As a regulator, what do you do when you have absorbed massive amounts of encumbered or otherwise distressed former CDO assets from a bunch of blown out former financial institutions? Well, if anyone here is old enough to remember the Resolution Trust Corporation, you already know. You make another CDO out of it, but this time you change the name, put the word “trust” in it, and offer up to 80% of seller financing. It’s a leveraged CDO. Oh, and you keep an equity tranche for yourself. Sound familiar now?
In essence, that’s what the RTC did with the sludge left over after the Savings and Loan Crisis. It’s already been tried in this particular crisis too (do we have an official name for it yet?) Lehman, among others, put together a private partnership, sold toxic assets into it and gave the buyer seller financing just a few months ago. (See how well that worked?)
Of course, the argument is that the incentives are better positioned to effectively liquidate the assets which you really don’t want the Fed et al hanging on to that long. But CDOing a CDO just rubs me the wrong way. So, when it comes out that Paulson is shopping around a similar idea, well….
I wonder what the partnerships will have for credit ratings.
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too long. no read.
Duh, they will be AAA as a wholly owned subsidiary of the US govt.
1st
Wait, so where can I get me a piece of the super senior cdo^2?
You knocked the holy CDO out of that dude!
those “too long no read” loosers should get a life
Its a CDO^3.
@4
good choice. the super senior is backed extra sham-wow subordination.
CDO*6.02^23
CDO*6.02*10^23
It will be AAA by all major ratings agencies… until the Monday after a buyout is arranged on Sunday. Then they will nock it down to A-.
@2 The US govt. not likely to be AAA very much longer at this rate
@9–that should be CDO*(6.023*10^23)
It’s all bs to stop the stock market fall. It will steady things for a couple of days.
It’s all bs to stop the stock market fall. It will steady things for a couple of days.
avogadro’s number?
Now I”m confused, hold me
THose @6 should step in front of a bus.
I think avogadro’s number is going to be the outcome of the model Hank the Tank is runnign to see how much this is going to cost to cover…
@13 teh ratings mafia wouldn’t dare downgrade the gubmint and lose their monopoly
Oh, and I fap to EP!
@18
Perfect
I fear that with the takeovers of AIG and Fan/Fred, and now this RTC idea, the government’s finances will become a black box and opaque making it too difficult for the average citizen to understand just what the hell’s going on financially.
It’s a CDO twice divorced
Super-SIV Redux!
Has anyone discussed the responsibility that Basel 2 has for the situation that we’re seeing now?
This whole stinking mess is one phenomenal shit show.
People, where the fuck were these high minded ‘regulators’ and ‘polly -ticians” when AIG, MER, MS, LEH, UBS GS, CS, and Cayne’s ganja hut were all falling over themselves to make bullshit “structures” up out of bullshit liar loans slipping S&P and Fitch a cool $250k per ‘rating’ and slicing off fat azzzed fees for themselves- to the tune of billions of dollars per year in “bonuses”???
Oh, I see, the bonus is heads I win, tails you lose. The tax payer bails out numbnuts CEOs and CFOS who levered up their companies 30, 40 and 50 to 1 inflate their ROEs and collect fat checks for themselves.
What a fucking joke, we should all take a moment of silence for capitalism, it just bit the fucking dust. These dimwits refuse to let the market do what it does best: find a clearing price.
So upward and onwaerd Jimmy ‘Uptick’ Cramer, Scarecrow Henry (he lacks a brain) and Cowardly Ben, who most definitely lacks adny fucking courage.
These aren’t markets, these are showtunes on Broadway- with all the evident certainty that in the end we will all feel good about ourselves as we stand and applaud what we knew would ineevitably come.
This is too funny.
Misty
I see debt people.
@21 yeah cuz this is the thing that will make the average american not understand what is going on financially. Not the fact that most of us are too dumb, fat, and lazy to even try to think for ourselves, we just listen to the moving picture box and repeat what it says.
Remember when everyone was making fun of Albania because the whole country had turned into a gigantic pyramid scheme.
like it @24 – our basle 2 gurus said buy loads of aaa rmbs for your books – its great for rwa and you get a pick up over senior – nice!
@25, spot on.
This is all about a huge leverage fuck up. The structured products themselves are not to blame. Most of those depressed prices will bounce back. It just may take a few years.
Now because a bunch of greedy fucks levered up and ignored the fact that like hurricanes liquidity events are inevitable, taxpayers could be stuck bailing out an entire industry.
This just happened 10 years ago with LTCM. You would think the market would have learned. But nobody (or almost nobody) priced liquidity risk into their models. Fuck them.
THE SCAM
1. Worldwide financial institutions jigger loaned CDO assets back on their books from central bank pawnshops ie. market fraud
2. Newly formed Resolution Trust corporation buys these toxic CDOs outright at a much higher valuation then they’re actually worth, putting phony cash assets back on worldwide financial institution balance sheet. (charged directly to taxpayers)
3. Government RTC corporation turns around and sells CDOs back to worldwide institutions at a loss.
A double Con.
RTC – ROAD TO WAR
The difference between the first RTC bailout and this one, is that the 2008 economy is NOT coming back. Employment statistics show fraud.
How many $50,000 jobs remain? Department of Labor statistics on jobs by industry are totally bogus. Check it out for yourself.
We are already in a post 1933 situation. The Playbook reads stagflation until War looms (McCain).
They’ve got nothing else to offer us dead country walking.
Michaelzstillman@yahoo.com
RTC – ROAD TO WAR
The difference between the first RTC bailout and this one, is that the 2008 economy is NOT coming back. Employment statistics show fraud.
How many $50,000 jobs remain? Department of Labor statistics on jobs by industry are totally bogus. Check it out for yourself.
We are already in a post 1933 situation. The Playbook reads stagflation until War looms (McCain).
They’ve got nothing else to offer us dead country walking.
@33 I guess you and your sister fucking friends with grade seven educations who blog for moveon.org in bumblefuck Michigan are in for it.
Plenty of 50K + jobs for those with at least a high-school education. Screw your head on straight, 1933 was the bottom of the depression if that is true now things can only get better from here and we dont even need a good ol fashioned World War.
Just curious fucko who who play, Hitler Stalin and Hirohito….oh thats right Bush II b/c he is the most evil man in the history of the world ever….I guess in your mind one “robbed” election = 6 million dead jews….get a fucking life and while your at it take Michael Moore’s/Noam Chompsky’s cock out of your ear and out it in your mouth…. got to shut you up somehow.
Warm Regards,
An American in Paris
Misty read my comment here :
Capitalism is Dead, United National-Socialist States of America under way…
http://lacrisepourlesnuls.blogspot.com/2008/09/lincendie-du-reichstag-amricain.html
@EP btw the name of the crisis is ‘Credit Crunch’, but you can’t say that on TV.
Credit Crunch will be followed by ‘The Second Great Depression’ (or maybe they’ll call it ‘The Big Failure’).
‘The Greater Depression’ ?
@34 American In Paris
Are you really THE JACKAL?
http://www.securitization.net/pdf/Nomura/CDO-Squared_4Feb05.pdf
“Synthetic CDOs-squared offer investors higher spreads than single-layer CDOs but also may present additional risks … If
the actual performance of the reference credits deviates substantially from the original modeling assumptions, the CDO-squared can suffer unexpected losses.”