Posted on 03/10/2023 12:21:07 PM PST by nuconvert
All the old tunes are new again...
Been a while since we had a good old fashioned bank run.
The Big Short is a very entertaining and very educational movie! I was surprised at how much I liked it.
This story literally hits home for us.
Our house was built in 2005 by someone who overextended on it and lost everything in 2008. The bank foreclosed and we bought it in 2010 for about 20% of what had been owed on it. There si no way we would have been able to afford the place otherwise. For us it was answered prayer.
Exactly. If they held the bonds to maturity there would have been no losses, but bank runs can upset the best laid plans.
Thank you! I way over-simplified it, and it looks like the bulk of their securities are mortgage-backed bonds.
“The entire US banking system was federalized in 2008”
What is that supposed to mean?
No. Mortgages are bundled and sold on Wall Street.
Banks loaded up on mortgage paper during the bubble. A huge amount of that defaulted and left commercial banks technically bankrupt. TARP was a Treasury program that took a lot of that paper from banks.
The Big Short was very good but it did not point out the biggest culprit of all: Congress forcing banks to loan money to fraudulent borrowers who could never pay back the loans.
Because interest rates are much higher today than they were when the bank bought the bonds, they had to sell the low-yield bonds at a steep discount.
Indeed back to the Mason jars in a ceramic container.
It means the zombie banks were all bailed out by the taxpayers and now basically are government run entities.
Definitely one of the better movies regarding what happened. If not the best. Entertaining and informative.
Welcome toxic paper, cause those securities are going to be at 50% par real soon.
I’ll bet this had almost nothing to do with the 2008-2010 mortgage meltdown.
In all my reading on the subject, I got the impression that the banks would have extended those loans even if the U.S. government never said anything about it. They had irresponsible lending standards because they weren’t taking any risk themselves … they were just packaging the loans into bonds and selling them off.
“…and the average amount leveraged in 1.5% money facing a 300% increase,…”
Damn! That doesn’t seem workable…
“It means the zombie banks were all bailed out by the taxpayers and now basically are government run entities.”
Half of that is correct. They were bailed out. Other than than that nothing changed.
“Congress forcing banks to loan money to fraudulent borrowers who could never pay back the loans.”
That didn’t happen no matter how often that canard gets repeated.
The Community Reinvestment Act only applied to deposit taking financial firms. It didn’t compel them to lower loan quality. And the loans didn’t have to be mortgages.
The vast majority of toxic lending during the bubble was made by shadow banks that weren’t subject to the CRA or any other banking regulation. They got into subprime and other non-conforming loans because it created high yield paper and made them a ton of money.
She should open an account in another bank or credit union and keep both accounts below the $250,000 FDIC insured limit.
There was one analyst at Morgan Stanley who had a Sell rating. They rest were all buy.
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