Word: bankes
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Dates: during 2000-2009
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...Emergency Economic Stabilization Act, known as the bailout plan, was to restore stability and liquidity to the U.S. financial system. The TARP, one of the Act's driving initiatives, was intended to be a mechanism for financial institutions to offload toxic assets, in general, heavily leveraged ABS securitized by banks and held on their books. An ABS is considered a toxic asset when the value of the ABS is less than the original investment. The toxic asset has a negative impact on the bank's balance sheet which, when multiplied, reduces the banks ability to lend...
...collapse of the housing market. Like all ABS, MBS derive their value from underlying loans, in this case, mortgages. A large group of mortgages provides the payment stream to the holders of ABS in the form of individual interest and principal payments made by a borrower to the bank...
...home would be less than the balance on the mortgage. However, since MBS derive their value from a pool of loans - typically thousands of individual mortgages - the default of some portion of the mortgages would not mean the security had no value, only a reduced value. Unfortunately, banks, in an effort to increase their investment returns, exacerbated the problem by using enormous leverage to purchase and securitize mortgage loans. Thus, even if MBS's value declined because of defaults, because of the use of leverage, the security could still be toxic to the bank...
...Under TALF, the Fed will only finance AAA-rated ABS. Investors are not given an incentive to purchase the riskier tranches. The result is that securitizers would have to keep the riskier tranches on their own balance sheet. And, given banks recent experience with this approach, it is unlikely that they will be eager to do so again. However, in the event a bank wishes to act as a securitizer, they will have no choice...
...less. At the same time, Manuel has also helped transform how the rich world views the poor one. Globalization has given new status to places like Brazil, China, India, Russia and South Africa, but the institutions that manage the global economy - the U.N., the World Bank, the International Monetary Fund - still reflect the world as it was at the end of World War II. Manuel was one of the first to point this out and has consistently championed the view, now widely accepted, that the global order needs a fundamental overhaul. (See pictures of the Top 10 scared traders...