- Registration time
- Last login
- Online time
- 1223 Hour
- Reading permission
HOW DO YOU ERADICATE SYSTEMIC CORRUPTION, NOT JUST INDIVIDUAL CORRUPTION???|
You are getting the picture. It is the running up of the market using margin accounts that could be. It benefits the shadow banks using financing corporations (trust companies and stock-matching-endowment companies) that offer loans in their own names to private investors, for collateral as low as 10% of the face value of the loan. In effect, the private investor SELLS a bond to a trust company or stock-matching-endowment company, using his stock plus a non-stock asset as collateral, in exchange for which, he invests the cash paid to him in the stock market, using the stock as a collateral, as noted above. The trust company gets the other 90% of the face value of the bond from a standard bank, by SELLING this bond as a "Wealth Management Product" to the bank, which is essentially a loan, much like home mortgages were sold to banks by finance companies that lent to borrowers of limited credit ratings at high interest rates. These loans to stock buyers (instead of home buyers) is called a Wealth Management Product. These can be repackaged and sold to regular commercial banks, which then tender 90% of the face value of the loan to the trust/stock-matching-endowment company, and collect on the interest paid by the stock buyer to the trust company, to the tune of 10% of a 15% interest on the loan. The trust company or stock-matching-company does not risk any capital, as its capital comes from a regular commercial bank, and simply collects 5% profit on every loan it generates and sells to the standard commercial bank.
This is a carefully scripted replay of the US mortgage default crisis, except that instead of homes as collateral plus the down payment, stocks and a 10% down payment serve as the collateral. The interest rate is about 15% for above-board trust or stock-matching-endowment companies loans. But there are conceivably other black market loan sharks who would use the same methodology and charge 20% interest. These loans are uninsured so there is no possibility of a re-insurer like AIG going bankrupt. But they are sold to banks, nonetheless, who when faced with defaults by the original borrowers (stock buyers) will have to absorb the losses entire, on their balance sheets. Thus the stock market rescue may help the small private investor, but it definitely also helps the shadow banks, the trust companies and the stock-matching-endowment companies, who stand to lose billions of Yuan if the market continues to fall.
The fact that big banks are involved with the blessings of their regulators makes this stock market rescue less an act of charity, than an act of self-preservation by the big boys and their backers.