> -----Original Message----- > From: Gruss Gott [mailto:[email protected]] > Sent: Monday, January 26, 2009 10:36 PM > To: cf-community > Subject: Re: Wow! Holy Snub > > > Won wrote: > > happen even if it was triggered by something else. While we could > argue > > over what to call the bottoming of the real estate market, I feel > > comfortable calling a 8%+ default rate on subprimes a crisis. > > > > Well I'd toss out 3 points to that: > > (1.) Since pre-2001 the CFMA didn't exist (and probably didn't get > rolling until 2004) we have no way of knowing this but ... think if > you could've bought swaps or created CDO-type securities against the > internet bubble stocks ... would we have had a different result? Not > in my book. Thus the problem is not the underlying asset, it's the > bet and thus the system.
No one denies this. > (2.) Every single sub-prime including Alt-a, et al is ~$1 trillion in > total. Even if we agree that 20% are totally worthless (not your 8% > number), that's $200 million. Big deal. The gov't could just buy > every single one and be done with it. 8% default rate does not mean 20% of the mortgages are useless. You are forgetting two very important facts. A) You are forgetting to include the consequences that when you default on your mortgage you run the very real risk of losing your home. The crisis is not the dollar amount but American's being displaced as well as losing their credit rating. Also the effect of this fear. b) 8% default affects more than 20% of the MBS. I don't have the numbers, and I doubt I ever will, but you know just as well that each tranche is composed of multiple mortgages. And guess what? Certain investment companies have to carry certain rated MBS, CDO, etc. Even a certain tranche being in default will lower the whole rating this forcing them to sell. Banks will start to sell because their VAR models will swing. This causes a sell off. > (3.) Let's assume there was no CFMA meaning we just had $200 million > in bad loans. If anti-trust was working as intended, there'd still be > no crisis just a bunch of bankrupt bankers. W00t! Which brings us > back to the system problem. > > CONCLUSION: it was a systemic failure exacerbated by the CFMA and > nothing to do with the underlying assets that failed. > I also agree with you there. This was not a failure of the product. It was a maelstrom. But not to call it a crisis is to undervalue the situation we are currently in. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~| Adobe® ColdFusion® 8 software 8 is the most important and dramatic release to date Get the Free Trial http://ad.doubleclick.net/clk;207172674;29440083;f Archive: http://www.houseoffusion.com/groups/cf-community/message.cfm/messageid:286819 Subscription: http://www.houseoffusion.com/groups/cf-community/subscribe.cfm Unsubscribe: http://www.houseoffusion.com/cf_lists/unsubscribe.cfm?user=89.70.5
