Financial Alchemy

[4plexowner]

http://money.cnn.com/2007/10/15/markets/junk_mortgages.fortune/index.htm?postversion=2007101609

Junk mortgages under the microscope

If you are interested in the structured financial vehicles that Wall Street puts together and sells this article is well worth reading. The article focuses on a single Goldman Sachs sub-prime MBS security and analyzes what the security contains.

Here’s how we can make the same products at home in our kitchen sinks:

– Take $494 million worth of 2nd mortgages
– Make sure the average equity in the homes secured by the mortgages is less than 1%
– Make sure that at least 50% of the loans were no-doc or low-doc
– Now slice this conglomeration of mortgages into 13 slices (tranches)
– Have one of your neighbors (you know, the one that owes you the favor) rate the 13 slices from AAA down (make sure your neighbor knows that at least 90% of these tranches are investment grade)
>> at least 68% of the tranches should be rated AAA
>> another 25% should be rated AA through BBB – –
– Market these financial securities to our standard clients who (for some reason) still trust us – you know, pension funds, state retirement funds, foreign investment banks, hedge funds, etc

~

The f*king nerve of these people! Taking $494 million worth of paper trash that will never be repaid and repackaging it into $459 million worth of investment grade securities!

Goldman sold this MBS in spring of 2006. As of now, 18% of the mortgages have defaulted and the bottom 9 tranches are worth $0 (that’s ‘zero’) dollars.

~

At some point the people of this country are going to realize that we have to eliminate the bankers. I hope it happens in my lifetime.

[4plexowner]

http://themessthatgreenspanmade.blogspot.com/2007/10/gsamp-slide.html

slightly different numbers in this article:

“…Ten of the tranches were originally investment grade … seven of the original ten investment-grade tranches have been downgraded to junk status, and four of them have been totally wiped out.”

[4plexowner]

http://themessthatgreenspanmade.blogspot.com/2007/10/gsamp-slide.html

slightly different numbers in this article:

“…Ten of the tranches were originally investment grade … seven of the original ten investment-grade tranches have been downgraded to junk status, and four of them have been totally wiped out.”

[4plexowner]

http://themessthatgreenspanmade.blogspot.com/2007/10/gsamp-slide.html

slightly different numbers in this article:

“…Ten of the tranches were originally investment grade … seven of the original ten investment-grade tranches have been downgraded to junk status, and four of them have been totally wiped out.”

[4plexowner]

In case it hasn’t registered with everyone, Goldman Sachs made record profits this year by betting that low-quality mortgage-backed investment products would decline in value.

Yes, at the same time they were selling low-quality securities into the market they were betting that those securities would be worth less in the future.

Have you hugged a banker today?

[lindismith]

Completely unreal. These people know exactly what they’re doing.

I could understand one bum deal within one marginal firm, but a massive trend within a traditionally conservative industry???? Does a memo go out?????

These people are crooks. Every one of them.

[lindismith]

Completely unreal. These people know exactly what they’re doing.

I could understand one bum deal within one marginal firm, but a massive trend within a traditionally conservative industry???? Does a memo go out?????

These people are crooks. Every one of them.

[lindismith]

Completely unreal. These people know exactly what they’re doing.

I could understand one bum deal within one marginal firm, but a massive trend within a traditionally conservative industry???? Does a memo go out?????

These people are crooks. Every one of them.

[HereWeGo]

4plex-
I can’t understand how GS will keep its international customers.

[patientlywaiting]

Great articles. Thanks for posting.

[patientlywaiting]

Great articles. Thanks for posting.

[patientlywaiting]

Great articles. Thanks for posting.

[HereWeGo]

4plex-
I can’t understand how GS will keep its international customers.

[HereWeGo]

4plex-
I can’t understand how GS will keep its international customers.

[4plexowner]

In case it hasn’t registered with everyone, Goldman Sachs made record profits this year by betting that low-quality mortgage-backed investment products would decline in value.

Yes, at the same time they were selling low-quality securities into the market they were betting that those securities would be worth less in the future.

Have you hugged a banker today?

[4plexowner]

In case it hasn’t registered with everyone, Goldman Sachs made record profits this year by betting that low-quality mortgage-backed investment products would decline in value.

Yes, at the same time they were selling low-quality securities into the market they were betting that those securities would be worth less in the future.

Have you hugged a banker today?

[Author]

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