Don`t Spoil The Subprime

Years ago into the 1970s newmania senior was a pretty high profile Lloyds Broker. He was embroiled in a scandal that was at the beginning of a long list of scandals which did much to end Lloyds as it used to be. Nowadays it is really a name behind which companies write Insurance in the usual way aside from the Marine Market.
Anyway this scandal involved the writing of a certain Sasse Syndicate of a binder for the states called the Den Har binder. At that time, and still as far as I know , Premium written outside the US had to be declared surplus and those writing in the US had to accept a trenche of income that they might not want to accept . This was slum business for which there was no possibly underwriting rate. Nonetheless US Insurers had to take their share and all of this lead to the deadly cocktail of a huge flood of money with commissions to be made but no underlying underwriting criteria. It looked quite different by the time it got to London but the results were predictable .Events surrounding the catastrophic losses of this binding authority lead to the end of newmania seniors glittering career and the suicide of Tim Sasse.
I haven’t thought about it for a long time but with the Sub Prime lending scandal threatening to engulf the world in a new depression I cannot help but notice the similarities . One of the usual Lloyds broker tricks was to take a load of rubbish ( like US slum business) pass it though an Insurer and sell it as a treaty into the naïve treaty( Reinsurance) market it might be re packaged but the real trick was to get away from the risk and talk about the money
That is what has happened again except on a grand scale. Just as Insurance used to be passed around a treaty placement spiral so derivative s debt and loans are passed endlessly around with commissions all the way by the time it gets through a couple of hoops no-one remembers what it was. Brokers want commissions and lenders want the business.

Here is a question “ Would you lend money at any rate to someone with no job no security and no obvious way of paying you back.”
Answer “ No”

By passing this question through what is in effect a sort of laundry of derivative markets the question is lost. I know the story and it is a lot less complicated than it may be made to appear. I remember a very similar one