Paulson: Subprime help on the way

[Jumby]

Well said hipmatt….

[bubba99]

So, given that the holder of an MBS will or can be compelled to take less than the contract rate, the MBS must be discounted for the lower return. The holder then still suffers a “big” loss. If the spread is even 4% for 5 years, the loss is at least 20% of the MBS – much more when the additional risk of future discounts, FAS157 kicks in, and the new S+P ratings are applied. Maybe as high as 50% discount over contract. Does the MBS insurer eat the loss, or CITI who gave buyback guarantees or . . . ?

And does the re-valuation of the CDOs and CMOs kick another round of dominos when “offsheet” liabilities like buyback guarantees are finally triggered.

The owner of the MBS still has a 50% hit. The homeowner is still paying for an overpriced asset, and nothing has been solved. Moreover, who is going to buy MBS or CDOs in the future. The financial market is still screwed, and we haves solved nothing. The MBS holder is actually better off taking the asset (house), and holding it at close to par for as long as possible.

[bubba99]

So, given that the holder of an MBS will or can be compelled to take less than the contract rate, the MBS must be discounted for the lower return. The holder then still suffers a “big” loss. If the spread is even 4% for 5 years, the loss is at least 20% of the MBS – much more when the additional risk of future discounts, FAS157 kicks in, and the new S+P ratings are applied. Maybe as high as 50% discount over contract. Does the MBS insurer eat the loss, or CITI who gave buyback guarantees or . . . ?

And does the re-valuation of the CDOs and CMOs kick another round of dominos when “offsheet” liabilities like buyback guarantees are finally triggered.

The owner of the MBS still has a 50% hit. The homeowner is still paying for an overpriced asset, and nothing has been solved. Moreover, who is going to buy MBS or CDOs in the future. The financial market is still screwed, and we haves solved nothing. The MBS holder is actually better off taking the asset (house), and holding it at close to par for as long as possible.

[bubba99]

So, given that the holder of an MBS will or can be compelled to take less than the contract rate, the MBS must be discounted for the lower return. The holder then still suffers a “big” loss. If the spread is even 4% for 5 years, the loss is at least 20% of the MBS – much more when the additional risk of future discounts, FAS157 kicks in, and the new S+P ratings are applied. Maybe as high as 50% discount over contract. Does the MBS insurer eat the loss, or CITI who gave buyback guarantees or . . . ?

And does the re-valuation of the CDOs and CMOs kick another round of dominos when “offsheet” liabilities like buyback guarantees are finally triggered.

The owner of the MBS still has a 50% hit. The homeowner is still paying for an overpriced asset, and nothing has been solved. Moreover, who is going to buy MBS or CDOs in the future. The financial market is still screwed, and we haves solved nothing. The MBS holder is actually better off taking the asset (house), and holding it at close to par for as long as possible.

[bubba99]

So, given that the holder of an MBS will or can be compelled to take less than the contract rate, the MBS must be discounted for the lower return. The holder then still suffers a “big” loss. If the spread is even 4% for 5 years, the loss is at least 20% of the MBS – much more when the additional risk of future discounts, FAS157 kicks in, and the new S+P ratings are applied. Maybe as high as 50% discount over contract. Does the MBS insurer eat the loss, or CITI who gave buyback guarantees or . . . ?

And does the re-valuation of the CDOs and CMOs kick another round of dominos when “offsheet” liabilities like buyback guarantees are finally triggered.

The owner of the MBS still has a 50% hit. The homeowner is still paying for an overpriced asset, and nothing has been solved. Moreover, who is going to buy MBS or CDOs in the future. The financial market is still screwed, and we haves solved nothing. The MBS holder is actually better off taking the asset (house), and holding it at close to par for as long as possible.

[bubba99]

So, given that the holder of an MBS will or can be compelled to take less than the contract rate, the MBS must be discounted for the lower return. The holder then still suffers a “big” loss. If the spread is even 4% for 5 years, the loss is at least 20% of the MBS – much more when the additional risk of future discounts, FAS157 kicks in, and the new S+P ratings are applied. Maybe as high as 50% discount over contract. Does the MBS insurer eat the loss, or CITI who gave buyback guarantees or . . . ?

And does the re-valuation of the CDOs and CMOs kick another round of dominos when “offsheet” liabilities like buyback guarantees are finally triggered.

The owner of the MBS still has a 50% hit. The homeowner is still paying for an overpriced asset, and nothing has been solved. Moreover, who is going to buy MBS or CDOs in the future. The financial market is still screwed, and we haves solved nothing. The MBS holder is actually better off taking the asset (house), and holding it at close to par for as long as possible.

[Author]

Posts