Pigs War Over Who Will Survive the Mortgage Collapse

June 1, 2007 (LPAC) - A group of hedge funds which have been betting vast sums that subprime mortgages will fail, are now demanding public action be taken to stop the banker-lenders from interfering with defaults and foreclosures. The Financial Times of London reports that the hedge fund Paulson & Co. led a group of 25 firms in a request to the International Swaps and Derivatives Association, complaining that mortgage bankers sell credit derivatives (which these hedge funds buy) to insure themselves against failure of the usurious loans, and then somehow renegotiate the mortgages that fail -- thus these loans are not reported as failed and they don't have to pay off on their lost bets.

A spokesman for Paulson & Co. told Executive Intelligence Review that investors make a fortune by keeping or buying up failed loans and manipulating the credit-insured market, which he said is leveraged to 1,000% or even 10,000% of the value of the loans.

Hundreds of billions in losses are building up to crash upon hedge funds, mutual funds, banks and others who have milked the mortgage bubble. Who will eat the losses; who will survive the smashup?

Paulson & Co. (no relation to Treasury Secretary Henry Paulson) is a real vulture fund, specializing in taking stock positions and then staging anti-management revolts to block planned capital investments, and forcing payouts to shareholders instead. Victims include Algoma Steel in Canada and Reliant Energy in Texas. The Financial Times reports that Paulson & Co. "last year launched a specialist fund to bet on a downturn in the subprime market. The fund is up more than 90 per cent in the year to date."

The hedge funds betting on collapse and default have hired former Securities and Exchange Commission chairman Harvey Pitt to publicly state their complaint against the mortgage bankers who are not foreclosing on homeowners they have squeezed. Pitt reportedly coined the phrase "corporate Darwinism" to credit law-of-the-jungle immorality as the cause of higher economic efficiency.

On May 15, Federal Reserve Board Chairman Ben Bernanke told the 2007 Financial Markets Conference on credit derivatives, "we should ... always keep in view the enormous economic benefits that flow from a healthy and innovative financial sector. The increasing sophistication and depth of financial markets promote economic growth by allocating capital where it can be most productive."