Jump to content
House Price Crash Forum
Sign in to follow this  
drrayjo

Sub-prime Housing Problems Limited To Just 7 States

Recommended Posts

7_states_affected_by_subprime_mortg.png

7 states and the entire financial world ?

http://www.moneyandmarkets.com/issues/MaM633_4.html

When oh when will a regulator have the balls to force lenders to use "mark to market" pricing instead of "mark to (their own) model"?

Imagine you start a hedge fund, buy some CDOs (debt packages), then lend 10 times that amount on the basis of the supposed "value" of the CDO. So if the underlying debtor goes bankrupt what security is there for the 10 times lending you've done? Answer = NIL. How do you cover the loss? Raise more cash by stock or asset sales.

In the mean time you get a friendly ratings agency (e.g. Moody) and say "well we've assessed our own model and think the CDO is worth X, so we're going to lend 10x to other people. Please can you give us an A rating based on our own model?" Moody of course say "Here's our fee for agreeing with you, next please !". Now the hedge fund is legitimmised and no further questions about value are asked.

Thank goodness UK pension funds aren't buying these hedge funds... Oops !

Edited by Warwick-Watcher

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 356 The Prime Minister stated that there were three Brexit options available to the UK:

    1. 1. Which of the Prime Minister's options would you choose?


      • Leave with the negotiated deal
      • Remain
      • Leave with no deal



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.