The Great Financial Crisis

All the major financial analysts claim the ongoing and deepening financial crisis is in large part the result of investor uncertainty. This is because the investment banks, derivatives and hedge funds placed high risk, sub-prime mortgages and junk bonds, along with other more reliable debt paper into packages and sold them to institutional and private bankers who in turn 'retailed' them around the world.

The rating agencies, who are paid by the sellers, all gave top billing (AA, AAA) to these hybrid securities, mortgages and junk bonds, encouraging investment advisers to push them on to risk-averse client looking for higher returns than Treasury notes. Most of the investors do not know whose and what paper they are holding, nor how much their hedge funds are losing or have lost. Those who can, have pulled out. The banks are reticent to loan to any applicant. Leverage funds are a dirty word among lenders. Hedge funds are either selling assets to pay loans or not telling what they own or owe. Derivatives have been deflowered. Central Banks in the US, Japan and the European Union have poured (and keep pouring) over $250 billion to the private banks hoping to create liquidity but the banks won't lend — because, as one prominent banker in Palm Springs told me "Nobody knows who's got a turd (worthless investments) in his brief case."

Meanwhile, Goldman Sach, Bear Stearns and Lehman Brothers are all closing down bankrupt investment funds or trying to prop them up. The Fed props up all the worst speculators in the name of 'saving the financial system' - in a way that it would never prop up the failing American health system. The financial system has the 'runs' and infusions of Fed funds have failed to block the 'run for cover'.

www.atlanticfreepress.com/content/view/2260/32/ 

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