Chris Whalen and Bailout EP John Titus Talk Bailouts

June 10, 2012

"Over the weekend, I met with John Titus, Executive Producer of the new documentary film "Bailout: The Dukes of Moral Hazard," which tells the story of individual Americans affected by the financial bust. Myself, Yves Smith and other members of the blogerati are featured in the film."

"We talked about why the film seems to connect with people at a viseral level. Our conclusion is that the clarity and hilarity comes from the choice of our late friend John Fox as narrator."

Another fantastic piece by America's number 1 independent bank analyst, Chris Whalen. With a couple hours to go before the Belmont Stakes, Chris and I met at a bar to talk about his upcoming book on Henry Ford. As usual, though, the waves of booze pushed the world's largest welfare program to the fore, and this time we explored a rarely discussed angle: why haven't RMBS trusts--which are chock full of shitty notes, assuming they weren't defrauded out of promissory notes altogether--sued the banksters who fleeced them?

The answer is that lawsuits bring discovery, which in this day in age requires both defendant AND plaintiff to hand over every email, memo, document, PowerPoint presentation, hell, even voicemail, to the other side. For litigious MBS investors, this means that all of their dirty laundry will come out. And that will produce some rather embarrassing answers for professional fund managers who are asked: so why'd you invest in a mortgage-backed security that, uh, isn't backed by a single fucking mortgage?

To save face, they don't file suit.

Whalen then pointed out that Bailout covers "retail" fraud against individuals, not "wholesale" fraud. And that led to plot discussions of Bailout 2, but that's another story.