The Bet That Blew Up Wall Street

The TNT was the collapse of the housing market and the failure of complicated mortgage securities that the big investment houses created and sold around the world.

“As the market began to seize up and as the market for the underlying obligations began to perform poorly, everybody wanted to get paid, had a right to get paid on those credit default swaps. There was no money behind the commitments. All rights reserved.

While Congress and the rest of the country scratched their heads trying to figure out how we got into this mess, 60 Minutes decided to go to Frank Partnoy, a law professor at the University of San Diego, who has written a couple of books on the subject.

Ask to explain what a derivative is, Partnoy says, “A derivative is a financial instrument whose value is based on something else. But the people in the stands may also have a financial stake in the ouctome, in the form of a bet with a friend or a bookie.

They are called credit derivatives or credit default swaps.

When 60 Minutes last spoke with Eric Dinallo, he was insurance superintendent for the state of New York. But we have a bet based on the outcome.

“It’s legalized gambling. And a lot of derivatives are bets based on the outcome of games of a sort. Every week, the New York Giants take the field with hopes of getting back to the Super Bowl. We don’t own the teams. Morgan for pennies on the dollar, Lehman Brothers was allowed to go belly up, and AIG, considered too big to let fail, is on life support thanks to a $180 billion investment by U.S. It’s basically a side bet.”

Partnoy says the bet was whether interest rates were going to go up or down. “And the new bet that arose over the last several years is a bet based on whether people will default on their mortgages.”

“We could call that a derivative. And people came up short. It was updated on Aug. They have a direct investment in the game. It was very illegal 100 years ago,” Dinallo says. It was illegal gambling. And so that’s to a large extent what happened to Bear Sterns, Lehman Brothers, and the holding company of AIG,” he explains.

As correspondent Steve Kroft first reported last fall, they are essentially side bets on the performance of the U.S. Bear Stearns was sold to J.P.

Copyright 2008 CBS. It was triggered by the collapse of the housing market in the United States and magnified worldwide by the sale of complicated investments that Warren Buffett once labeled financial weapons of mass destruction. Zero, as far as I can tell,” Dinallo says.

In other words, three of the nation’s largest financial institutions had made more bad bets than they could afford to pay off. Not football games, but games in the markets,” Partnoy explains.

“Yes, and it used to be illegal. 26, 2008. And there was no ‘there’ there. And we made it legal gambling…with absolutely no regulatory controls. It’s a side bet. If they do, they will get more money and glory for the team and its owners. mortgage markets and some of the biggest financial institutions in the world – a form of legalized gambling that allows you to wager on financial outcomes without ever having to actually buy the stocks and bonds and mortgages. But the rocket fuel was the trillions of dollars in side bets on those mortgage securities, called “credit default swaps.” They were essentially private insurance contracts that paid off if the investment went bad, but you didn’t have to actually own the investment to collect on the insurance.

Think of it for a moment as a football game. He says credit default swaps were totally unregulated and the big banks and investment houses that sold them didn’t have to set aside any money to cover potential losses and pay off their bets.

“I mean it sounds a little like a bookie operation,” Kroft comments.

This story was first published on Oct. . 27, 2009.

Anyone with more than a casual interest in why their 401(k) has tanked over the past year knows that it’s because of the global credit crisis.

And that was the bet that blew up Wall Street. taxpayers.

It would have been illegal during most of the 20th century under the gaming laws, but in 2000, Congress gave Wall Street an exemption and it has turned out to be a very bad idea

Where to Turn When Gambling Debt Gets Out of Hand

Credit Counseling

It’s also important to note that some gamblers incur gambling debts from disreputable lenders or loan sharks. Steer clear of any organization that requires large fees or asks you to make your debt payments to them. Often, under-the-table lending is not covered under bankruptcy laws and is frequently coupled with very high interest rates.

Professional Help for Gambling Debt

About Krista McDonald

Regardless of where you turn to help you with your gambling debt, whether you opt to manage it yourself or go to a professional organization for assistance, it’s important to get help for the root cause of the problem–the gambling itself. They then arrange for you to pay them one monthly payment and distribute it to your debtors accordingly. Most Medicine Hat bankruptcy lawyers will provide free consultations and let you know whether or not bankruptcy is a good option for you or not. If you opt for credit counseling, make sure you go with an organization that is accredited and non-for-profit.

This should be the very last resort. In addition, support groups can also guide you to reputable outside sources, including debt consolidation or debt counseling companies, which can also help you with your financial planning. Not only do these groups help support their members through gambling recovery, but they also provide counseling and tips for getting debt under control.


A debt consolidation company can also work on your behalf to negotiate lower rates with creditors or to freeze interest rates. Stop by Bromwich & Smith, Inc.’s site where you can explore their educational resources..

There are many gambling support groups, including Gamblers Anonymous and Recoveries Anonymous. This is different from a debt consolidation loan because the debt consolidation company does not loan you money.  It’s important to weigh the pros and cons of debt consolidation before opting for it.

Learn how Bankruptcy Trustee can help you today with filing bankruptcy in Calgary.

Debt consolidation is a way to combine your debt into one monthly payment as opposed to multiple payments each month. In this case, a number of resources exist to help you handle your gambling debt:

Credit counseling organizations, such as Credit Counseling Canada, work with people who are in debt to help educate them in paying down their debts and managing their finances. While you don’t lose everything in a bankruptcy, you could potentially lose your home (or at least a significant portion of the equity), your vehicles, and other possessions, depending on the Province in which you reside. Once you overcome your compulsive gambling, you will be better prepared to take control of your finances. When you file bankruptcy, you agree to give up the majority of your assets to a trustee assigned to your case, who is turn sells them to settle your gambling debts. If you are threatened by a loan shark or other lender or otherwise feel harassed, it’s important to call the police. With this method, you take out one loan, which is used to pay off your debts.

Debt consolidation

Support group

If you are experiencing a number of financial warning signs, or if you no longer have money left over each month to pay the bills, your debt may truly be out of hand. From there, you make one payment each month

How Can You Help Employees To Quit-Gambling Effectively?

Unlike alcohol addictions, which often take years to drain a family’s financial security, gambling addictions can bankrupt a family’s savings account and credibility in less than a week!

During recent years the EAP support infrastructure, has stepped up to offer help to employees and their family members who are being adversely affected by gambling with gambling cessation literature, call center help, and problem gambling assessment.

Gambling addictions are not easy to spot in the workplace.

It is also important for onlookers and EAP support providers to be aware of why it is that a troubled gambler thinks they can “quit-gambling” when you can see that they can’t?

At the onset of 21 Steps intervention the EAP client is required to schedule three appointments with their EAP counselor, and then as he/she works through the remaining 20 workbooks – one step at a time – through to Step 21 “Enjoying Life without Gambling”, their EAP counselor holds them accountable to progression and the process of working through the point of full recovery, successfully.

Anyone who uses the 21 Step method also receives access to a global 24/7 online support community at the , Recovery & Beyond website, where he or she can connect with other recovering gamblers from around the world who are working through the same step.

It is not uncommon for people who are in danger of developing a gambling related addiction to spend in excess of 60 hours per week thinking about their next bet or how to create the stake to be able to place their next bet. They include specific and detailed information on how to help the troubled gambler to control their addiction, teach him or her responsible financial practices, rebuild confidence, and channel his or her addictive energy into productive behavior.

Yes, they still think they can quit even if they start gambling right after their counseling session, is finished!

Other signs to watch for include vacation days taken in isolation rather than a week or two at a time; employees who owe money to colleagues; employees who request salary advances, or pay, instead of vacation days; or employees who volunteer for lots of overtime.

Each of the 21 workbooks are designed to serve as tools to help guide the treatment and recovery process. . He also is Vice President of Learning and Innovation for Money School Ltd., where he guides the curriculum design and “much more than common cents” money education the company offers.

When a troubled gambler, begins to realize that they have a problem it is important that the support measure they call upon as a source of help does not further stymie the problem, or prolong the process of treatment and recovery oriented intervention.

For more information, insights and tips on how you can help troubled gamblers and their families overcome gambling related adversities and aftermath effectively, please take a moment to preview the information available online at;

When perceptions differ, communication often breaks down and this makes it increasingly difficult to be able to effectively help a client with a non substance based addiction – such as gambling – from relapsing, harming their financial security, and self-esteem.

Shawn is the original author of Shawn and Drew’s 21 Steps to STOP Gambling System and Workbooks.

Gambling is often found out to be the root cause of many individual and family related hardships including financial distress, relationship difficulties, poor parenting, absenteeism, criminal behaviors, depression, suicide, poor eating habits, and isolationism. Warning signs that an employee has an addiction are often subtle, such as habitual lateness, long lunches, absenteeism, exhaustion and declining productivity.

Shawn Jordan

Gambling Recovery Specialist

21 Steps to STOP Gambling System & Workbooks

The steps take from one to three days each to complete, or about 60 days to finish the whole program.

Let’s face it, the creative intelligence of the mind is amazing! – It’s that creative intelligence being misdirected – that often holds clients back from being more successful and productive, during the recovery process. The troubled gambler thinks – if they are not gambling “for a period of time” that they have quit-gambling and that they can quit-gambling.

It is common practice for companies to offer support for employees being distracted by substance addictions, such as alcohol abuse and smoking too much, but little exists for a problem that is often difficult to notice – and treat effectively – a gambling addiction.

Author’s Bio: 

It is important for EAP counselors to think in clearer terms of “if my client could learn to quit-gambling permanently” then he or she could enjoy life more and have more money available to contribute with.

By learning how to counter a gamblers ill suited perceptions of reality, it is possible to help them to get back on track! On track to begin WINNING – in the game of LIFE – seeing more clearly, and feeling as though they deserve to have (some) money!

With the increase of easy access to gambling such as through local casinos, scratch and win lotteries, and the internet the problem of gambling too much is currently plaguing approximately 5% of all employees, in North America, today.

So what happens next? After the EAP client realizes, that they are gambling too much and that gambling is causing a loss of financial security and undermining their productivity at work and contributions at home.

The 21 Steps to STOP Gambling Tools including workbooks and online support have been engineered specifically for EAP application.

Today, Shawn is the Vice President of Production and Distribution at STOP Gambling Inc.

This occurs because their “concept” of time differs from yours. Shawn created the manuscript with the help of an Alberta Alcohol and Drug Abuse Commission (AADAC) councilor and the encouragment of his family’s psychologist. He used the process of writing the original manuscript to get him out of a gambling relapse