Al Qaeda and the credit crisis

The following is a piece of news item that appeared in the site of fox.news.com on October 4, 2008 {An American member of Al Qaeda pointed to economic troubles in the United States as proof that "the enemies of Islam" face defeat, in an English-language video released Saturday. In a half hour video message, California-native Adam Gadahn urged Pakistanis to unite against their government and U.S. forces, and taunted Americans over their economic crisis, relating it to their military interventions. "The enemies of Islam are facing a crushing defeat, which is beginning to manifest itself in the expanding crisis their economy is experiencing," said Gadahn, in a clip of the message distributed by the SITE Intelligence Group, a Washington-based monitor of militant Web sites. "A crisis whose primary cause, in addition to the abortive and unsustainable crusades they are waging in Afghanistan, Pakistan, and Iraq, is their turning their backs on Allah's revealed laws, which forbid interest-bearing transactions, exploitation, greed and injustice in all its forms."} This leads me to think who really is behind the credit crisis that is pushing the world to the brink of economic collapse. We all know that the US investment banks (like Lehman) fell because of subprime woes. Basically loans, subprime, midprime or prime were packaged and sold as asset-backed securities (ABS) which were split into “tranches” and re-sold. The low-rated tranches of ABS were pooled together to create collateralized debt obligations (CDO). Similarly midprime and prime housing loans were also pooled together to create CDOs. All of these instruments were rated by rating agencies (but then nobody knew which “tranch” contained which mortgage). Then there were the CDS or credit default swap which is nothing but insurance on debt (this CDS were the reason behind the failure of AIG). Once the property market went bust, more and more mortgages were foreclosed, leading to loss on the ABSs and CDOs which in turn led to failure of AIG. The European banks were affected too and Iceland is on the verge of national bankruptcy. The stock markets all around the world are reeling, investors are suffering zillions of losses around the globe. IF Tuesday, 9/11/2001 could have been orchestrated by Al-Qaeda (sitting in the caves of Afghanistan) then they (AQ) sure must have had insider people in US Government Agencies otherwise an event of such a magnitude could not have been carried out just by 19 renegades. If they (AQ) had the connections then they sure have them now (after 8 years), so if 9/11 was the handiwork of AQ why not 9/29 (the biggest single day fall of Dow Jones as a result of the credit crisis). Now, the unanswered question about the ABSs, CDOs? CDOs. Did any one knew (or for that matter know today) what is the exact underlying security of these instruments (I mean which particular mortgages). How could the rating agency rate these products as high as AA without knowing the exact underlying assets? What were the Risk Management Team at the Banks doing? (one team might be lousy but not so many, remember almost all the big and mighty fell) Is the financial crisis just because of the “greed” of the investment banks of the capitalist society or was there a bigger plan which just took advantage of the greed of the capitalistic society and the Investment Banks just walked into the trap? I do not have answers to these questions now neither did I have the answers then (how 19 renegades took on the might of Uncle Sam to such a precision on 9/11) but what I definitely know is Lehman Brothers survived 9/11 although it lost its headquarter and one of its employees but 8 years later lost its very existence.