NEWSFLASH: Not ALL Mortgage Backed Securities Are Bad!
National Public Radio Podcast from the Planet Money Team 03/20/09: http://www.npr.org/templates/player/mediaPlayer.htmlaction=1&t=1&islist=false&id=102154567&m=102154705
The analysis is laid out on the actual payback of Mortgage Backed Securities over time vs. the value today (i.e., if you sold your holdings). If you sold them today, sure you'd get back 50 cents on the dollar of your investment. You see, the world has gotten the view lately that risk is bad. Lots of folks are buying these things and would continue to buy them today. According to Planet Money: because they are handled by the big money managers who consider them worth every dime of their original investment -- they are not selling them! Sure, the banks that have the ones that are not performing seem to be taking their losses and the rest of their businesses are doing well. Holding on seems to be the advice of the day.
This newscast points out that not everyone is suffering and many banks and investors continue to make money in this market. Good News!
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susan templeton |
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Hi Susan - The Podcast discusses 2 Trillion dollars worth of Mortgage Backed Securities that deserved that AAA rating and states that they are performing. Then it discusses the 8 - 10 Trillion dollars of MBSs that are toxic and not peforming. It is the second group that is making the banks insolvent and it is this group that the govt. wants to buy to clear them off of the banks books. No matter how Geithner packages this plan to sell it to the taxpayers the underlying solution to the problem that taxpayers need to understand is that we are going to take the losses.
Yes, George thanks for pointing that out. Wonder what today's TAP deal will mean to these banks. It seems that we are the ones on the hook again...good for the banks short term.