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What I heard Jon Stewart say tonight about a Blackstone credit default swap scam is about the most repulsive thing I've ever heard. The story begins with an October 22nd story in Bloomberg Blackstone Unit Wins in No-Lose Codere Trade: Corporate Finance.

Weeding out the comedy because there is nothing funny about financial weapons of mass destruction, this is the way Jon Stewart put it;

Earlier this year Blackstone bought something called a credit default swap on debt that Codere owed to a third party. Which means Blackstone would make money if Codere blew a lone payment to the other guys. So far, so good.

Then a short time later Blacksone offers Codere a $100 million loan with the condition that Codere pay the other loan to the other company late. The loan Blackstone had already bet that they would in fact pay late.

So Blackstone loans $100 million. Codere deliberately pays the other loan two days late. A credit default swap is triggered and Blackstone collects $15 million in insurance money.

Then Jon Stewart compared it to a scene for Goodfellas where it would actually be illegal and the rest of the segment was about how the financial media is not covering these legal stick up artist.

Since Bloomberg is financial media I wasn't all that impressed by the lack of media claim but after all the pain and suffering caused to this nation by credit default swaps I do have one question. Who the fuck is running this country and why is a clear cut case of insurance fraud still legal?

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Comment Preferences

  •  I know I can't buy an life insurance policy... (45+ / 0-)

    on someone I don't know. Makes good sense. It prevents me from killing them for the money.

    But after all of that taxpayer bailout when we found much of it was really big companies holding shady policies on paper where they had no interest, after we learned so much about the dangers of allowing the rich a greedy to bet on the misfortune of others,  the big players can still insure loans where they have no other involvement whatsoever.

  •  I saw that on The Daily Show, too. Shameful! (13+ / 0-)

    The New York Times reporter that Sam Bee interviewed didn't come off too well, either. She said she was "buried" in other stories, which is why she didn't cover this seemingly huge crime.

    I ♥ President Barack Obama.

    by ericlewis0 on Wed Dec 04, 2013 at 09:57:42 PM PST

    •  I could not care less about Gretchen Morgenson (11+ / 0-)

      I've never fit in here with that "let's focus on the media" habit.

      I just want to know about the people we elected to pass laws and why it is legal to pull off a scam like that.

      •  I agree with you... (8+ / 0-)

        but if we don't even hear about these scams, they are even harder to fight, IMO.

        I ♥ President Barack Obama.

        by ericlewis0 on Wed Dec 04, 2013 at 10:07:13 PM PST

        [ Parent ]

      •  The law has been used since the royals of (3+ / 0-)
        Recommended by:
        shortgirl, Bluefin, diggerspop

        Europe granted charters for land in the Americas to explorers and exploiters to favor the haves and dispossess the hads. Let's not forget that even as late as the adoption of the Constitution, the ownership of people, as well as other creatures and inanimate land was a legal matter. For that matter, involuntary servitude is still legal as a punishment for crime and minors continue to be the property of their parents. Parents are entitled to free legal representation if they are indigent and their children are to be removed, but not the children. At best, the children get an ill-trained guardian ad litem to stand up for rights the children don't actually have. (Many people get upset at the news that children don't have rights. The truth hurts, but in this instance it also explains why the U.S. Senate, along with Somalia, has refused to ratify the Convention on the Rights of the Child). The concept that property rights trump human rights reverberates as an historical echo the U.S. seemingly can't escape. The equation between the law and justice continues tenuous. That's why Obama says "the arc bends towards justice" but it isn't there yet.

        Equality is not a desideratum for the hierarchists. Nor is it likely to be because hierarchists are people who not only need to look down on someone, but need to be able to coerce their labor because, if other people's labor is not coerced, they do not know how they are to be sustained. Most of them, when you come right down to it, have no talents, other than the gift of gab with which to issue demands. Even "do unto others" is incomprehensible to individuals who don't know how to do anything, but talk.

        When you think about it, "all talk, no action" is not a comfortable situation to be in.

        Obamacare at your fingertips: 1-800-318-2596; TTY: 1-855-889-4325

        by hannah on Thu Dec 05, 2013 at 05:47:14 AM PST

        [ Parent ]

  •  Comedy Central give me insomnia (9+ / 0-)

    Oh sure $15.6 million is small potatoes compared to when they are really giving us a screwing but it's so obvious that there is no one to stop them.

    That makes me sick.  

  •  Barney Frank and Chris Dodd sold out (5+ / 0-)

    when they had the chance to fix things.

    •  They did not sell out. If the bankers, to whom the (1+ / 0-)
      Recommended by:
      Bluefin

      Fed distributes free money, are to be reined in, it is first necessary that we know the numbers. That's a somewhat tricky problem because the principle that someone cannot be forced to testify against oneself also applies to financial groups when criminal matters are considered. Even banks are entitled to keep secrets, unless there is a strong suspicion of crime, which can't be raised unless the evidence, which is secret, is brought out. Sometimes that happens as a result of a civil suit, which is different in that defendants HAVE to produce information or lose the suit -- which in their confrontations with ACORN the banks often preferred to do and which is why they were irked with ACORN and ACORN got funded but was, ultimately, unable to change how banks behave.
      Dodd/Frank is designed to require the reporting of information ahead of time and to require compliance with lending standards and consumer relations in order to keep their charters. Dodd/Frank sets up a regimen similar to the Constitution. It outlines how banks are supposed to operate and then, if they don't, they can be shut down. It doesn't guarantee that abuses (like NSA surveillance) won't happen, but it does provide a mechanism for calling a halt.
      There is, granted, a reluctance in Congress and in the state legislatures (which authorize most corporations) to exercise control over financial entities because these entities are supposed to funnel funds back to promote legislative candidacies. After all, that's mostly what local chambers of commerce (the playgrounds of insurers and bankers and stock brokers) are about, promoting the election of public officials who will massage the law to promote commercial interests.

      Obamacare at your fingertips: 1-800-318-2596; TTY: 1-855-889-4325

      by hannah on Thu Dec 05, 2013 at 06:01:10 AM PST

      [ Parent ]

      •  i would respectfully disagree on the law and facts (1+ / 0-)
        Recommended by:
        Bluefin
        1) if the bankers to whom fed distributes free money to are to be reined in  it is first necessary that we know the numbers.
        This can also be done in Bankruptcy court.  There you stop the clock, you invalidate presumptively all contracts
        and you go in clean up the depositors, start looking at assets,
        and figure out creditors.  A lot easier to do on a dead
        entity then a moving one.
        That's a somewhat tricky problem because the principle that someone cannot be forced to testify against oneself also applies to financial groups when criminal matters are considered.
        That's not true of "Highly Regulated Entities" and the 5th amendment doesn't apply to corporations.  While you still need search warrants, a "Company" doesn't plead the fifith.
        Individuals do.  
        Even banks are entitled to keep secrets, unless there is a strong suspicion of crime, which can't be raised unless the evidence, which is secret, is brought out.
        True only if they are a private bank, if they are a regulated bank, and that means access to FEDWire and the Discount window, then they are regulated, and the regulators get to come in routinely and check the books.  It's a supreme court ruling dating from Junkyards, where the inspectors get to come in and check every car for a VIN number to see if it's stolen.
        Dodd/Frank sets up a regimen similar to the Constitution
        this is so over the top as to not even worth the time to correct.
        Dodd/Frank is designed to require the reporting of information ahead of time and to require compliance with lending standards and consumer relations in order to keep their charters
        Dodd Frank didn't end proprietary trading or reestablish Glass-Steagal, so, all it is a paper chase. the bombs are still in the system.

        Dodd-Frank also requires by law the Fed/taxpayers bail out the 6 too big to fail banks.  That enrages me every time I think about it.  It cost the Dems the house in 2010. Thanks Barney. People were so pissed off, Dodd retired rather then run again, in CT, a deep blue state.It's so Blue, it's Green.
        Barney retired once he realized he was facing a less gerrymandered district in 12.

        It outlines how banks are supposed to operate and then, if they don't, they can be shut down.
        except that it protects the biggest banks and has supported the Fed in bailing them out instead of driving up capital requirements, cutting interstate banking down, adding barriers between trade lines.  Used to be regulated banks couldn't do international work. Used to be only corresponding centers did those.

        dodd-frank did very little, it was mostly a boon to the biggest.

        •  Dodd retired because he had family obligations. (0+ / 0-)

          Running for President was not a matter of personal ambition, but to promote an agenda.
          Democrats won by having many good candidates and vitiating the argument the Republicans' argument. 2010 was a consolation prize giving Republicans an opportunity to regroup.
          Implementing the legislation that was passed in 2009 was enough to keep everyone busy. The only useful thing a Democratic House could have done was investigate the mess that was/is Iraq, but the President was not keen on having the dirty laundry washed in public. That's still in the offing since the pictures can always be released.

          Obamacare at your fingertips: 1-800-318-2596; TTY: 1-855-889-4325

          by hannah on Thu Dec 05, 2013 at 09:47:08 AM PST

          [ Parent ]

  •  did you ever read the big short? (3+ / 0-)

    Michael Lewis wrote a great book about this credit default swap stuff.

    I tried to click on your link, but it didn't work for me. I don't have comedy central right now, so I missed everything. I can see why you're so upset, though. Bastards. How can they live with themselves?

    "...i also also want a legally binding apology." -George Rockwell

    by thankgodforairamerica on Wed Dec 04, 2013 at 10:44:22 PM PST

    •  Thanks (3+ / 0-)

      I made a mistake on the link. It works now.

      I have not read a book by Michael Lewis but after what Warren Buffett had to say about credit default swaps, judging by the actions of the elected I guess they must have figured the most successful capitalist alive had turned all pinko socialist on them.

      Everybody we have in government is for sale to the highest bidder. Too big to fail when you can hand out those kinds of campaign contributions. They couldn't even make it illegal to insure something you don't own. I can't get over that.

    •  somewhere in a much earlier Michael Lewis book (3+ / 0-)
      Recommended by:
      Eddie C, SchuyH, Bluefin

      Liar's Poker, there is about a half-page in which the mortgage department people think up the ideas that shook the nation later and someone says 'that would be illegal' and the answer is, 'well- watch how long it will take them to catch us and see what doesn't happen when they finally do understand they've been had.'

      We are all pupils in the eyes of God.

      by nuclear winter solstice on Thu Dec 05, 2013 at 05:33:25 AM PST

      [ Parent ]

  •  This is part of what sank the economy in '08 (9+ / 0-)

    The Federal Reserve and Treasury had been propping this up with trillions. When they finally fessed up the bill came to nearly $14 trillion. We'll never know the full cost and our "fully owned" congress won't stop them. Liz Warren is an anomaly that needs to be repeated at least 59 more times.


    "Information is power. But like all power there are those who want to keep it for themselves" Aaron Swartz, 1986 - 2013
    TheStarsHollowGazette.com

    by TheMomCat on Thu Dec 05, 2013 at 02:14:21 AM PST

  •  How is this not tortious interference? (8+ / 0-)

    1. Codere had a contractual obligation to its lender to pay on time.

    2. Blackstone gave Codere consideration to convince Codere to breach said contract.

    3. Intentionally inducing someone to breach a contract is the very definition of tortious interference, which has been prohibited in the common law since at least 1620.

    The lender may sue Blackstone, and the damages might be interesting to say the least.  As the link above notes:

    Typical legal remedies for tortious interference include economic losses if they can be proven with certainty and mental distress. Additionally punitive damages may be awarded if malice on the part of the wrongdoer can be established.

    Equitable remedies may include injunctive relief in the form of a negative injunction that would be used to prevent the wrongdoer from benefiting from any contractual relationship that may arise out of the interference,

    in theory, Blackstone might be forced to disgorge any profit from the credit default swap.

    Fiat justitia ruat caelum "Let justice be done though the heavens fall."

    by bobdevo on Thu Dec 05, 2013 at 03:21:16 AM PST

  •  Credit Default Swaps are sometimes explained as a (6+ / 0-)

    type of insurance, but they are not an insurance contract. "Insurance" helps us understand what money is going where, but when it comes to dueling lawyers at 10 paces, I believe (IANAL) a credit default swap will be treated as a regular commercial contract. That was part of the S*** sandwich that Gramm got through Congress - keeping these derivatives a racket free of regulation, so the biggest sharks can go on eating the smaller sharks and if they get a belly ache, you know who has to pay for the Alka-Seltzer.
    What Bobdevo said about tortious interference makes good sense. Of course, the aggrieved party needs to have the Benjamins to pay for the legal firepower to run a big case against a group like Blackstone. My guess is that like all good grifters, they picked a mark who isn't in a great position to come after them. Nefarious? Definitely! Criminal? I don't know, but I wouldn't hold my breathe waiting for someone to prosecute them.

  •  I wonder if AIG sold the CDS? eom (3+ / 0-)
  •  The insurance company should sue Blackstone then. (1+ / 0-)
    Recommended by:
    SchuyH

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