If it's legal, is it cheating?

[piece-itpete]

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

Pete

[ebacon]

Originally Posted by piece-itpete

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.

[piece-itpete]

Thanks mate. So this slight of hand is legal?

Pete

[ebacon]

Originally Posted by piece-itpete

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"

[ebacon]

Here's a blurb on the issue.

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

[piece-itpete]

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

[ebacon]

Pete,

That's an interesting site you found.

Pretty tricky game, eh?

[piece-itpete]

Yeah it sure is! Where are the lynch mobs?

Pete

[ebacon]

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/

[piece-itpete]

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