Word: defaulter
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...first time this has happened, yet Wall Street still isn't getting the message. One August day nine years ago, Russian bonds defaulted. A surprising result of this default was the spectacular failure of Long-Term Capital Management (LTCM), a hedge fund in Greenwich, Conn. Surprising because LTCM had nary a penny in Russian bonds. They nearly took the global financial structure with them...
...current trouble can be traced back to disturbances in U.S. mortgage markets, especially in the so-called subprime market sectors, where default rates have been rising sharply. As problems have graduated from little-known U.S. homebuilders and finance companies to brand-name commercial and investment banks, public alarm has escalated. Falling house prices, rising levels of unsold homes and the financial stress from the expected surge in higher-interest mortgage resets mean that there will be no early end to these housing-sector woes...
...then slice up the result into different securities (reflecting different levels of risk) to sell to investors. Many such securities carry AAA or "investment grade" ratings despite subprime mortgages being in the mix. From there, things get really complex--CDOs created from other CDOs, synthetic CDOs crafted from credit-default swaps, none of which had experienced a down market. "The problem is that CDOs were untested. There was not much history to suggest CDOs would behave the same way as AAA corporate bonds," says Richard Bookstaber, a hedge-fund manager and author of A Demon of Our Own Design...
...decades past, the trouble would end with a borrower in default and a bank foreclosing on the home. But today few banks hold onto mortgages until they are paid off. Most loans are bundled together and sold as mortgage-backed securities. ? Mortgage delinquency rate...
...Post liberalization of the economy in the '90s, a new mind-set has evolved," says sociologist Patricia Oberoi. "The socialist inhibitions of old have gone, and there is encouragement from private interests, and by default from the government, to spend more. Weddings are the bread and butter of bridal fairs and magazines, and of the fashion and event management industries...