Post
Banks seek to offload risk to avoid ‘choking’ on data centre debt: Global lenders explore private deals and risk transfers to cut exposure to AI boom
what this means is packaging up the data centre loans like toxic waste bombs, pre-Global Financial Crisis style
https://www.ft.com/content/08aba5e4-5834-4e79-a48d-989a2c5bad0f
archive: https://archive.is/GoRyM
If the terms:
1.) Tranche or
2.) Collateralized Debt Obligation (CDO)
Are mentioned, bandied about, then run like hell. It's the years 2008-9 repeating.
@davidgerard they want to offload their current risk, so they can take on NEW risk, probably by lending to even MORE data center projects.
@davidgerard i can't use either of these links.
@davidgerard Isn't packaging bad debts and selling them as a an investment product what caused what caused the subprime mortgage crisis?
I'm sure this will end better.
@davidgerard 20 years ago the banks were able to sell the CDSs because they lied their asses off about what was in there and the credit rating agencies went along with it. How good are the investors' memories? Do they think 'fool me once' or 'this time is different'?
@maccruiskeen the average memory span of a trader is about five minutes, so
@davidgerard oh ffs- this does not end well 🔥
@davidgerard Thanks for the archive. Who will pay for the power those datacenters use? Here is another late reminder that cities need to own and control their use of power. I will of course boost this, if only because it includes an archive link.
@indyradio these things have every problem you can think of, these loans are *bad* and will default, the banks *know* this, and they're working out who to fob the toxic waste off onto
@davidgerard
Rates have already increased grandly everywhere.
Too obviously, you and I are being made to pay.
"Sell 'em by the six-pack to public pension funds."
@whoosh now you might think
Oh wait, I've seen this one before!
@davidgerard Gosh I wonder what happened after they last did things pre-Global Financial Crisis style
@Ailbhe it was very cool and everything worked out *fine*
Whenever the 1% screw up big time, they launch a variety of exotic financial instruments to disguise the downward spiral for as long as possible.
In 1929, it was trusts (mutual funds)
https://en.wikipedia.org/wiki/Wall_Street_crash_of_1929
https://www.edelman.com/newsroom/richard-edelmans-6am-blog/1929-and-trust
In 2008 it was Credit Default Swaps, Collateralized Debt Obligations, derivatives, & Mortgage Backed Securities
https://en.wikipedia.org/wiki/2008_financial_crisis
https://en.wikipedia.org/wiki/Credit_default_swap
https://en.wikipedia.org/wiki/Collateralized_debt_obligation
https://www.investopedia.com/terms/d/derivativestimebomb.asp
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