Best Analogy to Securitization and Foreclosure - The Producers by Mel Brooks

[Slimprofits]

This is the scene in the show "The Producers" in which the accountant tells the producer that it might be possible to make more money by over-subscribing a show designed to fail then by actually working to produce a hit. All very funny in the stage play and the film until you realize that this is exactly what the nation's financial corporations have done to us all! They over-subscribed the mortgage backed securities, making billions by re-selling the same mortgages over and over again up to 20 times, then foreclosed on the properties to cover the over-subscription!

[don]

Re: Best Analogy to Securitization and Foreclosure - The Producers by Mel Brooks

They over-subscribed the mortgage backed securities, making billions by re-selling the same mortgages over and over again up to 20 times, then foreclosed on the properties to cover the over-subscription!

I read recently it's more like 30. The math comes out to a $300,000 mortgage, being current, is worth $300,000 to the bank. A foreclosed $300,000 mortgage is worth 30 times that...$9M to those parties positioned accordingly.

[ThePythonicCow]

Re: Best Analogy to Securitization and Foreclosure - The Producers by Mel Brooks

A foreclosed $300,000 mortgage is worth 30 times that.

How does that work?

The jaded cynic in me has no doubt you speak the truth.

But the techie geek in me says: huh?

[Chomsky]

Re: Best Analogy to Securitization and Foreclosure - The Producers by Mel Brooks

How does that work?

The jaded cynic in me has no doubt you speak the truth.

But the techie geek in me says: huh?

Credit default swaps?

[ThePythonicCow]

Re: Best Analogy to Securitization and Foreclosure - The Producers by Mel Brooks

Credit default swaps?

Perhaps, in theory, if the counter-parties to all these CDS's paid up without question. That's an interesting suggestion.

But I doubt all those counter-parties could do so. Moreover, some of them might see the same underlying property show up on multiple CDS's claims, causing them to object that the CDS's were fraudulent.

So ... was that a good as cash in hand, take it to the bank 30x return, or was that a hypothetical return, good only for justifying big bonuses for a few years, until the chickens roost and the cows come home?

This whole bloody affair has got to be the biggest, most extensive and pervasively fraudulent conflagration of Ponzi schemes in human history.

[Chomsky]

Re: Best Analogy to Securitization and Foreclosure - The Producers by Mel Brooks

Perhaps, in theory, if the counter-parties to all these CDS's paid up without question. That's an interesting suggestion.

But I doubt all those counter-parties could do so. Moreover, some of them might see the same underlying property show up on multiple CDS's claims, causing them to object that the CDS's were fraudulent.

So ... was that a good as cash in hand, take it to the bank 30x return, or was that a hypothetical return, good only for justifying big bonuses for a few years, until the chickens roost and the cows come home?

This whole bloody affair has got to be the biggest, most extensive and pervasively fraudulent conflagration of Ponzi schemes in human history.

There's no central clearinghouse for CDS. So how would the various counterparties know whether a given mortgage had other swaps covering it?

Agreed on the scale of the Ponzi scheme.

[ThePythonicCow]

Re: Best Analogy to Securitization and Foreclosure - The Producers by Mel Brooks

So how would the various counterparties know whether a given mortgage had other swaps covering it?

I had in mind the possibility that a single given counter party might have ended up funding multiple CDS's which fraudulently overlapped.

[don]

Re: Best Analogy to Securitization and Foreclosure - The Producers by Mel Brooks

Perhaps, in theory, if the counter-parties to all these CDS's paid up without question. That's an interesting suggestion.

But I doubt all those counter-parties could do so. Moreover, some of them might see the same underlying property show up on multiple CDS's claims, causing them to object that the CDS's were fraudulent.

So ... was that a good as cash in hand, take it to the bank 30x return, or was that a hypothetical return, good only for justifying big bonuses for a few years, until the chickens roost and the cows come home?

This whole bloody affair has got to be the biggest, most extensive and pervasively fraudulent conflagration of Ponzi schemes in human history.

There's no central clearinghouse for CDS. So how would the various counterparties know whether a given mortgage had other swaps covering it?

Agreed on the scale of the Ponzi scheme.

Would it surprise anyone that the unraveling of this fraud is a principal motivator behind so-called foreclosure-gate. Counterpunching counter parties.