Simit Patel

hey pshah,

i'm not an expert on the inner workings of mortgage backed securities, however since david is not involved in the site anymore, i wanted to take a shot at answering your question.

i think ownership of the toxic assets (many of the mortgage-backed securities) is still a murky issue, and the cause of many bank failures as well as the unwillingness of banks to lend to each other back in october of 2008. in either event, with all the bailouts, i think the US federal government will end up owning those (i.e. US taxpayers and those holding US dollar-denominated assets).

anyway that's my take -- i'd recommend getting some other opinions.

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advfn2828

Hi pshah

Unfortunately I am not an expert in this subject either but my understanding is the same as Simit's.

The big problem is the institutions pass these things around each other like candy at Xmas and as a result the ownership lines get really busted up. It is a bit like pass the parcel and when the financial music stops if you are left holding the "asset" you are in deep trouble.

This is what is wrong with many of the banking sectors products which are incestuous and almost Ponzi schemes (I use the term very very loosely) but when someone calls time, there simply is not enough real money to back it all up, and hence the Fed and other central Banks involvement in creating money and buying back the securities.

Also when a Bank sells one security it almost certainly buys another one back in somewhere along the line so the balance sheets of most Banks will have some exposure.

Hope that is of some help.

Graeme

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Am@n

Hi David ,

Thanks for such informative posts. I really appreciate the ease with which i could grasp most of the concepts even when i am fro a technical background and know quite little about finance.

Thanks once again for your awesome work.

Aman

Am@n

Hi David ,

Thanks for such informative posts. I really appreciate the ease with which i could grasp most of the concepts even when i am from a technical background and know quite little about finance.

Thanks once again for your awesome work.

Aman