Bond Market Braces For $ 1 Trillion Tsunami Of Treasuries This Year

[Dschrute3]

Oh Gawd, another butthurt Hater-Bot fantasy. These Bots sit around all day desperately hoping the Economy collapses. Very sad folks. Shame on em.

 

[g5000]

The GSEs set the industry standard, known as "conforming loans". Rigid underwriting rules which had been learned the hard way over centuries.

The borrower had to be a good credit risk, and provide a down payment. Basel capital reserve guidelines had to be observed.

This tied up a lot of capital the financial services industry wanted to put to work. They were forced to set aside capital to cover losses incurred by defaults.

In a subprime loan, the borrower was charged a higher interest rate because they were a higher risk.

Companies like Ameriquest and Countrywide began teasing their low risk customers into non-conforming loans. They actually bragged about this sleazy practice in the literature they provided to their investors.

Profits soared.

With a non-conforming loan, you could get a middle class suburbanite into a much bigger loan then he normally would have with a conforming loan. The more you can get someone to borrow, the more profit you can make from them.

Credit derivatives made it possible to do just that. If person is a good risk when they borrow $200,000 but a bad risk if they borrow a more profitable principal of $400,000, you could eliminate that risk with credit derivatives.

Or so the banking industry believed. They never stopped to think of just how insane that actually is.

When someone did ask them about that insanity, which is exactly what I did way back in 2003, the talking point response was that the borrower could always sell their house to pay off the loan and walk away with a profit since housing prices were going to go up forever.

Insanity squared.

 

[g5000]

Some good books which explain how derivatives took down our economy:

https://www.amazon.com/Fools-Gold-Corrupted-Financial-Catastrophe/dp/1439100136&tag=ff0d01-20

https://www.amazon.com/All-Devils-Are-Here-Financial/dp/159184438X&tag=ff0d01-20

https://www.amazon.com/Traders-Guns-Money-derivatives-Financial/dp/0273731963&tag=ff0d01-20


That last one was written on the eve of the crash by a derivatives trader who tried to warn what was happening. It's probably the best of the three.

Yeah, bubbles are rough.

Especially global derivatives bubbles.

 

[g5000]

You buy a house for $200,000 and you cover it with a fire insurance policy.

If your house burns down, the insurance company pays you the value of your loss. The economy experiences a maximum loss of $200,000 because of the fire.

Now imagine a situation where ten people buy a fire insurance policy against your house and it burns down.

Each policy holder is paid $200,000 for a total loss to the economy of $2 million. A tenfold loss.

That is how credit derivatives multiplied the losses incurred by mortgage defaults.

In fact, those derivatives caused more bad loans to be made than if those derivatives had never existed.

 

[Toddsterpatriot]

The GSEs set the industry standard, known as "conforming loans". Rigid underwriting rules which had been learned the hard way over centuries.

The borrower had to be a good credit risk, and provide a down payment. Basel capital reserve guidelines had to be observed.

This tied up a lot of capital the financial services industry wanted to put to work. They were forced to set aside capital to cover losses incurred by defaults.

In a subprime loan, the borrower was charged a higher interest rate because they were a higher risk.

Companies like Ameriquest and Countrywide began teasing their low risk customers into non-conforming loans. They actually bragged about this sleazy practice in the literature they provided to their investors.

Profits soared.

With a non-conforming loan, you could get a middle class suburbanite into a much bigger loan then he normally would have with a conforming loan. The more you can get someone to borrow, the more profit you can make from them.

Credit derivatives made it possible to do just that. If person is a good risk when they borrow $200,000 but a bad risk if they borrow a more profitable principal of $400,000, you could eliminate that risk with credit derivatives.

Or so the banking industry believed. They never stopped to think of just how insane that actually is.

When someone did ask them about that insanity, which is exactly what I did way back in 2003, the talking point response was that the borrower could always sell their house to pay off the loan and walk away with a profit since housing prices were going to go up forever.

Insanity squared.

The GSEs set the industry standard, known as "conforming loans". Rigid underwriting rules which had been learned the hard way over centuries.

And then, under Clinton, HUD required them to make 50% of their mortgage purchases from subprime borrowers. Later, under Bush, the requirement rose to 55%. Insanity!

Companies like Ameriquest and Countrywide....could eliminate that risk with credit derivatives.

If you think they bought derivatives to hedge their risk, you weren't paying attention.

 

[g5000]

Now imagine you are a homebuilder and you are allowed to buy fire insurance policies against the houses you sold.

You build a house, sell it for $200,000, and you are allowed to buy fire insurance against it.

You can see how some homebuilders would be tempted to build and sell firetraps.

That's essentially what some banks did. They created toxic CDOs, sold them to investors, and then bet those CDOs would burn down.

And nobody went to prison for that. They were fined lunch money.

 

[g5000]

The GSEs set the industry standard, known as "conforming loans". Rigid underwriting rules which had been learned the hard way over centuries.

The borrower had to be a good credit risk, and provide a down payment. Basel capital reserve guidelines had to be observed.

This tied up a lot of capital the financial services industry wanted to put to work. They were forced to set aside capital to cover losses incurred by defaults.

In a subprime loan, the borrower was charged a higher interest rate because they were a higher risk.

Companies like Ameriquest and Countrywide began teasing their low risk customers into non-conforming loans. They actually bragged about this sleazy practice in the literature they provided to their investors.

Profits soared.

With a non-conforming loan, you could get a middle class suburbanite into a much bigger loan then he normally would have with a conforming loan. The more you can get someone to borrow, the more profit you can make from them.

Credit derivatives made it possible to do just that. If person is a good risk when they borrow $200,000 but a bad risk if they borrow a more profitable principal of $400,000, you could eliminate that risk with credit derivatives.

Or so the banking industry believed. They never stopped to think of just how insane that actually is.

When someone did ask them about that insanity, which is exactly what I did way back in 2003, the talking point response was that the borrower could always sell their house to pay off the loan and walk away with a profit since housing prices were going to go up forever.

Insanity squared.

The GSEs set the industry standard, known as "conforming loans". Rigid underwriting rules which had been learned the hard way over centuries.

And then, under Clinton, HUD required them to make 50% of their mortgage purchases from subprime borrowers. Later, under Bush, the requirement rose to 55%. Insanity!

Nope. That's totally false.

 

[John Shaw]

Tip of the iceberg.

Beginning in January next year, there will be automatic cuts to Medicaid and Medicare that are triggered by the explosive deficit this dumb tax plan causes. 60% of all nursing home care is paid by Medicaid. So what does that mean for the middle class? It means make room for mom and dad, because they're going to have to move in. Medicaid also pays for most home care as well, so the nurses and health care workers that visit homes to provide care will lose their jobs and the middle class will have to administer medication, treatment, and therapies on their own.

But don't fret - Bob Corker got a personal tax cut. So there's that.

Or you can just ... not let them move in and have them fend for themselves, like I would do. Simple.

 

[g5000]

Companies like Ameriquest and Countrywide....could eliminate that risk with credit derivatives.

If you think they bought derivatives to hedge their risk, you weren't paying attention.

The originators of the toxic loans weren't buying the credit derivatives. The broker-dealers were.

The originators were selling the toxic mortages to the broker-dealer before the ink was dry on the paperwork. They were merely trying to meet the demand of the broker-dealers.

They ran out of good risk borrowers, and the demand for more notes increased, so they went after anyone with a pulse and threw money at them.

 

[g5000]

Investors were sold the credit derivative products.

But you can't build a CDO without an underlying asset: loans.

So in order to meet the customer demand for CDO tranches, you had to get more and more people to borrow money.

When you run out of good risk loans, you start making really bad loans. Just to keep the CDO party going.

That's why it is a fucking joke to claim the banks were being forced to make subprime loans. That's a total hoax.

 

[g5000]

As I said earlier, by 2005 when the toxic lending parade was going into fulls swing, the GSEs weren't even the biggest players any more.

Wall Street had taken over. And not just Wall Street. This was global. Ireland, Iceland, Germany, Spain, Italy, etc.

These banks all over the world were not being forced to make these loans. That's a racist hoax.

 

[Toddsterpatriot]

You buy a house for $200,000 and you cover it with a fire insurance policy.

If your house burns down, the insurance company pays you the value of your loss. The economy experiences a maximum loss of $200,000 because of the fire.

Now imagine a situation where ten people buy a fire insurance policy against your house and it burns down.

Each policy holder is paid $200,000 for a total loss to the economy of $2 million. A tenfold loss.

That is how credit derivatives multiplied the losses incurred by mortgage defaults.

In fact, those derivatives caused more bad loans to be made than if those derivatives had never existed.

If your house burns down, the insurance company pays you the value of your loss. The economy experiences a maximum loss of $200,000 because of the fire.

Insurance or not, $200,000 was lost because of the fire.
Without insurance, the homeowner takes the loss.
With insurance, the insurer takes the loss. In either case, total loss is still $200,000.

Now imagine a situation where ten people buy a fire insurance policy against your house and it burns down.​

​

Each policy holder is paid $200,000 for a total loss to the economy of $2 million. A tenfold loss.​

​

Wow! Such confusion on your part. Assume the homeowner is one of the policy holders.​

As in the example above, the insurance company has a loss of $200,000 and the homeowner breaks even.​

Total loss is $200,000.​

​

Now let's look at the other nine policies.​

The insurer writes 9 checks for $200,000 each.​

The policy holders cash 9 checks for $200,000 each.​

​

Looks like a wash. Zero sum.​

Total economic loss is still $200,000.​

​

That is how credit derivatives multiplied the losses incurred by mortgage defaults.​

​

Derivatives don't multiply losses, they just move them around.​

​

In fact, those derivatives caused more bad loans to be made than if those derivatives had never existed.​

​

Absolutely. Firms felt they could safely make more crappy loans, buy more crappy loans made by others.​

Just as the GSEs caused more bad loans to be made. You have ready buyers with trillions to spend, you'll happily crank up the subprime lending operation to satisfy their insatiable demand.​

Except in their case, the derivative was the implied government guarantees.​

​

​

 

[Toddsterpatriot]

Now imagine you are a homebuilder and you are allowed to buy fire insurance policies against the houses you sold.

You build a house, sell it for $200,000, and you are allowed to buy fire insurance against it.

You can see how some homebuilders would be tempted to build and sell firetraps.

That's essentially what some banks did. They created toxic CDOs, sold them to investors, and then bet those CDOs would burn down.

And nobody went to prison for that. They were fined lunch money.

That's essentially what some banks did. They created toxic CDOs, sold them to investors, and then bet those CDOs would burn down.

Now you're conflating CDOs with synthetic CDOs.

 

[Toddsterpatriot]

The GSEs set the industry standard, known as "conforming loans". Rigid underwriting rules which had been learned the hard way over centuries.

The borrower had to be a good credit risk, and provide a down payment. Basel capital reserve guidelines had to be observed.

This tied up a lot of capital the financial services industry wanted to put to work. They were forced to set aside capital to cover losses incurred by defaults.

In a subprime loan, the borrower was charged a higher interest rate because they were a higher risk.

Companies like Ameriquest and Countrywide began teasing their low risk customers into non-conforming loans. They actually bragged about this sleazy practice in the literature they provided to their investors.

Profits soared.

With a non-conforming loan, you could get a middle class suburbanite into a much bigger loan then he normally would have with a conforming loan. The more you can get someone to borrow, the more profit you can make from them.

Credit derivatives made it possible to do just that. If person is a good risk when they borrow $200,000 but a bad risk if they borrow a more profitable principal of $400,000, you could eliminate that risk with credit derivatives.

Or so the banking industry believed. They never stopped to think of just how insane that actually is.

When someone did ask them about that insanity, which is exactly what I did way back in 2003, the talking point response was that the borrower could always sell their house to pay off the loan and walk away with a profit since housing prices were going to go up forever.

Insanity squared.

The GSEs set the industry standard, known as "conforming loans". Rigid underwriting rules which had been learned the hard way over centuries.

And then, under Clinton, HUD required them to make 50% of their mortgage purchases from subprime borrowers. Later, under Bush, the requirement rose to 55%. Insanity!

Nope. That's totally false.

What was the HUD requirement under Clinton? Under Bush? Link?

 

[g5000]

Ten people buy a fire insurance policy against a house.

The house burns down. That's the "credit event" which triggers all the sellers of the insurance policies to pay out.

When the subprime loans started defaulting, credit events were triggered all over the globe, magnifying the losses tremendously. All thanks to derivatives.

That's why the oracle of Omaha called credit derivatives "financial weapons of mass destruction".

 

[g5000]

The GSEs set the industry standard, known as "conforming loans". Rigid underwriting rules which had been learned the hard way over centuries.

The borrower had to be a good credit risk, and provide a down payment. Basel capital reserve guidelines had to be observed.

This tied up a lot of capital the financial services industry wanted to put to work. They were forced to set aside capital to cover losses incurred by defaults.

In a subprime loan, the borrower was charged a higher interest rate because they were a higher risk.

Companies like Ameriquest and Countrywide began teasing their low risk customers into non-conforming loans. They actually bragged about this sleazy practice in the literature they provided to their investors.

Profits soared.

With a non-conforming loan, you could get a middle class suburbanite into a much bigger loan then he normally would have with a conforming loan. The more you can get someone to borrow, the more profit you can make from them.

Credit derivatives made it possible to do just that. If person is a good risk when they borrow $200,000 but a bad risk if they borrow a more profitable principal of $400,000, you could eliminate that risk with credit derivatives.

Or so the banking industry believed. They never stopped to think of just how insane that actually is.

When someone did ask them about that insanity, which is exactly what I did way back in 2003, the talking point response was that the borrower could always sell their house to pay off the loan and walk away with a profit since housing prices were going to go up forever.

Insanity squared.

The GSEs set the industry standard, known as "conforming loans". Rigid underwriting rules which had been learned the hard way over centuries.

And then, under Clinton, HUD required them to make 50% of their mortgage purchases from subprime borrowers. Later, under Bush, the requirement rose to 55%. Insanity!

Nope. That's totally false.

What was the HUD requirement under Clinton? Under Bush? Link?

You made the claim. Prove it.

 

[Toddsterpatriot]

Companies like Ameriquest and Countrywide....could eliminate that risk with credit derivatives.

If you think they bought derivatives to hedge their risk, you weren't paying attention.

The originators of the toxic loans weren't buying the credit derivatives. The broker-dealers were.

The originators were selling the toxic mortages to the broker-dealer before the ink was dry on the paperwork. They were merely trying to meet the demand of the broker-dealers.

They ran out of good risk borrowers, and the demand for more notes increased, so they went after anyone with a pulse and threw money at them.

The originators were selling the toxic mortages to the broker-dealer before the ink was dry on the paperwork.

And the GSEs, don't forget their toxic purchases.

 

[Toddsterpatriot]

Investors were sold the credit derivative products.

But you can't build a CDO without an underlying asset: loans.

So in order to meet the customer demand for CDO tranches, you had to get more and more people to borrow money.

When you run out of good risk loans, you start making really bad loans. Just to keep the CDO party going.

That's why it is a fucking joke to claim the banks were being forced to make subprime loans. That's a total hoax.

But you can't build a CDO without an underlying asset: loans.

Thanks. For another example of your ignorance.

That's why it is a fucking joke to claim the banks were being forced to make subprime loans.

What do you think the CRA was all about?

 

[Toddsterpatriot]

Ten people buy a fire insurance policy against a house.

The house burns down. That's the "credit event" which triggers all the sellers of the insurance policies to pay out.

When the subprime loans started defaulting, credit events were triggered all over the globe, magnifying the losses tremendously. All thanks to derivatives.

That's why the oracle of Omaha called credit derivatives "financial weapons of mass destruction".

That's why the oracle of Omaha called credit derivatives "financial weapons of mass destruction".

And a few years later, he was buying those weapons. Made a good chunk of money too......

 

[g5000]

Investors were sold the credit derivative products.

But you can't build a CDO without an underlying asset: loans.

So in order to meet the customer demand for CDO tranches, you had to get more and more people to borrow money.

When you run out of good risk loans, you start making really bad loans. Just to keep the CDO party going.

That's why it is a fucking joke to claim the banks were being forced to make subprime loans. That's a total hoax.

But you can't build a CDO without an underlying asset: loans.

Thanks. For another example of your ignorance.

That's why it is a fucking joke to claim the banks were being forced to make subprime loans.

What do you think the CRA was all about?

And there it is. The CRA. The racist hoax. I knew it.

It's funny how you tards fall for a racist hoax even when the evidence which blows it out of the water is literally right in front of your face.

Tell me something. When you saw all those houses in foreclosure in your neighborhood, did you look at one of them and say, "I had no idea Biff was a negro!"?

Was it the negroes of Iceland and Ireland who took down Landsbanki, the Anglo Irish Bank, Allied Irish Banks, and the Bank of Ireland?

And it appears you do not know that neither Bear Stearns nor Merrill Lynch nor Lehman Brothers nor Goldman Sacs nor JP Morgan nor Morgan Stanley were subjet to the CRA.

One of the dumbshit congressmen who was obviously a Fox News consumer asked Dick Fuld how much the CRA had to do with the collapse of Lehman. Fuld responded, "De minimus."

It is astonishing you tards can see all those middle class foreclosures right in front of your faces, and see banks collapsing all over the world, and swallow the fucking piss that it was all the negroes' fault!

Truly astonishing.