Leverage Ratio 100 to 1
Most investment banks were leveraged by a ratio of 30 to 1,
and they were dealing with billions of dollars instead of thousands.
Government sponsored mortgage giants Freddie (FRE)
and Fannie were using leverage closer to 100 to 1,
because of their supposedly stricter lending standards and implicit government backing.
As you know, when asset prices are rising, this system works like a dream,... it's called "kiting a check".
http://seekingalpha.com/article/97299-leverage-101-the-real-cause-of-the-financial-crisis
If American's don't learn this time around what is "fractional reserve banking" and the way excesses are allowed even on top of that flawed system, then they will not earn the ability to keep or preserve their savings or their wealth.
Dr. Albert A. Bartlett on understanding exponential growth
Jim Rogers The Dollar is Collapsing The Dollar is collapsing
Richard Fuld, CEO of Lehman Bro, said to the congressional oversight committee that at one point he had leveraged the assets up to 30x. Link to Richard Fuld comments
AIG was also in the business of insuring debt. Compare that to our gov "guarantee" of our bank deposits.
They keep on saying "it's a matter of confidence. Like if you'd just believe, everything'd be ok."
I think it's a matter of truth in assets, truth in cash, truth in money. That I will believe. When the whole story is out there for the
American people.
AIG and their "insurance" policy for mortgage debt. ie a paper bookkeeping entry to guarantee Triple-A value.
Secretary of the Treasury, Henry Paulson, Jr. Text link to Henry Paulson's speech about guaranteeing our bank deposits.
Their guarantee is somewhat better than AIG's guarantee, but the principle is the same, fabricated accounting, based on debt.
Click here for video link
If you can find the video or text of Fauld's words to the congress oversight committee, he admited to a 30 times multiplier on their mortgage debt.
I saw it on cspan, but have not yet found a link to his words before the congressional committee.
If the people don't know what's wrong, how can they fix it?
Get your local paper to run a story on the LEVERAGE used to multiply the debt (ie credit, ie money) and the fractional reserve banking system.
Then maybe it can begin to be fixed.
Currently, the Secretary of the Treasury is getting away with saying it's a "Confidence Crisis", we just need to "believe" everything's ok.
No mention of the "Multiplier Effect" on money through
"Debt Insurance" as issued by LEH and AIG and many others,
"Fractional Banking"
and Derivatives
and then Synthetic Derivatives
and .... "Creative Accounting"