(10-06-2013, 01:31 PM)Temperament Wrote: [ -> ] (10-06-2013, 01:16 PM)finnfinn Wrote: [ -> ]CDO is a sexy tool where sub prime loans were package into something attractive to investors to mask the biggest con job by the greedy bankers in an environment where risk was mis-price, lax regulator, blur/irresponsible rating agencies. This resulted in a balance sheet recession that span from 2008- xxxx ...
Pls feel free to amend. . Hopefully we have a good summary.
Ha! Ha!
No amendment to anybody posting is needed unless trying to pull a fast one here. The only thing, i think we must always remember is: "This is not going to be the Last of the Mohicans; as far as "Financial Engineering" is concerned."
What do you think is the next change from "The Land Of Liberty"? i think it is something going to be related to "QE"
Agree to both statements. "Financial Engineering" is too good a "smoke bomb" to discard! I follow this principle very closely (especially after 2008): "if something looks too good to be true, definitely not true."
On QE, the questions I have are how it will impact us and how to profit from it? When will it happen? Definitely worth brainstorming...looking forward to everyone thoughts...
(10-06-2013, 01:31 PM)Temperament Wrote: [ -> ] (10-06-2013, 01:28 PM)freedom Wrote: [ -> ]bankers did not lie or con if they stated that CDOs contains subprime or other low grade mortgage. rating agencies rated them with their eyes open(or they choose to close their eyes).
bankers just provided what investors were asking for.
to blame everything on investment banks instead of rating agencies, are unfair at least. not saying that bankers did not have a role.
You are right.
Every one of them had play a part. But without the final participation of the credit agencies, persuaded by all Institutions like Morgan Stanley to rate CDO sub prime loans mixed with some prime loans and violas became "AAA" CDO bonds, 2008/2009 GFC would not have happen.
Specuvestor had said something like (not exactly);
"Whoever is the Paymaster calls the Tune". So what can the credit agencies do.
Same like the Enron case but only "Arthur Andersen" was found guilty and not the credit agencies then. Why? Where is A. A. now?
Anyway Chinese says,
"The snake and the mouse in one nest". Pardon my poor literary translation.
you are too light on credit rating agencies. just like whistle blowing, just because it is the employer, no one should blow the whistle?
credit rating agencies should have fiduciary duty to investors using their ratings if they don't have it now. They are providing a professional opinion, not a general opinion from anyone on the street.
(10-06-2013, 02:25 PM)freedom Wrote: [ -> ] (10-06-2013, 01:31 PM)Temperament Wrote: [ -> ] (10-06-2013, 01:28 PM)freedom Wrote: [ -> ]bankers did not lie or con if they stated that CDOs contains subprime or other low grade mortgage. rating agencies rated them with their eyes open(or they choose to close their eyes).
bankers just provided what investors were asking for.
to blame everything on investment banks instead of rating agencies, are unfair at least. not saying that bankers did not have a role.
You are right.
Every one of them had play a part. But without the final participation of the credit agencies, persuaded by all Institutions like Morgan Stanley to rate CDO sub prime loans mixed with some prime loans and violas became "AAA" CDO bonds, 2008/2009 GFC would not have happen.
Specuvestor had said something like (not exactly);
"Whoever is the Paymaster calls the Tune". So what can the credit agencies do.
Same like the Enron case but only "Arthur Andersen" was found guilty and not the credit agencies then. Why? Where is A. A. now?
Anyway Chinese says,
"The snake and the mouse in one nest". Pardon my poor literary translation.
you are too light on credit rating agencies. just like whistle blowing, just because it is the employer, no one should blow the whistle?
credit rating agencies should have fiduciary duty to investors using their ratings if they don't have it now. They are providing a professional opinion, not a general opinion from anyone on the street.
The US government does take rating agency to task on its role on sub-prime crisis. It is S&P credit rating agency and seeking US$ 5 billion...
http://www.investmentu.com/2013/February...to-do.html
(10-06-2013, 02:25 PM)freedom Wrote: [ -> ] (10-06-2013, 01:31 PM)Temperament Wrote: [ -> ] (10-06-2013, 01:28 PM)freedom Wrote: [ -> ]bankers did not lie or con if they stated that CDOs contains subprime or other low grade mortgage. rating agencies rated them with their eyes open(or they choose to close their eyes).
bankers just provided what investors were asking for.
to blame everything on investment banks instead of rating agencies, are unfair at least. not saying that bankers did not have a role.
You are right.
Every one of them had play a part. But without the final participation of the credit agencies, persuaded by all Institutions like Morgan Stanley to rate CDO sub prime loans mixed with some prime loans and violas became "AAA" CDO bonds, 2008/2009 GFC would not have happen.
Specuvestor had said something like (not exactly);
"Whoever is the Paymaster calls the Tune". So what can the credit agencies do.
Same like the Enron case but only "Arthur Andersen" was found guilty and not the credit agencies then. Why? Where is A. A. now?
Anyway Chinese says,
"The snake and the mouse in one nest". Pardon my poor literary translation.
you are too light on credit rating agencies. just like whistle blowing, just because it is the employer, no one should blow the whistle?
credit rating agencies should have fiduciary duty to investors using their ratings if they don't have it now. They are providing a professional opinion, not a general opinion from anyone on the street.
Not to defend the rating agencies but if they are liable for their opinions, wouldn't that create a moral hazard issue?
(10-06-2013, 02:25 PM)freedom Wrote: [ -> ] (10-06-2013, 01:31 PM)Temperament Wrote: [ -> ] (10-06-2013, 01:28 PM)freedom Wrote: [ -> ]bankers did not lie or con if they stated that CDOs contains subprime or other low grade mortgage. rating agencies rated them with their eyes open(or they choose to close their eyes).
bankers just provided what investors were asking for.
to blame everything on investment banks instead of rating agencies, are unfair at least. not saying that bankers did not have a role.
You are right.
Every one of them had play a part. But without the final participation of the credit agencies, persuaded by all Institutions like Morgan Stanley to rate CDO sub prime loans mixed with some prime loans and violas became "AAA" CDO bonds, 2008/2009 GFC would not have happen.
Specuvestor had said something like (not exactly);
"Whoever is the Paymaster calls the Tune". So what can the credit agencies do.
Same like the Enron case but only "Arthur Andersen" was found guilty and not the credit agencies then. Why? Where is A. A. now?
Anyway Chinese says,
"The snake and the mouse in one nest". Pardon my poor literary translation.
you are too light on credit rating agencies. just like whistle blowing, just because it is the employer, no one should blow the whistle?
credit rating agencies should have fiduciary duty to investors using their ratings if they don't have it now. They are providing a professional opinion, not a general opinion from anyone on the street.
Basically, the credit agencies were persuaded to treat housing loan bonds as corporate loans that can not all default at the same time and there were no history of collapse of National Housing loans before. Have you realised the credit agencies have not been prosecuted or sued for any part in the GFC fiasco. (Correct me if i am wrong).
If you want to apportion whose guilt is the greatest to the banks or credit agencies or institutions like Morgan Stanley, i really don't know? But imo, the source or who started it should be the most guilty. i am sure you know which party i am referring to. i know you have a different position. It's alright to me because we are not judges in the court who will give the final verdict.
"Self correction"
Oh!
Cityfarmer just posted B4 me, indeed someone is suing one of the credit agencies. So i am wrong. But the verdict by the court is still pending. Who knows?
http://www.investmentu.com/2013/February...to-do.html
(10-06-2013, 03:17 PM)finnfinn Wrote: [ -> ] (10-06-2013, 02:25 PM)freedom Wrote: [ -> ]you are too light on credit rating agencies. just like whistle blowing, just because it is the employer, no one should blow the whistle?
credit rating agencies should have fiduciary duty to investors using their ratings if they don't have it now. They are providing a professional opinion, not a general opinion from anyone on the street.
Not to defend the rating agencies but if they are liable for their opinions, wouldn't that create a moral hazard issue?
care to elaborate more on the moral hazard issue?
(10-06-2013, 03:33 PM)Temperament Wrote: [ -> ] (10-06-2013, 02:25 PM)freedom Wrote: [ -> ]you are too light on credit rating agencies. just like whistle blowing, just because it is the employer, no one should blow the whistle?
credit rating agencies should have fiduciary duty to investors using their ratings if they don't have it now. They are providing a professional opinion, not a general opinion from anyone on the street.
Basically, the credit agencies were persuaded to treat housing loan bonds as corporate loans that can not all default at the same time and there were no history of collapse of National Housing loans before. Have you realised the credit agencies have not been prosecuted or sued for any part in the GFC fiasco. (Correct me if i am wrong).
If you want to apportion whose guilt is the greatest to the banks or credit agencies or institutions like Morgan Stanley, i really don't know? But imo, the source or who started it should be the most guilty. i am sure you know which party i am referring to. i know you have a different position. It's alright to me because we are not judges in the court who will give the final verdict.
I can't agree on the source should be most guilty. Are the gun manufacturers more guilty than the criminals who did the crime?
without inference from the investment banks making the credit rating agencies give them high grade, the act of investment banks was totally reasonable. They were to fulfill the demand of a certain group of investors. They disclosed the risk within. If my customer wants more of my product, should I make more for my customers or should I refuse to do it if my customer accepts them without my influence?
Is selling a property to someone who can't afford it illegal? Is packaging a subprime mortgage into a CDO illegal? Did investment banks force the investors to buy their subprime CDOs?
Or from another angel, without the blessing of credit rating agencies, the subprime CDO market was much smaller.
We can argue that probably the investment banks and the credit rating agencies were corrupted, but it is much harder to prove that.
(10-06-2013, 03:42 PM)freedom Wrote: [ -> ] (10-06-2013, 03:17 PM)finnfinn Wrote: [ -> ] (10-06-2013, 02:25 PM)freedom Wrote: [ -> ]you are too light on credit rating agencies. just like whistle blowing, just because it is the employer, no one should blow the whistle?
credit rating agencies should have fiduciary duty to investors using their ratings if they don't have it now. They are providing a professional opinion, not a general opinion from anyone on the street.
Not to defend the rating agencies but if they are liable for their opinions, wouldn't that create a moral hazard issue?
care to elaborate more on the moral hazard issue?
(10-06-2013, 03:33 PM)Temperament Wrote: [ -> ] (10-06-2013, 02:25 PM)freedom Wrote: [ -> ]you are too light on credit rating agencies. just like whistle blowing, just because it is the employer, no one should blow the whistle?
credit rating agencies should have fiduciary duty to investors using their ratings if they don't have it now. They are providing a professional opinion, not a general opinion from anyone on the street.
Basically, the credit agencies were persuaded to treat housing loan bonds as corporate loans that can not all default at the same time and there were no history of collapse of National Housing loans before. Have you realised the credit agencies have not been prosecuted or sued for any part in the GFC fiasco. (Correct me if i am wrong).
If you want to apportion whose guilt is the greatest to the banks or credit agencies or institutions like Morgan Stanley, i really don't know? But imo, the source or who started it should be the most guilty. i am sure you know which party i am referring to. i know you have a different position. It's alright to me because we are not judges in the court who will give the final verdict.
I can't agree on the source should be most guilty. Are the gun manufacturers more guilty than the criminals who did the crime?
without inference from the investment banks making the credit rating agencies give them high grade, the act of investment banks was totally reasonable. They were to fulfill the demand of a certain group of investors. They disclosed the risk within. If my customer wants more of my product, should I make more for my customers or should I refuse to do it if my customer accepts them without my influence?
Is selling a property to someone who can't afford it illegal? Is packaging a subprime mortgage into a CDO illegal? Did investment banks force the investors to buy their subprime CDOs?
Or from another angel, without the blessing of credit rating agencies, the subprime CDO market was much smaller.
We can argue that probably the investment banks and the credit rating agencies were corrupted, but it is much harder to prove that.
The law is only one side of the equation. What about moral?
Example if i purposely loan my money to a bankrupt person who i know will not able to pay me yet i still make the loan. Why? Because i know i can make a profit by re-packaged this subprime loan to some other exotic products call CDO bonds and sell it to Ah KOW, a bond trader. And AH Kow knows what to do next. And so on, and so on...
It's not my fault as "Land of Liberty" allows me to make the loan to the bankrupt ma?
So there is nothing wrong legally, i have not committed any crime, right? Right. As i say, "The law is only one side of the equation. What about moral?
(10-06-2013, 04:25 PM)Temperament Wrote: [ -> ] (10-06-2013, 03:42 PM)freedom Wrote: [ -> ]I can't agree on the source should be most guilty. Are the gun manufacturers more guilty than the criminals who did the crime?
without inference from the investment banks making the credit rating agencies give them high grade, the act of investment banks was totally reasonable. They were to fulfill the demand of a certain group of investors. They disclosed the risk within. If my customer wants more of my product, should I make more for my customers or should I refuse to do it if my customer accepts them without my influence?
Is selling a property to someone who can't afford it illegal? Is packaging a subprime mortgage into a CDO illegal? Did investment banks force the investors to buy their subprime CDOs?
Or from another angel, without the blessing of credit rating agencies, the subprime CDO market was much smaller.
We can argue that probably the investment banks and the credit rating agencies were corrupted, but it is much harder to prove that.
The law is only one side of the equation. What about moral?
Example if i purposely loan my money to a bankrupt person who i know will not able to pay me yet i still make the loan. Why? Because i know i can make a profit by re-packaged this subprime loan to some other exotic products call CDO bonds and sell it to Ah KOW, a bond trader. And AH Kow knows what to do next. And so on, and so on...
It's not my fault as "Land of Liberty" allows me to make the loan to the bankrupt ma?
So there is nothing wrong legally, i have not committed any crime, right? Right. As i say, "The law is only one side of the equation. What about moral?
on hindsight, we can say "Because i know i can make a profit by re-packaged this subprime loan to some other exotic products call CDO bonds and sell it to Ah KOW, a bond trader. And AH Kow knows what to do next. And so on, and so on... ".
What if the investment banks couldn't sell their CDOs? Without blessing, I doubt investment banks can sell their CDOs easily. As mentioned earlier, CDO has been a business for very long. it had never taken the center stage. Why would subprime mortgage CDOs be so different from other CDOs?
Sure, the source has certain responsibilities.
if talking about moral or ethics, all companies are evil in a way or another. otherwise, where does the huge profit come from?
Think it's time for us to agree to disagree. peace.
(10-06-2013, 04:31 PM)freedom Wrote: [ -> ] (10-06-2013, 04:25 PM)Temperament Wrote: [ -> ] (10-06-2013, 03:42 PM)freedom Wrote: [ -> ]I can't agree on the source should be most guilty. Are the gun manufacturers more guilty than the criminals who did the crime?
without inference from the investment banks making the credit rating agencies give them high grade, the act of investment banks was totally reasonable. They were to fulfill the demand of a certain group of investors. They disclosed the risk within. If my customer wants more of my product, should I make more for my customers or should I refuse to do it if my customer accepts them without my influence?
Is selling a property to someone who can't afford it illegal? Is packaging a subprime mortgage into a CDO illegal? Did investment banks force the investors to buy their subprime CDOs?
Or from another angel, without the blessing of credit rating agencies, the subprime CDO market was much smaller.
Shalom.
We can argue that probably the investment banks and the credit rating agencies were corrupted, but it is much harder to prove that.
The law is only one side of the equation. What about moral?
Example if i purposely loan my money to a bankrupt person who i know will not able to pay me yet i still make the loan. Why? Because i know i can make a profit by re-packaged this subprime loan to some other exotic products call CDO bonds and sell it to Ah KOW, a bond trader. And AH Kow knows what to do next. And so on, and so on...
It's not my fault as "Land of Liberty" allows me to make the loan to the bankrupt ma?
So there is nothing wrong legally, i have not committed any crime, right? Right. As i say, "The law is only one side of the equation. What about moral?
on hindsight, we can say "Because i know i can make a profit by re-packaged this subprime loan to some other exotic products call CDO bonds and sell it to Ah KOW, a bond trader. And AH Kow knows what to do next. And so on, and so on... ".
What if the investment banks couldn't sell their CDOs? Without blessing, I doubt investment banks can sell their CDOs easily. As mentioned earlier, CDO has been a business for very long. it had never taken the center stage. Why would subprime mortgage CDOs be so different from other CDOs?
Sure, the source has certain responsibilities.
if talking about moral or ethics, all companies are evil in a way or another. otherwise, where does the huge profit come from?
Think it's time for us to agree to disagree. peace.
Peace Brother.
If you don't mind i like to share a wise Chinese saying:-
"Yuan yu tow, Chai yu chu".
Quote:But i agree one thing with you without credit agencies AAA rating, there would not be 2008/2009 GFC.
To me all responsible should be equally Kwan Sai. But in reality, usually not the case.
Shalom.
Some information on moral hazard:
http://en.wikipedia.org/wiki/Moral_hazard
My only concern is if rating agencies are liable for their opinions, then investors are having a fantastic deal as their downside are covered.
I think the extent of rating agencies' liability is important IMO.
Just my 2 cents worth...