given back to the lender.

You might be familiar with the situation on a smaller scale. When many of us bought our first home we had trouble scraping together the cash for the down payment. One of the things the bank did to protect themselves was look back a few months to see if we borrowed the money for down payment. If we borrowed the money then the bank would count that against us. A REPO contract is like borrowed money that is recategorized as saved money.

It's a nasty trick. Supposedly a REPO contract has legimate uses but I'm not feeling it.


Derivatives are completely different animals than REPO contracts. A derivative is a financial contract that derives from (hence the name derivative) data in the financial market. Derivatives are basicly bets.

Thanks mate. So this slight of hand is legal?

Pete

As far as I know the rules have eased to make REPO contracts easier to write. REPOs played a part in the Wall Street crash of 2008 and the Greek debt crisis. Afterwards there were some hearings regarding REPO rules and the financial people managed to persuade regulators to ease REPO rules.

There's a lot of info on the web. If you are interested search "REPO 105" and "REPO 108"

Here's a blurb on the issue.

http://www.economywatch.com/economy-...led-15-03.html

Excellent! I'll read it. I also found

http://repowatch.org/about-repo/

The 105 and 108 is what I needed, google repo and you (or at least I) get repo men stories.

Pete

Pete,

That's an interesting site you found.

Pretty tricky game, eh?

Yeah it sure is! Where are the lynch mobs?

Pete

The lynch mob is OWS.

There is also an author named Nomi Prins that writes about this stuff. She is a former GoldmanSachs manager that quit because she had a conscience. Here is her web site:

http://www.nomiprins.com/

OWS is a pretty ineffective lynch mob! And quite commie from what I can see. Clear laws and regs work for me.

Seems to me both sides of the aisle are culpable. I get extremely suspicious of motive when one side is blamed for everything... particularly when the other side had the power to change it.

Pete