Financial Fool's Day?

“Sarkozy had previously threatened to walk out if the summit didn't achieve a strong statement on new financial regulations, warning that he considered action on tax havens, hedge funds and ratings agencies as the absolute minimum the negotiations must resolve.”


“Sarkozy and Merkel have tried to push regulation to the fore, calling for new scrutiny of ratings agencies and lightly regulated hedge funds. The summit will also examine ways to get so-called toxic assets — unsellable securities such as mortgage-backed bonds — off banks' balance sheet where they are impeding lending to consumers and businesses.”

“Obama has acknowledged that U.S. regulatory failures contributed to the crisis in the financial system, but urged a focus on solutions, saying "we can only meet this challenge together."

“Some 4,000 anarchists, anti-capitalists, environmentalists and others protested Wednesday around the Bank of England for what demonstrators had called "Financial Fool's Day."

The above quotes were taken from a story on-line about the G-20 meeting in London, England this week. The reason I copied and pasted these quotes is because the first two make mention of the RATING AGENCIES!!! I have been writing about the significance of the credit rating agencies for several months, and have only one New York Times article to point to and say see, this credit rating business is an important piece of the puzzle. Well, I am relieved that Sarkozy (France) and Merkel (Germany) have brought this to the attention of the G-20 leaders. Hopefully, someone will explain to President Obama why these two leaders made special mention of the “rating agencies” in their statements to the G-20.

Furthermore, there is a relationship between the investment bankers that bought or took out insurance, known as credit default swaps, on the very structured debt obligations that they underwrote. These guys knew that the triple-A rating that was slapped on these bonds did not deserve this high credit rating, so, they got AIG to sell them an insurance policy that stated if the bonds defaulted, they would pay them off in full. Those contracts broke the back of AIG. It was a branch in London of AIG that sold these credit default swaps to the very people that underwrote the junk in the first place. Interestingly enough, it was these investment banks that were paid off in full from the bailout money given to AIG. I thought you would enjoy knowing this as it is no longer April 1, and I can not be accused of making up a bad April Fool’s joke. What I have just written is no joke, it is what happened. The top recipients of money from AIG were none other than the same investment banks that received Federal Government bailout money themselves. And now you know the rest of the story.

People in Europe, or should I say the vast majority of people in Europe do not live as well as we do in the United States, so, perhaps we can understand their anger when the little they have is put at risk and yet the wealthy continue to drive big cars and fly around in private jets. They know that the bankers and brokers have played us all for fools, but do we have to be financial fools as well. The answer is in holding the politicians accountable for their actions, and that is for both sides of the aisle.

Stay tuned.