Miami Gardens, FL -- In a shocking example of self-contradiction, billionaire Jeff Greene admitted on Friday to profiting from Wall Street to protect his investments and wealth, which in turn resulted in the near collapse of the U.S. economy.
As the housing market was peaking in April 2006, Jeff Greene became a pioneer in credit default swaps (CDS), a risky derivative product, that helped almost bring down the entire financial system. Investor Warren Buffet called credit default swaps "financial weapons of mass destruction."
On Friday, Greene admitted to the Tampa-area blog Creative Loafing that he profited from Wall Street "and won" by protecting his investments, which exposed Florida homeowners to massive financial losses.
Greene goes on to say, "our economy almost imploded because of Wall Street and because of the lack of financial regulation," admitting the cause and effect relationship between his betting on Credit Default Swaps and the near collapse of the economy. You can read the interview here.
"Jeff Greene refuses to admit that he became a billionaire on the backs of middle class Floridians. Greene continues to deny responsibility for his reckless behavior and that he is a profiteer of Floridians' personal misery," said Kendrick Meek spokesman Adam Sharon. "Greene might not like to hear the sad truth, but he played a major role in ruining the economic lives of an untold number of Floridians. Now, he wants to buy a U.S. Senate seat, but the people of Florida are not for sale."
Background Information:
Greene was the first to trade these risky derivative products. "In April 2006, just as the housing market was peaking, Greene convinced Wall Street banks to allow him to trade credit default swaps; he is believed to be the first individual to do so." [Forbes, 10/6/2008].
Greene convinced Big Banks to short mortgage-based bonds through credit default swaps. Greene got the idea from his friend hedge-fund manager John Paulson, of the recent Goldman Sachs scandal. CNBC reported: "'I [Greene] asked him, 'John, can I do this on my own?''" He says Paulson told him, 'You won't get approved.' Greene tried anyway, finally convincing Merrill Lynch and JP Morgan to let him short bonds backed by risky mortgages through these swaps. It took a lot of convincing." [CNBC, 2/29/2008]
Greene didn't stand up to Wall Street, he was in cahoots with them in a scheme to get rich. Greene's purchase of uncovered CDS set an example for the industry. Warren Buffet called Greene's CDS "financial weapons of mass destruction." Buffet knew that they could harm the whole economic system. Once banks began selling uncovered CDS and making short-term gains, other banks joined in the arms race for quarterly profits.
The example that Mr. Greene and other pioneers set led directly to the proliferation of uncovered CDS that brought down the financial system, resulted in the credit crunch, and further damaged the housing market. In addition, with the big banks having sustained great damage to their capital reserves, the bailout was used to shore up these financial institutions that were on the hook to pay people like Jeff Greene.
Posted By: Kendrick Meek
Monday, May 10th 2010 at 3:45PM
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