tag:blogger.com,1999:blog-912107698547747613.post7404640183978720517..comments2023-10-23T22:07:07.535+01:00Comments on London Banker: What's up with the covered bond push?London Bankerhttp://www.blogger.com/profile/13358082683340132378noreply@blogger.comBlogger16125tag:blogger.com,1999:blog-912107698547747613.post-67595042429270830822008-10-14T05:36:00.000+01:002008-10-14T05:36:00.000+01:00Your guess and suspect is going to happen. Good pr...Your guess and suspect is going to happen. Good prophecy! I think that we are standing before a deep waterfall ahead of us!<BR/><BR/><A HREF="http://www.myinvestorsplace.com/" REL="nofollow">MyInvestorsPlace - trading, value, investing, forex, stock, market, technical, analysis, systems</A>Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-912107698547747613.post-55843317777347424242008-08-07T21:52:00.000+01:002008-08-07T21:52:00.000+01:00Absolutely spot on LB. In fact that's effecti...Absolutely spot on LB. In fact that's effectively what happened (sans covered bonds) with the S&Ls 20 years ago. So why are the bonds entering the mix this time? Churn, baby, churn! There are fees to be pocketed. Then the bonds can be repackaged and sold as "high quality" paper on a secondary market. I smell another derivative bubble.<BR/><BR/>Then comes the inevitable bail-out (The history books will one day conclude that our civilization suffered death by moral hazard.), and things <I>really</I> go to Hell in a handbag. Fannie and Freddie could double the national debt overnight. What would the FDIC do? By then the system will be under so much pressure, it will be impossible to predict which gasket will blow first.Knute Rifehttps://www.blogger.com/profile/02345893660115107054noreply@blogger.comtag:blogger.com,1999:blog-912107698547747613.post-15859618414218260492008-07-29T15:18:00.000+01:002008-07-29T15:18:00.000+01:00Wouldn't there be a revolt by already existing ban...Wouldn't there be a revolt by already existing bank bond holders? Can a bank subordinate existing bond holders in this way?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-912107698547747613.post-14626748766939633522008-07-28T23:11:00.000+01:002008-07-28T23:11:00.000+01:00icanhasforce,you are getting money for the covered...icanhasforce,<BR/><BR/>you are getting money for the covered bonds, aren't you? (not that i would buy them.)<BR/><BR/>the fdic, in the event of receivership, would theoretically:<BR/><BR/>sell good assets for good money and sell bad assets for a lot less money.<BR/><BR/>under this plan the bank would "sell" the good assets for good money NOW, and leave the fdic to sell the bad assets for a lot less money later.<BR/><BR/>i'm still not sure i see a difference. The caveat would be the extent to which current management at the bank pillaged for bonuses and renumeration between now and receivership.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-912107698547747613.post-73082461677767539342008-07-28T22:54:00.000+01:002008-07-28T22:54:00.000+01:00You're the one with the experience, but when a ban...<I>You're the one with the experience, but when a bank goes into receivership, wouldn't the fdic sell all the assets (getting good money for the best ones) and essentially left taking big hits on the bad ones? I'm not sure what the difference is, except here we let the wolves out to go and identify the good assets ahead of time and take their money earlier rather than later.</I><BR/><BR/>From what I read, Covered bonds would get pulled out of the banks assets and go directly to the investors. That would mean that the FDIC would only get the garbage. Covered bonds can be repackaged at any time as the offering institution sees fit, so just before they go into receivership they can repackage all the underperforming loans into junk bonds, and the performing ones into their "good clients" bonds. This way friends stay solvent and the US taxpayer is guaranteed to pay a bailout.icanhasforcehttps://www.blogger.com/profile/07019140997734772887noreply@blogger.comtag:blogger.com,1999:blog-912107698547747613.post-89028576767028039972008-07-28T20:59:00.000+01:002008-07-28T20:59:00.000+01:00Cynical ? No I don't think so. More like money goo...Cynical ? No I don't think so. More like money good ! A brillant way (and well explained too) to skim off the last shreds of value and leave taxpayers holding a bigger bag.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-912107698547747613.post-56892656141955108522008-07-28T20:54:00.000+01:002008-07-28T20:54:00.000+01:00Hey, LBI guess we will know soon enough if you wer...Hey, LB<BR/><BR/>I guess we will know soon enough if you were paranoid or not. In the meanwhile, your scenario is credible enough.<BR/><BR/>RGE's AfAAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-912107698547747613.post-68952019707132803232008-07-28T15:57:00.001+01:002008-07-28T15:57:00.001+01:00anonymous 5:31With mbs, the cash flows are all ver...anonymous 5:31<BR/><BR/>With mbs, the cash flows are all very exact. I would guess they are thinking more along the lines of the 'kitchen sink' bonds of the late 80's, mixing up asset classes, etc. <BR/><BR/>mAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-912107698547747613.post-5199662968992216482008-07-28T15:57:00.000+01:002008-07-28T15:57:00.000+01:00anonymous 5:31With mbs, the cash flows are all ver...anonymous 5:31<BR/><BR/>With mbs, the cash flows are all very exact. I would guess they are thinking more along the lines of the 'kitchen sink' bonds of the late 80's, mixing up asset classes, etc. <BR/><BR/>mAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-912107698547747613.post-40639893818196279842008-07-28T14:57:00.000+01:002008-07-28T14:57:00.000+01:00should get more info from the Crooks soon enough!0...should get more info from the Crooks soon enough!<BR/><BR/>09:48 U.S. Treasury says to issue guidance for development of covered bond market at 2:30 pm - Reuters <BR/><BR/>gammaAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-912107698547747613.post-63957722228868400222008-07-28T13:31:00.000+01:002008-07-28T13:31:00.000+01:00I don't think Secretary Paulson has made clear why...I don't think Secretary Paulson has made clear why he thinks covered bonds are a great alternative to MBS. It seems he has successfully gotten the FDIC to "ring fence" the assets securing a covered bond in the case of a bank issuer which fails. Perhaps the assets are not viewed as part of the estate under the U.S. Bankruptcy Code for a non-bank issuer. However, my understanding is that the assets in a trust for MBS cannot be touched by other creditors in both the case of bank insolvency law and the Bankruptcy Code. covered bonds do not seem to have an advantage in this respect.<BR/><BR/>Also, one of the advantages of MBS is that the issuer gets rid of interest rate risk, though may retain credit risk if it guarantees the MBS, as Fannie and Freddie do. With covered bonds, it would seem that the issuer retains both type of risks.<BR/><BR/>What am I missing?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-912107698547747613.post-67246718158207860972008-07-27T05:19:00.000+01:002008-07-27T05:19:00.000+01:00I was going to say something similar to "m" (altho...I was going to say something similar to "m" (although probably not so cogently). What kind of ratio of bond $amount/asset do covered bonds have? If it were 1/1, then this wouldn't really make much difference, as the bank would have cash in hand to use, and so its demise would simply be delayed, and FDIC would gain some time and lose nothing. If the haircut ratio was substantial, then this would truly be a worrisome scheme.<BR/><BR/>I'm glad you have a blog of your own, LB. I bookmarked it, so it will be much easier to find that the sub-site at RGE. I have enjoyed reading your comments and think you have some great insights.<BR/><BR/>suecrisAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-912107698547747613.post-32384975568810566772008-07-26T23:05:00.000+01:002008-07-26T23:05:00.000+01:00You're the one with the experience, but when a ban...You're the one with the experience, but when a bank goes into receivership, wouldn't the fdic sell all the assets (getting good money for the best ones) and essentially left taking big hits on the bad ones? I'm not sure what the difference is, except here we let the wolves out to go and identify the good assets ahead of time and take their money earlier rather than later.<BR/><BR/>The real rub would be if the wolves were allowed to issue the covered bonds with larger haircuts than the fdic would if they were selling them outright.<BR/><BR/>To the extent that the whole situation is deteriorating rapidly, wouldn't the early money be the best money?<BR/><BR/>I see the early 'investments' (now worthless) of the SWF's in our banks to be similar. <BR/><BR/>mAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-912107698547747613.post-55475217501133472622008-07-25T16:00:00.000+01:002008-07-25T16:00:00.000+01:00that type of piecemeal would be the typical WS dog...that type of piecemeal would be the typical WS dog eat dog thing to do...<BR/><BR/>but, as timing might go, would they dare adding another burden on the taxpayer after F&F and potentially FHA?Dragos Popahttps://www.blogger.com/profile/08739116901565003240noreply@blogger.comtag:blogger.com,1999:blog-912107698547747613.post-42474996198433718582008-07-25T14:24:00.000+01:002008-07-25T14:24:00.000+01:00I'm expecting parallel inflation and deflation at ...I'm expecting parallel inflation and deflation at the same time. Inflation as imported commodities (oil, metals) rise in dollar terms and are subject to competitive demand while the serial bailouts and stimulus gimmicks blow out debt some more. Deflation as Americans get too squeezed to buy much in the way of inessentials (second homes, new electronics, investments, etc.). Deflation lasts longer.London Bankerhttps://www.blogger.com/profile/13358082683340132378noreply@blogger.comtag:blogger.com,1999:blog-912107698547747613.post-50045709373546072092008-07-25T13:33:00.000+01:002008-07-25T13:33:00.000+01:00LB,in your opinion are we heading down the path of...LB,<BR/>in your opinion are we heading down the path of hyperinflation or will credit destruction cause deflation? Not worried about the USD in deflation, but if HD occurs, what do you recommend to hedge? Gold? Even as its manipulated?<BR/>ThanksSennahttps://www.blogger.com/profile/15771137265451125046noreply@blogger.com