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Gold/Mining/Energy : Big Dog's Boom Boom Room -- Ignore unavailable to you. Want to Upgrade?

To: ChanceIs who wrote (64170)	5/11/2006 3:40:39 PM
From: ridingycurve	Read Replies (1) \| Respond to of 206093

<<My bank with option ARM exposure short (DSL) has not been doing well>> Ah, my good friend Chancels, I did try to warn you. Without privileged information you can't possibly predict bank earnings or judge asset quality to any consistent degree, IMO. You can, however, overestimate the public’s ability to understand how changes in interest rates and changes in the shape of the yield curve affect bank earnings. Did I tell you story about the OTS spending millions of dollars and countless man hours trying to develop an interest rate risk model that would predict net interest margin under various interest rate shock scenarios? The project was an abysmal failure and was finally abandoned. There were just too many moving parts. Re Golden West. It has traditionally been a lender with high credit and underwriting standards, to wit, option ARMS are not in and of themselves risky. Variations were used for years by conservative institutions to cater to the borrowing needs of their most credit worthy customers. The truth is though that the Feds let this cycle get out of hand by not clamping down quickly when it became obvious that option ARMS were being used massively to qualify home buyers and refiers who could not service amortizing mortgages. There will almost certainly be a price to pay, at least in Kali. FWIW, I believe Golden West went for about 3X book. There were times during the 90's when 4X book (or close to it) was not unheard of. I have no idea if Wachovia got its money's worth.