Word: bonde
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...Strata is one of the many so-called toxic assets clogging the nation's financial pathways. What's more, the complicated bond and its ilk are likely to present a significant stumbling block in the government's latest effort to fix our ailing banks. (Read "Why Your Bank is Broke...
...Here's how Strata worked: The original investment (made by hedge funds or other big investors) was $20 million, plus a fee paid to the underwriter, Bank of America, for structuring the bond. Bank of America then took the $20 million and bought some liquid, safe asset, such as Treasury bonds. Those safe bonds then became Strata's collateral...
...comes the messy part. Bank of America used Strata's collateral as the backing against which it could write credit default swaps (CDS), that is, insurance contracts based on whether some other bonds get paid back. As a writer, or seller, of CDS contracts, Strata investors get a regular fee, much like a annual amount any insurance holder would pay, for guaranteeing the buyer of the insurance against losses on the bonds. All told, Bank of America wrote CDS contracts worth $20 million based on the debts of as many as 75 companies. Add the fees from the insurance contracts...
...Here's the catch: If the bonds Strata insured against go bad, Strata is on the hook for the losses. And in a twist on regular insurance, the buyer of a CDS contract [i.e., the insured] doesn't actually have to own the bond. If the bond goes belly up, they get paid as if they had, pocketing the insurance payout as a profit, which of course would be a loss for the owners of Strata...
Stripped of his tuxedo, Aston Martin, and martini, the newest James Bond still maintains an heroic persona in his latest film, “Defiance.” While the movie’s Holocaust setting might arouse the expectation of another horrifying display of Nazi actions (as in “Schindler’s List), director Edward Zwick ’74 (“The Last Samurai,” “Blood Diamond”) surprises the audience by examining the Holocaust from an original angle. In a story of survival, Daniel Craig...