EPTOn December 20 2014 14:07 JonnyBNoHo wrote:
Nothing is 'supposed to' default. AAA does not mean zero risk. There's a hierarchy for tranches, so you do know who gets paid out first, and so on.
Not sure about your argument about citi. The rule pushes derivatives off the bank's balance sheets so if you don't like SPV's you shouldn't like the rule.
The rule pushes them out on SPV and spells out explicitly that the SPV wont be taken back onto the balance sheet. The collapse of citi was caused by citi taking those SPVs back on the balance sheet and this is what they are trying to avoid. Show nested quote +
On December 20 2014 12:58 oneofthem wrote:
but AAA isn't supposed to default, and defaulting on these tranches muddles everyone's books because they literally don't know which tranch will be paid out first and so on. the rating was horseshit
but AAA isn't supposed to default, and defaulting on these tranches muddles everyone's books because they literally don't know which tranch will be paid out first and so on. the rating was horseshit
Nothing is 'supposed to' default. AAA does not mean zero risk. There's a hierarchy for tranches, so you do know who gets paid out first, and so on.
Show nested quote +
On December 20 2014 13:49 Sub40APM wrote:
AAA by definition are not supposed to have any default rate, the service providers that were supposed ensure that were either inept/corrupt, the raters, or stupid, AIG and the monolines. The liquidity in the market dried up because as oneofthem said, when AAA turn into a big black box no financial institution could trust any other financial institution.
The Citirule was specifically created because retarded Citi pushed out all of its risk onto SPV when it was dancing around Tim Geithner asleep at the wheel and then took them back on its balance sheet once they realized their customers would never trust them again if they didnt.
On December 20 2014 12:06 JonnyBNoHo wrote:
Subprime's effect on the wider economy flowed in a number of ways. The main one was through a run on the money markets.
I wouldn't call a standard MBS a derivative, unless we're talking a synthetic. To my knowledge the provision just pushes out commodity derivatives, equity derivatives and un-cleared CDS so regardless of the definition I don't think they apply to this.
MBS worked pretty well btw. Most AAA tranches performed fine (low default rate), and a lot of the losses were due to the market price tanking after liquidity dried up and mark to market rules or for those holding junior / equity tranches.
On December 20 2014 10:14 Sub40APM wrote:
Are you purposefully being dense here? Subprime's impact on the wider economy flowed through derivatives.
On December 20 2014 09:05 JonnyBNoHo wrote:
Weird choice of criticism, subprime isn't a derivative.
On December 20 2014 08:46 Sub40APM wrote:
What a weird choice to cite as experts on derivatives. Bernanke's grasp of derivatives was so poor he didnt understand how subprime would impact the rest of the economy as late as 2008.
On December 20 2014 08:18 JonnyBNoHo wrote:
Says the guy who posted the youtube clip titled 'Reagan is a retard'.
Warren's bitching over derivatives is pretty laughable. Almost no one with credibility came to her side. Volker and Bernanke both panned it as ineffective and many have pointed out that it would reduce regulator's ability to regulate the activities.
On December 20 2014 07:03 GreenHorizons wrote:
I like how people avoided the states rights issue in order to step on Warren. What's wrong with the legislation being proposed...? "No one knows, but look at her cheekbones!" "Yeah she has funny nicknames! tehehe"
Politics really has devolved into an elementary school playground hasn't it?
I like how people avoided the states rights issue in order to step on Warren. What's wrong with the legislation being proposed...? "No one knows, but look at her cheekbones!" "Yeah she has funny nicknames! tehehe"
Politics really has devolved into an elementary school playground hasn't it?
Says the guy who posted the youtube clip titled 'Reagan is a retard'.
Warren's bitching over derivatives is pretty laughable. Almost no one with credibility came to her side. Volker and Bernanke both panned it as ineffective and many have pointed out that it would reduce regulator's ability to regulate the activities.
What a weird choice to cite as experts on derivatives. Bernanke's grasp of derivatives was so poor he didnt understand how subprime would impact the rest of the economy as late as 2008.
Weird choice of criticism, subprime isn't a derivative.
Are you purposefully being dense here? Subprime's impact on the wider economy flowed through derivatives.
Subprime's effect on the wider economy flowed in a number of ways. The main one was through a run on the money markets.
On December 20 2014 10:42 ticklishmusic wrote:
Err... subprime mortgages were bundled into mortgage backed securities (aka, derivatives) with a few prime mortgages, so basically adding kool aid powder to everclear (hint: it still tastes awful and will mess you up and yes I'm in college). Theory was that houses were good collateral, but turns out collateral is only worth something if 1. someone actually wants to buy it and 2. its not insanely overpriced. Basically if you drank the kool aid, you're fucked either way eventually.
I personally don't understand why "high finance" and investment banking exist since return is effectively a risk premium so it's not actually possible to beat the market. This recent article kinda outlines my view.
http://www.washingtonpost.com/sf/business/2014/12/16/a-black-hole-for-our-best-and-brightest/?hpid=z4
On another note, Obama is having one of the best weeks (or couple weeks) of his presidency. The timing suggests that God has a sense of humor.
On December 20 2014 09:05 JonnyBNoHo wrote:
Weird choice of criticism, subprime isn't a derivative.
Who would you like to cite? I've yet to see anyone knowledgeable come out in support of that rule.
On December 20 2014 08:46 Sub40APM wrote:
What a weird choice to cite as experts on derivatives. Bernanke's grasp of derivatives was so poor he didnt understand how subprime would impact the rest of the economy as late as 2008.
On December 20 2014 08:18 JonnyBNoHo wrote:
Says the guy who posted the youtube clip titled 'Reagan is a retard'.
Warren's bitching over derivatives is pretty laughable. Almost no one with credibility came to her side. Volker and Bernanke both panned it as ineffective and many have pointed out that it would reduce regulator's ability to regulate the activities.
On December 20 2014 07:03 GreenHorizons wrote:
I like how people avoided the states rights issue in order to step on Warren. What's wrong with the legislation being proposed...? "No one knows, but look at her cheekbones!" "Yeah she has funny nicknames! tehehe"
Politics really has devolved into an elementary school playground hasn't it?
I like how people avoided the states rights issue in order to step on Warren. What's wrong with the legislation being proposed...? "No one knows, but look at her cheekbones!" "Yeah she has funny nicknames! tehehe"
Politics really has devolved into an elementary school playground hasn't it?
Says the guy who posted the youtube clip titled 'Reagan is a retard'.
Warren's bitching over derivatives is pretty laughable. Almost no one with credibility came to her side. Volker and Bernanke both panned it as ineffective and many have pointed out that it would reduce regulator's ability to regulate the activities.
What a weird choice to cite as experts on derivatives. Bernanke's grasp of derivatives was so poor he didnt understand how subprime would impact the rest of the economy as late as 2008.
Weird choice of criticism, subprime isn't a derivative.
Who would you like to cite? I've yet to see anyone knowledgeable come out in support of that rule.
Err... subprime mortgages were bundled into mortgage backed securities (aka, derivatives) with a few prime mortgages, so basically adding kool aid powder to everclear (hint: it still tastes awful and will mess you up and yes I'm in college). Theory was that houses were good collateral, but turns out collateral is only worth something if 1. someone actually wants to buy it and 2. its not insanely overpriced. Basically if you drank the kool aid, you're fucked either way eventually.
I personally don't understand why "high finance" and investment banking exist since return is effectively a risk premium so it's not actually possible to beat the market. This recent article kinda outlines my view.
http://www.washingtonpost.com/sf/business/2014/12/16/a-black-hole-for-our-best-and-brightest/?hpid=z4
On another note, Obama is having one of the best weeks (or couple weeks) of his presidency. The timing suggests that God has a sense of humor.
I wouldn't call a standard MBS a derivative, unless we're talking a synthetic. To my knowledge the provision just pushes out commodity derivatives, equity derivatives and un-cleared CDS so regardless of the definition I don't think they apply to this.
MBS worked pretty well btw. Most AAA tranches performed fine (low default rate), and a lot of the losses were due to the market price tanking after liquidity dried up and mark to market rules or for those holding junior / equity tranches.
AAA by definition are not supposed to have any default rate, the service providers that were supposed ensure that were either inept/corrupt, the raters, or stupid, AIG and the monolines. The liquidity in the market dried up because as oneofthem said, when AAA turn into a big black box no financial institution could trust any other financial institution.
The Citirule was specifically created because retarded Citi pushed out all of its risk onto SPV when it was dancing around Tim Geithner asleep at the wheel and then took them back on its balance sheet once they realized their customers would never trust them again if they didnt.
Not sure about your argument about citi. The rule pushes derivatives off the bank's balance sheets so if you don't like SPV's you shouldn't like the rule.
