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Only America Could be That Dumb?

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April 29, 2009 – Comments (5)

That's the gist of many a protectionist/socialist European politician's whine about derivative securities and the world financial implosion these days. This is an American, or an "Anglo-Saxon" problem (for those who like to lump the Brits in with the U.S.) the story goes.

Bunk.

Next time you hear that, show 'em all this.

Many European municipalities were buying derivative junk they didn't understand, and now that they're on the hook, they're ticked at the snake-oil salesmen, even when those snake-oil salesmen came from their own backyard.

Municipal authorities across Europe are reporting losses from derivatives since credit markets unraveled in the slump triggered by the collapse of the U.S. subprime mortgage market in August 2007.

Milan’s financial police seized 476 million euros of assets from UBS AG, Deutsche Bank, JPMorgan and Depfa Bank Plc this week in an investigation into alleged fraud linked to the sale of interest-rate swaps, which are designed to protect buyers against losses caused by fluctuations in borrowing costs.

The city is suing the banks after losses on derivatives purchased in 2005, and alleges the lenders misled municipal officials on the advantages of the securities. Officials at the banks declined to comment, as did a spokesman for Milan’s city council.

5 Comments – Post Your Own

#1) On April 29, 2009 at 10:31 AM, saunafool (98.77) wrote:

Yep, that's what I've been telling them.

For the "innovators" who created this garbage, they certainly get no free pass.

However, buy a billion dollars (or even a few hundred million) worth of anything without knowing what it is and you've got to live with the consequences.

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#2) On April 29, 2009 at 11:23 AM, lenri (71.95) wrote:

That sort of thing has happened here in the US many times (remember Orange County?). Have you ever spoken with some of these city-hired financial wizards? My dog has a higher IQ. This is what happens with patronage appointments. No, I do not think it is too hard to mislead a municipal official.

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#3) On April 29, 2009 at 11:27 AM, TMFBent (99.82) wrote:

Remember Ohio and the scam coin investments uncovered by the Toledo Blade?

 

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#4) On April 29, 2009 at 3:41 PM, wrparks (65.76) wrote:

"However, buy a billion dollars (or even a few hundred million) worth of anything without knowing what it is and you've got to live with the consequences."

 

If only that were true....

 

Instead it's buy a billion dollars worth of something without understanding it and everybody else has to live with the consequences.

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#5) On April 30, 2009 at 5:44 AM, saunafool (98.77) wrote:

Instead it's buy a billion dollars worth of something without understanding it and everybody else has to live with the consequences.

Not quite, for America, it is sell a few trillion worth of "investment products" (with no capital to back them up) and everyone else has to live with the consequences.

Any way you slice it, it stinks.

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