THE CREDIT CRISIS: INVESTMENTS ON A TIGHTROPE WITH LESS SAFETY NETS RICK TOBIN
just a “sub-prime mortgage problem” as the mainstream media likes to tell their viewers. In fact, less than 1% of
all non-performing loans worldwide were supposedly U.S. sub-prime mortgage loans.
Most of the problem “Credit Crisis” loans or derivatives investments (a hybrid of a loan and an insurance
contract) were “Interest Rate Option Derivatives” when investment banks bet on the future directions of interest
rates. Interest Rate Option Derivatives are at the heart of the “LIBOR Scandal” (London Interbank Offered Rate
– the biggest financial scandal in world history), the benchmark interest rate index used by hundreds of trillions
of dollars of loans worldwide. In this scandal, banks and investment banks were supposedly told the exact
direction of the future rigged interest rates so that they may profit from their derivatives bets.
The origin of “The Credit Crisis” was a downward plummet into a black hole-like financial Abyss. It should not
be blamed entirely on U.S. homeowners or “flippers” as opposed to reckless investment bankers who enjoyed
leveraging trillions of dollars with their risky financial bets.
Many large U.S. banks, Wall Street firms, automobile companies, airlines, and major insurance companies
might have been technically insolvent in recent years. If they were forced to use standard bookkeeping
methods like the rest of the Americans, their debts would greatly exceed their assets. As a result, these multibillion dollar companies would be in bankruptcy court.
What is most frustrating to many Americans today is that these trillions of dollars of bailouts have helped many
financial institutions better stabilize their overall portfolios and their balance sheets. Yet, these same banks
have not rapidly increased their lending options for individual Americans or small to mid-sized businesses.
Financial Implosions &
Investment Opportunities
After the end of The Great Depression
and World War II and the collapse of
the Savings and Loan industry, many
investors created the bulk of their
family’s
generations
of
assets
by
picking up assets for literally cents on
the dollar. Why pay retail prices when
one may pay wholesale prices from
motivated
financial
individual sellers?
institutions
or