Defaulting banks - where will it stop?

[Jan Klimkowski]

David - a very astute first post. I'd love to hear what some of our financial luminaries think of this analysis, but certainly metaphorically speaking the mortgage-backed securities (MBS) and credit-default swaps (CDS) are a form of "debased currency" which is now being dumped on "First World" taxpayers at far more than its "face" value.

Indeed, the first British "nationalization", Northern Rock, contained a huge scandal in the form of Granite, a legal-accounting fiction (its trustees & beneficiaries included a Downs Syndrome charity in the North-East who'd never even heard of Granite!), but which held the best quality tranches of Northern Rock loans - which in turn were being packaged up and sold on as MBS. Granite was not part of the nationalization, so the British taxpayer didn't even get the best part of Northern Rock - we had the rump dumped on us.

I note that:

- Goldman Sachs were paid advisors to Gordon Brown throughout the "nationalization" of Northern Rock, which in reality involved British taxpayers paying way over the odds for this "debased currency".

- (Former) Goldman Sachs Chair & CEO, Hank Paulson, essentially wrote the terms of the $700 billion "bailout bill", which will result in American taxpayers being lumbered with another huge chunk of "debased currency".

As Mike Whitney wrote some months ago, we're witnessing a "banker's coup".