Posted on 02/27/2009 8:47:13 PM PST by TigerLikesRooster
Insight: Time to expose those CDOs
Published: February 26 2009 16:34 | Last updated:
February 26 2009 16:34
Just how much should a debt vehicle backed by subprime mortgage bonds be worth these days? Two years ago, most banks and insurance companies assumed the answer was close to 100 per cent of face value – or more.
Since then, however, that “price” has clearly collapsed, triggering tens of billions of dollars worth of writedowns, particularly in relation to a product known as collateralised debt obligations of asset-backed securities (CDO of ABS.)
But as the zeroes relating to writedowns multiply, a peculiar – and bitter – irony continues to hang over these numbers. Notwithstanding the fact that bankers used to promote CDOs as a tool to create more “complete” capital markets, very few of those instruments ever traded in a real market sense before the crisis – and fewer still have changed hands since then.
Thus, the “prices falls” that have blasted such terrible holes in the balance sheets of the banks have not been based on any real market numbers, but on models extrapolated from other measures such as the ABX, an index of mortgage derivatives.
What has blown up the capital markets is thus a set of theoretical swings in prices that were always pretty abstract.
This takes the concept of virtual banking onto a whole new, terrible level.
(Excerpt) Read more at ft.com ...
Ping!
Then, auto loans, consumer loans, mortgages, second mortgages, credit card loans, etc. were all scrutinized and sold by the no longer extant investment banks to dumb Swiss bankers, American bankers, Icelandic bankers, UK bankers, etc... as AAA rated investments.
Incredible how an increase from 2% default to 8% default makes this crap "worthless" under mark to market rules and wipes out the global banking system. Meanwhile... Soros and company are buying them up for 5 cents on the dollar and will profit from the dopey government bailbots, etc.
Somebody's been rolled here folks...
the blame owes to the guys in the 3 piece suits,
horn rim glasses, and briefcases
who evaluated the credit levels for the banks.
I am in the securities and insurance business.
NEVER sold a CDO.
Simple reason? Privacy issues!
In a bond mutual fund, I can look at the holdings and check the ratings.
There is NO way to check the credit rating of the people who owe these mortgages, and no way to know if their credit rating has changed -— at least, no way for the INVESTOR to know.
These investments would not exist at all, or at least not in such huge amounts, if not for the way ACORN and our Government and Fannie and Freddie PUSHED these risky loans on many of our other lenders.
I hold our government, and the Democrats in our government, mostly at fault.
Life begins at conception.
A mortgage begins at origination.
Also, again, check on all of the financial contributions your liberal Democrat Congressman or Senator has taken.
I think this issue will help kick the rats out of Congress next year!
Didn’t some of the large brokerage firms buy them too? Like Merrill Lynch???
These Wall Street parasites! What a freakin scam. And we still have morons here who call them capitalists.
FOLLOW THE MONEY!
Sure. Go blame the Feds for some of this mess but ask yourself who profited and made billions concocting this CDO/CMO drek and then hustling it to others?
The last man holding the bag is the loser in a Ponzi scheme. So most of what Wall Street did was to make billions from assembling CMOs then selling them off as soon as possible to Europeans and other investors
Merrill Lynch assembled many CMOs and made billions from that. Stan O'Neal (president) made 165 million his last year there before getting the boot
Cramer's Lightning Round - Stan O'Neal Wrecked Merrill Lynch (11 ...
Merrill Lynch (MER): “ I will say this: Stan O’Neal wrecked that company…what they did with that company...that is a great American company and they ...
seekingalpha.com/article/106558-cramer-s-lightning-round-stan-o-neal- wrecked-merrill-lynch-11-17-08 - 59k - Cached - Similar pages -
Merrill's big mistake was holding so much toxic crap when the crisis hit. Normally it was selling off CMOs as fast as it made them
Nothing is risk free. That’s the first lie.
What I want to know is how to get in on the action?
There is real value behind these CDOs. Soros for all his creepiness is a master investor. Better than Buffet IMHO. A true natural who’s skills are beyond luck.
Does anyone know how to buy assets out of CDOs?
Reality bites.
ARRGH
Nice to see someone putting country before pocketbook!
If anyone knew how to un-puree the CDOs, there wouldn't be a banking crisis.
How obnoxious. I hope you typed that with a smile.
The business of America is business. Therefore the most patriotic thing to do is profit.
The market clears and we get back to work.
Unless you like Obama's way - class envy & blame - AKA Socialism.
Roll up your sleeves, pitch in and produce something, or don't. Your choice. It is still America for now.
If anyone knew how to un-puree the CDOs, there wouldn't be a banking crisis.
I do know how. Let the market work and clear the chaff.
The "crisis" is a creation of our government. Petite socialism has been tried already and found wanting.
Thanks for the ping.
Too much for you? Hey, that's America, baby!!!!!!!!!!!!!!
Other than the derivative thing, I agree with the rest of your post.
Therefore the most patriotic thing to do is profit.
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Bullsheet.
Didn’t London start doing this same thing? In fact, if we had not done it, it would have been done by others. Doesn’t make it right, but I guess we really didn’t have Leadership strong enough to stop it.
How could it have been stopped? Lets say our Government had put a stop to it, would it have continued to be done via other industrialized countries?
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