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It is in spanish.. but here is an excelletn link.. and an explanation of why the mortgage buy is generally a good idea and will shield the spanish economy...

http://www.soitu.es/soitu/2008/10/09/actualidad/1223568245_318730.html

I do not know if you read spanish.. I hope... it basically says tat cedulas are not SIV (they were forbidden) nor CDS nor CDO... they were bonds given by the bank insttuion to pay with the guaratee of the insitution, the mortgage and the building (whcih  belogns to the bank if its nt paid) plus the 20-30% amount of direct cash payment.

If there is a massive mortgage default, banks will have to deleverage by caliming debt or selling houses, to pay for the interest rates to te costumers that bought it... so if there is a meltdown they could end up having to sell hundreds of houses to pay and rebuy the cedulas... that would be crazy during a recesion.

With this buy, the government will take a risk up to a certain level.. if defaults are contained the treasury will earn a lot of money if there is a meltdown, the banks will have no meltdown and teh treasury willr aise debt 4 pints over the GDP.

Another completely different issue are the private comapanie debt that banks have now...

A pleasure

I therefore claim to show, not how men think in myths, but how myths operate in men's minds without their being aware of the fact. Levi-Strauss, Claude

by kcurie on Fri Oct 10th, 2008 at 12:58:59 PM EST
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