On the other hand: The origins of the crisis can be traced back even further, to the implosion of two Bear Stearns hedge funds run by Ralph Cioffi and Matthew Tannin, the Bear Stearns High Grade Structured Credit Strategies Fund and the Bear Stearns High Grade Structured Credit Strategies Enhanced Fund.
Cioffi and Tannin invested the funds' $1.4 billion in CDOs backed by highly rated (meaning that they were meant to be safe, investment-grade) mortgages, aka the top tranch CDOs. In the last two weeks of June 2007, rising defaults by the least credit-worthy borrowers spread from the bottom tranches of CDOs to the top, triggering massive losses in the funds.
Many on Wall Street were surprised that the top tranches were affected, and they became aware of a crisis brewing in the mortgage market. Sophisticated investors became wary of investing in even AAA-rated mortgages, and firms that held them on their books began trying to offload them quickly before they went bad.
(By the way, Cioffi and Tannin were soon bankrupted, charged with defrauding investors and later, acquitted of fraud.) Click here to read more >
5)A businessman named Jon Asgeir Johannesson, former head of the major retailcompany Bagur, is noted for taking out a loan amounting to billions of dollars.Jon used this money to purchase investments such as other top retail businesses andconsumer goods such as a $40m yacht and a fashionably designed private jet.6)Beginning with the introduction of Alcoa into Iceland, whose aluminum plants were
colonizing some of the richest portions of Iceland‟s greenery and continuing with
various provisions of deregulation such as bank privatisation and lax requirements forbank loans
some of which were massive
the dominion of finance was interfacingIceland.Gylfi Zoega, Professor of Economics at the University of Iceland, comments on this
financial possession by stating simply, “Finance took over, and uh, more or lesswrecked the place.”
7)Credit rating agencies analyzed a vastly overleveraged and indebted Iceland and,reflecting a pattern throughout the global financial system, gave Iceland a satisfactoryor spectacular rating.Sigridur Benediktsdottir, member of the special investigative committee of the IcelandicParliament says regarding the three Icelandic banks that combined to borrow over ten
times Iceland‟s entire GDP, “In February 2007, the rating agency decided to upgrade
the banks to the highest possible rating
8)In a word, due to the dominion of chaotic finance, Iceland was being drained of financial resources and other resources that are related to finance, such as the naturalland, education, civil stability, personal quality of life, and trust in the system.Iceland began this journey into the dangerous power known as excess money, and hasbeen struggling with incredible debts
material and immaterial
since the journeybegan.
Perhaps the most important point about Iceland‟s financial degeneration is that,
analogous to a free radical escaping from order and wreaking havoc throughout thephysical system, the excessive dominion of finance has spread as a cancer throughoutthe global financial system
which Gylfi Zoega, our Icelandic Professor of Economics,sums up by sayin
g, “But this is a universal problem. In New York you have the sameproblem, right?”
2 - Summary - Inside Job - Part I: How We Got Here -
10)During the forty years of economic growth in the United States, investment bankswere small. A prominent investment bank named Morgan Stanley, in 1972, had 110employees and $12m in capital, and now, in 2009, has 50,000 employees and severalbillions in capital.