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... mortgage market of the 50's and 60's, especially the cap on mortgages at 80% of property value.

And, no, I do not read Spanish well enough to read that in the original, but I read Spanish well enough to follow it in the Babelfish translation.

The systemic risk is that broad-based default of the mortgages would lead to solvency problems at the institutions that guarantees the bond. The difference between an unstructured CDO on the same pool of mortgages is that with an instructured CDO, the holders would pay for the haircut if there was a spike in foreclosures, while with the mortgage-bonds, its the bank pays for the haircut.

And, no, there is none of the concentration of systemic risks that comes with structured CDO's.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Fri Oct 10th, 2008 at 01:41:47 PM EST
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Exactly... this is why I did nto see that a big problem ont he mrotgage problem.. it is a tailor-amde solution for Spain...

but as you I ahve said pre cisely, the bank debt and credit on companies can look very much a structured vehicle created and bought byt the treasury...

so your point about asking for guarantees in equities makes a lot of sense.

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 04:13:40 PM EST
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