Chapter 545 MBS&MBs

  In the South China Sea bubble, it was the British government that issued bonds, with the purpose of reducing interest rates to reduce the financial burden caused by national debt.

Those who play hedge funds are high-IQ Wall Street elites. Those who can’t afford mortgages are low-educated, unable to find a good job, and want to live at the bottom of the rich life, such as plumbers. People in these two groups are not. There will be any intersection, unless the water pipes of the Wall Street elites break and need someone to repair them, but the financial crisis has brought their lives to an intersection.

  In 2000, the Internet developed too fast, too miraculous, and too stimulating, beyond the scope of human understanding. This created a bubble. The federal government sued the Microsoft monopoly case, and Microsoft lost the case. With this as the fuse, the Internet bubble in the US stock market burst and the US economy began to weaken. The Federal Reserve in order to reduce the unemployment rate and boost the economy.

  The South China Sea bubble is because the South China Sea company and stockholders who bought the shares did not know that the United Kingdom had no actual control in South America. It was caused by poor information. The rapid exchange of information on the Internet prevented the same problem from happening again.

  Many years ago, investors were sitting on a pile of money, looking for good investment opportunities to make more money. It is customary for them to go to the Federal Reserve Board to buy short-term Treasury bonds, which is considered to be the safest investment. However, due to the bursting of the Internet bubble and 9/11, the chairman of the US Federal Reserve lowered the interest rate to 1 percentage point to maintain economic growth. Investors say that a 1% rate of return is too low.

  But from another perspective, this means that banks can borrow from the Fed at a 1% interest rate, plus trade surpluses continue to flow in from Japan, China, and the Middle East. So there are a lot of low-interest loans that make it easy for banks to borrow.

  So they use "leverage" frantically.

  Leverage can make investment gains huge, and investment losses can also be huge. Compared with insurance companies and financial institutions, people who play hedge funds are much more gambled. They give money to investment banks. The investment banking business includes many pieces. When it comes to issuance and underwriting, they think of Morgan Stanley. When it comes to mergers and acquisitions, it is easy to think of Goldman Sachs. When it comes to retail brokerage, it must be Merrill Lynch. With General Motors, etc., these famous companies can't go bankrupt.

MBS is mortgaged by the mortgage, or the physical property of the house; CDO is mortgaged by the cash flow of the interest repayment of the mortgage, and the house is not his mortgage. These investment banks sell the CDO to hedge fund managers and insurance companies. , CDO is not only about mortgages, but the key thing is that the buyers and sellers of the CDO market are far away from the participants in the real estate market. This distance is not the actual distance. The plumber who borrowed the mortgage may even go to the elite homes to repair the water pipes. The Wall Street elite would never take a look at the "loser". He may be busy on the phone, or may be making out with his beautiful wife. In short, he will not spend an extra second on the plumber.

  After the Great Depression, the Roosevelt administration promulgated a bill called "Glass Steiger", which established the global financial supervision system for more than half a century. One of the most famous is that the business of commercial banks must be strictly separated from the securities business, and separate operations must be implemented. Those who engage in deposits and loans cannot engage in securities underwriting. Therefore, under this pressure, the Morgan Consortium split its business into two, Morgan Stanley became an investment bank, and the other J.P. Morgan became a commercial bank.

  Hedge fund managers will give money to Morgan Stanley and obtain CDOs from Morgan.

  Now the commercial bank JP Morgan is holding a loan contract in his hand, and the loan contract is immobile. In order to improve liquidity, these subprime loans need to be packaged and packaged, so MBS was created. When you go to the bank, you can't buy other people's loan contracts, you can only buy the bank's wealth management products. MBS can be regarded as a kind of wealth management product. The bank packs these loan contracts into MBS, and then splits them into three levels for sale: priority, sub-optimal, and sub-prime. Each time the loan is reclaimed, the priority of the return is guaranteed first, the second priority is satisfied after the priority return is met, and the last is subprime. Therefore, the priority expected rate of return is the lowest, and the risk is the lowest, and the secondary expected rate of return is the highest, and the risk is also the largest.

  Subprime mortgage loans are characterized by high risks, high risk premiums, and higher returns than ordinary bonds. Hedge fund managers buy CDOs from Morgan Stanley to buy such high-yield ones. Their flow of funds is large, but they are not as good as insurance companies. Insurance companies choose low-risk and low-returns. CDOs are like three small waterfalls. At work, when the funds are returned, the top box is filled first, then flows to the middle box, and the rest goes to the bottom layer. The fund comes from the mortgage repaid by the homeowner. If someone owes the loan and fails to repay the loan, there will be less funds returned, and the bottom box will be dissatisfied.

  Why are hedge fund managers so stupid? If he is really stupid, he won't be able to play hedge funds. The speculative behavior is to fast in and out, not to hold in the long-term, and whoever takes the last one is unlucky, but as long as he is not the last one, the profits are considerable.

In addition to commercial banks, there are also special mortgage companies in the United States. They are not only doing mortgage business, but also real estate intermediaries. You can buy and sell houses through them. The loan company packs all subprime loans and incorporates some high-level and intermediate assets. Formation of ABS including MBS. The underlying collaterals of ABS are diverse, from bank loans, leases, auto loans, credit card loans, etc. The investment bank buys the bonds of the loan company. If the borrower cannot repay the money, the flow of funds To stop, everything is okay when the economy is booming.

Since 2004, real estate agents and the U.S. government have slowly discovered that not all new immigrants are wealthy people. On the contrary, there are many poor people with poor qualifications, especially after refugees and stowaways from Latin America were laundered in the underground market. , Entered the ranks of new immigrants.

  At this time, the indigenous citizens of the United States almost have their own homes, and they can't consume the excess capacity of the property market at all.

  So the U.S. federal government put pressure on major lending institutions, hoping that they would relax their loan issuance requirements and give money to low-income people to buy houses.

  In the beginning, the loan company was unwilling, but the housing prices kept rising. Banks earned intermediate fees, management fees, and interest rate differentials. The wealthy investors got stable investment income, and the poor got loans to buy houses. Occasionally, a few people do not repay the loan, because the house price has been rising, and the bank has taken the house back for auction. The bank feels there is no risk. As a result, commercial banks and loan companies have become more and more courageous and have been declining, so anyone can get a loan to buy a house. It used to be a 30% down payment and income proof, but now a 5% down payment or even 0 down payment, you can get a loan by standing on the street and taking a photo. The house bought with the loan can be used as a mortgage and then the loan can be used to buy a second house. MBS products have always sold well, and banks have further developed MBS-based CDOs, and the real estate bubble has risen under the background of excess liquidity.

The premise of all this is that the Fed’s low interest rate, once the interest rate increases, speculators can no longer get low-interest loans and cannot earn interest differentials, then it will cause deflation, and one or two points of interest is not for small funds. No matter what, two or three dollars more for 100 dollars is not enough for a cup of Starbucks money, but if the capital pool is large enough, even a 1 point increase in interest is a huge sum of money. Speculative hedge fund managers are the first to run. But investment banks will not let him run so easily, and there are so many safe-haven currencies.

  According to the laws and regulations of the United States, the loan company's housing loan is issued without recourse. This means that if the lender is unable to repay the mortgage, the loan company has no right to confiscate other property other than the mortgaged real estate. Americans are still very open to the idea of ​​house ownership. It is different if you switch to a Chinese. When the purchase price rises, everyone will work together. Buy, and if you lose money, you must return the house to the real estate developer. Investment is risky. How can you make money without losing it?

The subprime mortgage crisis occurred due to the inadequate supervision of the real estate financial industry by the federal financial regulatory agency. If face-to-face, hedge fund managers would never lend money to plumbers, let him invest in a house, charge meager interest, and the manager would have to give money. The customer income that he takes care of.

   But this kind of weird thing happened during the subprime mortgage crisis.

  So the Internet has really brought in the distance between people?

  It happened to be the issue of information exchange. The Order of the Phoenix always received news from behind the Death Eaters. The Battle of the Ministry of Magic is an example.

New immigrants thought that the order was to take a dinner plate, but in fact a grinding plate fell. The loan was bought for the school district. The first thing the loan company discovered was the auction of the property when it was overdue. The children could not even read the book, let alone Good school.

If you admit your gambling, you have to accept defeat. You can lose money and jump to bankruptcy. Sapo can't do it. The Pacific Ocean is not covered. Just jump and teach yourself the most vivid lesson by paying tuition. Dreaming is always a dream. , Excessive packaging will deceive people’s perception, no matter how good the pie painting is, it will not be eaten after all, and it will not fill the stomach if it is taken.

  (End of this chapter)