Re: Lower ratings for mortgage-backed bonds could cause a domino effect that might ultimately strangle what, until this year, was a major propellent of home prices: consumers' easy access to money.



On Sun, 22 Jul 2007, alexy wrote:

Straydog <asd@xxxxxxxxx> wrote:



On Fri, 20 Jul 2007, alexy wrote:

Straydog <asd@xxxxxxxxx> wrote:

On Fri, 20 Jul 2007, alexy wrote:

Video61@xxxxxxx wrote:

the investment banks used those bonds which are debt, not money,
You keep bringing that up. Have you seen anyone other than yourself
suggest that bonds are money?

The context around the phrase "bonds are money" says that your opinion is
that bonds are not money
That's correct. Vid and I agree on that; I just don't get his
fascination with repeating that statement ad nauseum.

and yet I have read many many accounts, in books,
of cases where literally anything of value can be put up a collateral for
loans as long as the loaning entity is willing to take that "anything of
value" as collateral.
Is that supposed to be an argument that debt is money?

Where in what I wrote did I say or imply or suggest that debt is money?
I'll take that as a "no". I didn't know why you would be saying such a
thing, but after you said that I appeared to not think debt was money,
you went into a discussion of "and yet I have read...", and I just
wanted to clarify what you meant.

And, kinda poorly at that. When money moves around, so does debt, and maybe even bonds. All depends on what other words you use to fill in the gaps between the words, and I'm not going any further on that, here.



In the section of the WSJ where lots of little numbers are, you can find
all kinds of data on bond prices, buying or selling. Sure seems like if
bonds are not money, then at least you can get real money pretty easily.

The same can be said of stocks and commodities. Maybe vid needs to go
off on an "equities are not money" or "commodities are not money"
binge if the basis for his "debt is not money" fascination is as you
suggest here.

Oh, on the contrary. As in Alice in Wonderland, one can use words any way
he/she wants to use them. And, I've read (WSJ) where some/certain
accountants can take liabilities and put them, depending on circumstances
and arguments, wherever they want on a balance ***.
It is entirely accurate to say that there is some discretion about how
certain transactions are recorded,

And, as mentioned in many WSJ articles over the years, actually happens.

but it is a gross overstatement to
say that liabilities can be put wherever they want on a balance ***.

You should have read Levitt's book like I did. In addition to the WSJ articles I read where people were putting numbers, basically, anywhere they wanted to put them. Whether it is a "gross overstatement" (your words), there is a raft of Pro Forma accounting out there where, in fact, a lot of liabilities were just totally loft off the balance ***, period.

as collateral to finance buyouts, mergers, and acquisitions.
How do you imagine that works? Private equity investor A has $50
million to invest.

In cool cash?

He goes to Bear Stearns and buys $50 million worth
of mortgage backed bonds.

I guess you never read the book "Barbarians at the gate." Or, many others.
Are you suggesting that any of these books supports the idea that
private equity players are using mortgage backed bonds to fund
buyouts?

Not specifically, but I'd like you to back up any idea that they can't use
mortgage-backed bonds to fund a buyout.

Right after you either provide back-up for the idea that they do use
mortgage backed securities,

How about...you go first on this one. But, I'll also add that I'll bet you didn't read the book (and I did read the book).

or back up any idea that they can't use
rutabagas to fund a buyout.

They can sure do that just as all the tea in china can make you a very rich man. But, then your last phrase basically proves my point, not yours.

If so, I suggest you reread your sources a little more
carefully, trying to avoid the video61 mistake of thinking that any
discussion of debt or of collateralized debt obligations is about
mortgage-backed obligations.

Well, I would guess that if we're talking about "collateralized debt
obligations" that it would mean the debt obligations have collateral
behind them (ie secured)
No, it means bonds that have other debt as collateral.

And, why would the debt obligations be called collateralized?

and that "mortgage-backed obligations" are backed
with mortgages.
Yes.

Different words, different terms, therefore, different
animals, right?
Sounds like your understanding is about as sophisticated as video61's.

Basically, I used different terms, and you said no to one and yes to the other, and that means I'm right.

Mortgage backed obligations are one type of collateralized debt
obligations.

And, you said, above, they are not.

.

Loading