Word: mortgagees
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Finally, many CDSs insured products ill-suited for insurance. Insurance works best when a disaster is random, infrequent, and independent from other disasters. This is not the case for mortgage-backed securities. In the housing market, prices are dependent on the surrounding area. A firm can attempt to mitigate this...
For CDSs that back investments in mortgage-backed securities, this is especially potent. There is no way to insure a disaster that in turn causes other disasters. It would be like providing health insurance when one heart attack induces a chain of other heart attacks in the population. Therefore, the...
But, the great banking crisis of 2008 is over. It began last September 15 when Lehman Brothers filed for bankruptcy and bottomed when Citigroup (C) traded below $1 last month. Most analysts believe that mortgage-backed securities which included packages of subprime home loans failed when mortgage default rates went...
It is equally safe to say that the large American banks are works in progress which are, in most ways, still dilapidated. Treasury Department analysts may not have the IQs of the PhDs who created mortgage-backed securities, but they did not do their detective work blindly when they insisted...
Economists simply do not believe that tight-fisted and relatively poor Chinese consumers have the purchasing power to rescue China's economy, let alone the rest of the world. They're too busy saving for a rainy day. Beijing realizes that among consumers "household savings are high (and their consumption...