Setting the Stage for a Chaotic Swindle ~ The Risk Averse Alert

Wednesday, September 08, 2010

Setting the Stage for a Chaotic Swindle

It is becoming clear that, a drive aiming to scam prized assets for pennies on the dollar is on. The hope apparently is this might adequately backstop some large part of the mountain of technically insolvent securities presently accelerating the global financial system's rush into the abyss.

The growing chatter about ending government support of the housing market and pulling the plug on Fannie Mae and Freddie Mac reveals so much.

Surely, though, chaos in the banking system would result. So, another massive taxpayer giveaway to purveyors of fraud (promoted via mortgage-backed securities) could be expected to follow, paving the way for consolidation of the banking system — bringing together assets acquired for pennies on the dollar in the midst of chaos whose probability "no one saw coming."

Make no mistake about it: today's "resolution" of the Anglo Irish Bank crisis was no resolution at all. By delaying until October its announcement of capital levels to which the so-called "bad bank" will be funded the Irish government effectively is saying the bank's bad real estate development loans might not be backstopped at all. Seeing what is going on here in the U.S. who would be shocked if the Irish government wised up? If the U.S. is threatening to end support of its shattered real estate bubble what point is there for the Irish people to backstop theirs?

You get the sense this is all very deliberately being orchestrated, particularly now that the United States is being presented as a resource-constrained pauper.

Meanwhile in the place where risk is greatest — a place that, no shortage of analysts call "cheap" despite profound risks higher up in the capital structure...

OEX 5-min

Levitating as expected.

Any near-term pressure is likely to be contained. Likewise, any prospective, nominal move higher only brings nearer the precipice from which a dizzying spiral lower appears set to commence.

Fast Money
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