On Sun, 23 Mar 2008 21:18:40 -0700 (PDT), Too_Many_Tools
wrote:
A question....
I keep hearing how "nobody" knows who owns these mortgages.
Why?
But at the same time, they do know gets the monthly mortgage payment.
In my world if you know who is owed, you know who owns the note.
The saying "follow the money" still holds true....
TMT
============
Finance is the art of passing money from hand to hand until it
finally disappears.
Robert W. Sarnoff
http://www.infoplease.com/ipea/A0763145.html
[Which ain't easy when you are talking about 3 to 5 trillion
dollars, (and counting).]
To start see
http://en.wikipedia.org/wiki/Collate...ebt_obligation
There are layers on layers on layers of "ownership" of these
mortgages, which were first commingled/aggregated and then
stratified. Any particular sub-prim, alt-a, NINA/(liar) [no
income, no asset], etc. mortgage, along with thousands of others
are generally owned "in trust" by a foreign domiciled alien
corporation beyond the reach of US law, regulation, subpoena,
etc.
The ownership of the trust is split into several "tranches" or
slices with different rates of return and risk. In theory, the
risk of loss was to be born first by the highest return tranches,
then next highest, etc. with the lowest risk slice to never have
a default as these would all be absorbed by the lower priority
tranches, hence the AAA rating, but only for the highest tranche,
a point that was frequently overlooked or omitted when the CDOs
were sold.
Things get much more complicated at this point, as the shares in
the "tranches" can be owned by individuals, corporations, hedge
funds, private capital pools, pension funds, and nominally
"independent" SIVs [special investment vehicles], SPEs [special
purpose entities, conduits, etc. that were specifically designed
to allow a commercial bank to buy and hold an interest in a
"tranche," without having it appear on the banks books as a loan
to avoid/evade the US loan reserve / vault cash requirements. In
many cases the banks in turn had loaned money to the hedge funds,
private capital pools directly, or had loaned money to
individuals to "invest" in the hedge funds, private capital
pools, etc. that bought shares of the tranches at several levels
of risk in multiple CDOs.
In many cases, these transactions were specifically designed to
be impossible to trace to facilitate tax evasion and concealment
of assets by "high net worth" clients. (Although if I was a
banker, and one of my clients was named Gambino, Chaney, Bush or
Corleone, I would be sweating bullets...)
If things were not complicated enough to this point, many of
these "shares" were pledged as collateral, generally through a
"repurchase agreement" to raise money for additional "leverage."
When the "great unwinding" started back in September, the value
of these "securities" fell below the amount lent, so the banks
[commercial and merchant] and other bank-like institutions made a
margin call for addition collateral or cash, which was not
available. These pledged "securities" were then seized (and
sold, depressing the market) as the loans were in default,
starting the current "death spiral."
Thus it is difficult, possibly impossible, to determine the
actual owner.
FWIW -- this is not new except for scale. When IOS [Investors
Overseas Service] collapsed in 1970 the same thing occurred.
Rumors are that the CIA contract employee [spook] pension funds
were involved and Robert Vesco made off with a 2.5 billion boodle
bag of black money. For details of this pioneering effort in
creative finance click on
http://en.wikipedia.org/wiki/Investors_Overseas_Service and
http://www.rinfret.com/vesco.html
Note that IOS gave it big time in the shorts to the small
European [mainly German] investors, but they still came back for
more. First for the Argentinean dollar denominated bonds sold by
the American banks, and then for the CDOs hawked by the American
banks, proving again that humans are the only animals you can
skin more than once.
Unka' George [George McDuffee]
-------------------------------------------
He that will not apply new remedies,
must expect new evils:
for Time is the greatest innovator: and
if Time, of course, alter things to the worse,
and wisdom and counsel shall not alter them to the better,
what shall be the end?
Francis Bacon (1561-1626), English philosopher, essayist, statesman.
Essays, "Of Innovations" (1597-1625).