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To: sammaster who wrote (225515)	3/5/2003 11:55:34 AM
From: patron_anejo_por_favor	Respond to of 436258

<<how can ncen take high risk mortgages and somehow convert them into a AAA rated asset backed instrument? i cant figure out how asset backed intruments in mortgages, credit card, car loans, etc get AAA ratings when the underlying is so risky...>> This is done via securitization...streams of cash flow (receivables) are packaged and "insured" by another entity (which itself is grossly undercapitalized to do this, BTW, but carries an AAA rating nonetheless), and resold to unassuming bagholders. Thus the initiating lendor gets the soon-to-be bad debt off its books, the hot potato is off loaded to insurance companies, money market funds, pension funds, and the risk is offloaded to Pluto (HO HO HO! NOT!) As Bobcor eloquently put it, the whole process sits in a regulatory blind spot, a situation that is unlikely to change until we get a major meltdown of this debt. It both extended the life of the credit bubble, and will vastly prolong its unwinding (and the economic pain associated).