30 Sep

Posted at 02:51h in Credit Spectrum
No doubt Romney and Obama each sincerely believe the other has the wrong idea of how to restore America to economic health. But, most of the narrative about the economy (is better, is worse) is sheer nonsense. We voters know it, and they know we know it. The true cause of our economic woes is the decoupling of the real economy from the financial system. It has been nearly 40 years since the commercial banks morphed into investment banks, ceding their credit function to the credit rating agencies; and nearly 10 years since the credit rating agencies switched allegiances from the buy side to the sell side. Today, neither government investment nor QE can put the asset and liability sides of our private sector balance sheet (a.k.a. the economy) back together again.

04 Aug

Posted at 13:52h in NRSRO

Overnight Marc Joffe sent a paper published 8/3/12, written by Pedro Romero at the Universidad San Francisco de Quito, entitled Why Did the US Market for Mortgage Backed Securities Unravel?  Dr. Romero explains the Financial Crisis as an instance of Gresham's Law: "Bad money drives out good if [the] exchange...

25 Jul

Posted at 21:01h in Credit Spectrum

Structured credit ratings spectacularly failed AAA and AA investors, and they also hollowed out the market for mezzanine risk. A healthy structured market needs investors willing to sacrifice yield for certainty. It also needs investors willing to sacrifice certainty for yield, without whom risk transfer in structured finance...

22 Jul

Posted at 13:08h in Credit Spectrum

SIFMA's decision to exclude mortgages coming from a jurisdiction where the threat of eminent domain being exercised is material was a hot topic on Naked Capitalism on 7/20 (last Friday) where it turned into a wrangle about public policy that, IMHO, missed the point of...

18 Jul

Posted at 13:11h in Credit Spectrum

Patrick Klaybor sent me an email, asking: I am trying to determine the value of a video that I shot of Les Paul at a dinner in Madison Wi. Wanna help? Since we finance portfolios using securitization but don't do single-asset valuations, I connected him to...

05 Jul

Posted at 17:23h in Credit Spectrum

VSOP consists of long and short positions on 50 tranches from a variety of issuers and servicers. The deals come from a range of vintages going back before 2000 but most from 2006 or 2007. There is a high concentration of Class A tranches for...

18 Jun

Posted at 21:57h in Credit Spectrum
Everyone I know is anxious. Those who are employed are worried about how long their jobs will last. My entrepreneur-friends are all anxious that they are not making enough money, not getting enough recognition, not realizing their goals fast enough, etc. Of course those who are neither working nor "entrepreneuring" are also anxious. If we are going to eradicate the root of our economic problem, we must embrace the possibility that these three propositions are true:
  1. Balance sheet realities largely determine economic reality.