Toxic Mortgage Bond Sales are Booming!

[clb09]

http://news.yahoo.com/s/ap/20090824/ap_on_bi_ge/us_meltdown_deja_vu_6

These are holdovers from the housing bubble, when home prices soared, banks bought risky mortgages, bundled them with solid mortgages and sold them all as top-rated bonds. With investors eager to buy these bonds, lenders came up with increasingly risky mortgages, sometimes for people who could not afford them. It didn't matter because, in the end, the bonds would all get AAA ratings.

 

[MrNick]

Who would buy the bonds again knowing what we know now and also knowing the housing market has a lot more defaults left! I doesn't make sense to me, maybe some people do ok but I can't imagine as a whole this being a good investment.

I'm sticking with the safe approach buying stock in Enron.

 

[ArchPaul]

If you're looking for a bailout you'd buy them... then sell them back to the government. Double whammy!

 

[MrNick]

I hope it blows up in their faces, I can't feel sorry for someone like that if things go wrong.

Btw my business class today started out with the "professor" attacking the free market, because without some socialism the free market would kill us all! I hope I get a chance to write some papers refuting his ignorance, a bit off topic but I needed to vent.

 

[Feenix566]

They still have some value. Even if the bond is backed by a group of mortgages that each have a 60% chance of default, they'll still pay money from the 40% that don't default. They're probably dirt cheap because of the recent revelations about them. But they still have value, and that value may be more than the current owners are asking for them. That's why they're getting bought.

 

[legion]

YouTube - Geithner Plan I
YouTube - Geithner Plan II
YouTube - Geithner Plan 2.5
YouTube - Geithner Plan III
YouTube - Geithner Plan IV

 

[legion]

Whats happening is the Fed and the banks that created these assets, through shells, are buying these things, basically.

 

[NewEnd]

Kaufman said he's optimistic about the recent string of deals because, unlike during the real estate boom, investors in these new bonds know what they're buying.

No they don't.

They have no clue what the risks are.

they have no clue they are buying toxic assets based on toxic assets, that will make them money, but when they fail.... they will be begging for more big bailout money.

and when they have to beg for more bailout money a second time....

I mean, they are buying their own death and/or exile certificates.

"It actually makes a lot of fundamental sense,"

Yes... fundamental. Right.

But he said banks are still smarting from the market implosion and are unlikely to rush into new, risky ventures.

They are smarting? from getting $700 Billion in bailouts? You actually trying to tell me that the banks got the bailout money, and with that, somehow came moral hazards too?