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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: CalculatedRisk who wrote (150196)	9/25/2008 11:30:08 AM
From: MulhollandDrive	Respond to of 306849

yeah, amazing how just a small (but growing) percentage )of loan defaults contaminates the entire tranche.... the very thing that securitization was meant to keep markets stable has come back to bite the CDO holders in the ass

To: CalculatedRisk who wrote (150196)	9/25/2008 12:02:45 PM
From: XoFruitCake	Read Replies (1) \| Respond to of 306849

"There is some trash that might be worth 90cents on the dollar. There is toxic waste that is worth zero. We can't just pay one number." I think this can be done by grouping similar securities (e.g. NEW 07-01/07-02 AAA) in each mini auction (and there can be hundred of mini-auctions). We have history of default rate for all the CDO from 05-06-07, so I don't think group them together is too hard of a problem. As long as there are enough participants in the auction and the grouping is done correctly, we should be o.k.. I think as the market get going, the distress investors will jump in as well... The key aspect of the proposal is to get the crappy mortgage off banks balance sheet, let them raise capital and hopefully get the lending part of the economy going. We will still have the consumer part of economy that is not fix.. But that is your vanilla recession and we know how to deal with it...