Lehman’s principal source of (fictional) income and real losses was making (and selling) what the trade accurately called “liar’s loans” through its subsidiary, Aurora … The FBI began warning publicly about the epidemic of mortgage fraud in 2004 (CNN).
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That loss, however, may not be recognized for many years – particularly if the liar’s loans become so large that they help hyper-inflate a financial bubble. In the near-term, making massive amounts of liar’s losses loans creates a mathematical guarantee of producing record (albeit fictional) accounting income. As long as the bubble inflates, the liar’s loans can be refinanced – creating additional fictional income and delaying (but increasing) the eventual loss. The industry saying for this during the S&L debacle was: “a rolling loan gathers no loss.”
"Young fool, only now, at the end, do you understand!" - Darth Sidious to Luke Skywalker
Extend and Pretend is option one, and it still is.
Jesse has the video embedded here.
Have a good night.
