Sean L. Talking about the use of post conviction DNA testing. It has been used in recent years to prove innocence and set those who are wrongly convicted free.
Chase, as usual, gives off that freshly graded feel that is ever so charictoristic of is vibrant personality by including such rarities as Doc Z's highlighting. Joking aside, this is a very serious subject. Many aspects of war are being covered by mercinaries who are dedicated to a paycheck, not a common goal. This issue will become more prevalent as the goverment is less willing to directly engage the enemy.
John "The point is, ladies and gentlemen, that greed -- for a lack of a better word -- is good. Greed is right. Greed works. Greed clairfies, cuts through, and captures the essence of the evoloutionary spirit. Greed in all of its forms -- greed for life, for money, for love, knowledge -- has marked the upward surge of mankind. And greed -- you mark my words -- will not only save Teldar Paper, but that other malfunctioning corporation called the USA."
-Gordon Gekko
Sunday, January 9, 2011
Friday, January 7, 2011
CDO's are Awesome!
Jackson R.
Dr. Zerwin
11/17/10
SLCC
All good things must come to an end. We have all heard it before, yet humans lack the foresight to imagine the end. It begs the question: Do collateralized debt obligations help or hurt the economy? It has been a subject of much debate in recent years. A Collateralized debt obligation, or CDO is a group of securities that have been grouped to form one trade-able security that is sold to investors for their inherent safety when they were sold they were sold with an expected default rate of 2% and a recovery rate of 50%, therefore you get 99% of your money back plus the accrued interest generated by the law of averages. they are typically composed of varying grades and coupons (interest rates) to provide a balanced risk and returns. There are hedge funds betting against the very funds they helped create, and there are the people who bought a house they knew they couldn't afford with capital that came from unseen investors who were led to believe that what they were buying was investment grade. Several years of prosperity have been the direct result of CDO's however like most examples, they are being blamed for the end of the prosperity instead of the prosperity they granted many Americans.
The abacus cdo was set up by Goldman Sachs and a hedge fund for the sole purpose of failing (Rappaport). A short time after it was all sold to investors as AAA grade debt (debt goes from AAA, AA, A, BBB and so on with plus and minus sub grades) this very hedge fund went short on the cdo and the rating began to fall. Within months it was CC grade and close to worthless. The Investors in the hedge fund made billions of dollars while the investors in the abacus cdo lost significant amounts of money (Rappaport). Goldman Sachs maintains the position of letting the investors see exactly what was in the cdo and it is the investors fault that they lost money, witch is true, the investors take a risk in purchasing debt and if they prefer to not take risks then investing in mortgage backed bonds is not for them.
A credit default swap insures against the debtor failing to pay. It is also the basis of synthetic CDOs. (Moses) They can be used to take a short position on debt that is expected to fail, like magnatar capital did to the abacus CDO (Levitin). This use of shorting, or betting against an unsound pile of debt is what made the hedge fund billions of dollars. A CDO that is made up of credit default swaps is called a synthetic CDO.
Citi group has sold billions of dollars in CDO's and other related securities that they service but not hold (SBNH). There is a clause in the contract that requires Citi to repurchase the loans at a future date is the investor desires. Citi has 952 million in reserve for this event however estimates range between 20 an 140 billion (Carney). This is obviously not enough and if they do end up having to buy back all of these loans then the economy might have a double dip.
Goldman Sachs has been fined an additional $650,000 wich is a mere slap on the wrist. that is the amount that a bond trader makes in a year and the amount that a bond trader makes for Goldman in a day. The SEC has decided that Goldman Sachs is the instigator of the Abacus CDO and the ensuing financial melt down that followed. The hedge fund that picked the bad debt has not been punished yet and it is not clear if they will be. Shady dealings are not unfamiliar to wall street: the entire history of mortgage bond trading has involved shady dealings and less than quality debt being pawned off (Rappaport).
The abacus CDO was set up to fail from the start. that is undeniable. It was due to a greedy hedge fund and a firm with absolute control over the street. Goldman Sachs rules the street and according to John Gutfreund, they are the king of wall street. They hold the money and money is power. They showed what was in the abacus CDO but many investors just read the ratings not the debt its self. It is more the fault of the rating agencies for misrepresenting the debt (levitin).
A put back feature is a very important part of a bond. It allows the holder to send it back if they don’t like it. The seller of the bond must buy it back if it has been put. the banks hold large capital reserves for the expected put backs. Unfortunately for Most of the banks on the street, they don’t have enough to pay off the waves of bad bonds flooding lower Manhattan. Citi is seriously lacking in the supplies of money that they usually have lying around (Carney).
CDOs and CDSs, like many other things important to our modern world, can be used for both good and bad. The reputation of CDOs has been tarnished, however the fundemental basis of the debt market relies on CDOs and other securities to remain in widespread use. They are an important part of getting money from investors to home buyers.
Works Cited:
Carney, John. "Citigroup's Toxic Mortgage Pipeline Could Mean Mammoth Put-Back Risks." CNBC Real-Time (2010): n. pag. Web. 9 Nov 2010.
Rappaport, Liz. "Finra Fines Goldman Over Disclosure; New Name Emerges .." Wall Street Journal n. pag. Web. 9 Nov 2010. <http://online.wsj.com/article/SB10001424052748704635704575604513104539130.html>.
Sterngold, James. "TOO FAR, TOO FAST; Salomon Brothers' John Gutfreund." new York Times 10 Jan 1988: n. pag. Web. 27 Nov 2010. <http://www.nytimes.com/1988/01/10/magazine/too-far-too-fast-salomon-brothers-john-gutfreund.html>.
Moses, Abigail . "Corporate Bond Risk Falls in Europe, Credit-Default Swaps Show." Bloomberg.com. Bloomberg, 22 Nov 2010. Web. 27 Nov 2010. <http://www.bloomberg.com/news/2010-11-22/corporate-bond-risk-falls-in-europe-credit-default-swaps-show.html>.
Dr. Zerwin
11/17/10
SLCC
CDO’s are awesome!
All good things must come to an end. We have all heard it before, yet humans lack the foresight to imagine the end. It begs the question: Do collateralized debt obligations help or hurt the economy? It has been a subject of much debate in recent years. A Collateralized debt obligation, or CDO is a group of securities that have been grouped to form one trade-able security that is sold to investors for their inherent safety when they were sold they were sold with an expected default rate of 2% and a recovery rate of 50%, therefore you get 99% of your money back plus the accrued interest generated by the law of averages. they are typically composed of varying grades and coupons (interest rates) to provide a balanced risk and returns. There are hedge funds betting against the very funds they helped create, and there are the people who bought a house they knew they couldn't afford with capital that came from unseen investors who were led to believe that what they were buying was investment grade. Several years of prosperity have been the direct result of CDO's however like most examples, they are being blamed for the end of the prosperity instead of the prosperity they granted many Americans.
The abacus cdo was set up by Goldman Sachs and a hedge fund for the sole purpose of failing (Rappaport). A short time after it was all sold to investors as AAA grade debt (debt goes from AAA, AA, A, BBB and so on with plus and minus sub grades) this very hedge fund went short on the cdo and the rating began to fall. Within months it was CC grade and close to worthless. The Investors in the hedge fund made billions of dollars while the investors in the abacus cdo lost significant amounts of money (Rappaport). Goldman Sachs maintains the position of letting the investors see exactly what was in the cdo and it is the investors fault that they lost money, witch is true, the investors take a risk in purchasing debt and if they prefer to not take risks then investing in mortgage backed bonds is not for them.
A credit default swap insures against the debtor failing to pay. It is also the basis of synthetic CDOs. (Moses) They can be used to take a short position on debt that is expected to fail, like magnatar capital did to the abacus CDO (Levitin). This use of shorting, or betting against an unsound pile of debt is what made the hedge fund billions of dollars. A CDO that is made up of credit default swaps is called a synthetic CDO.
Citi group has sold billions of dollars in CDO's and other related securities that they service but not hold (SBNH). There is a clause in the contract that requires Citi to repurchase the loans at a future date is the investor desires. Citi has 952 million in reserve for this event however estimates range between 20 an 140 billion (Carney). This is obviously not enough and if they do end up having to buy back all of these loans then the economy might have a double dip.
Goldman Sachs has been fined an additional $650,000 wich is a mere slap on the wrist. that is the amount that a bond trader makes in a year and the amount that a bond trader makes for Goldman in a day. The SEC has decided that Goldman Sachs is the instigator of the Abacus CDO and the ensuing financial melt down that followed. The hedge fund that picked the bad debt has not been punished yet and it is not clear if they will be. Shady dealings are not unfamiliar to wall street: the entire history of mortgage bond trading has involved shady dealings and less than quality debt being pawned off (Rappaport).
The abacus CDO was set up to fail from the start. that is undeniable. It was due to a greedy hedge fund and a firm with absolute control over the street. Goldman Sachs rules the street and according to John Gutfreund, they are the king of wall street. They hold the money and money is power. They showed what was in the abacus CDO but many investors just read the ratings not the debt its self. It is more the fault of the rating agencies for misrepresenting the debt (levitin).
A put back feature is a very important part of a bond. It allows the holder to send it back if they don’t like it. The seller of the bond must buy it back if it has been put. the banks hold large capital reserves for the expected put backs. Unfortunately for Most of the banks on the street, they don’t have enough to pay off the waves of bad bonds flooding lower Manhattan. Citi is seriously lacking in the supplies of money that they usually have lying around (Carney).
CDOs and CDSs, like many other things important to our modern world, can be used for both good and bad. The reputation of CDOs has been tarnished, however the fundemental basis of the debt market relies on CDOs and other securities to remain in widespread use. They are an important part of getting money from investors to home buyers.
Works Cited:
Carney, John. "Citigroup's Toxic Mortgage Pipeline Could Mean Mammoth Put-Back Risks." CNBC Real-Time (2010): n. pag. Web. 9 Nov 2010.
Rappaport, Liz. "Finra Fines Goldman Over Disclosure; New Name Emerges .." Wall Street Journal n. pag. Web. 9 Nov 2010. <http://online.wsj.com/article/SB10001424052748704635704575604513104539130.html>.
Levitin, Adam. "Explaining the Abacus CDO ." Credit Slips. Credit Slips, 04 16 2010. Web. 27 Nov 2010. <http://www.creditslips.org/creditslips/2010/04/explaining-the-abacus-cdo.html>.
Sterngold, James. "TOO FAR, TOO FAST; Salomon Brothers' John Gutfreund." new York Times 10 Jan 1988: n. pag. Web. 27 Nov 2010. <http://www.nytimes.com/1988/01/10/magazine/too-far-too-fast-salomon-brothers-john-gutfreund.html>.
Moses, Abigail . "Corporate Bond Risk Falls in Europe, Credit-Default Swaps Show." Bloomberg.com. Bloomberg, 22 Nov 2010. Web. 27 Nov 2010. <http://www.bloomberg.com/news/2010-11-22/corporate-bond-risk-falls-in-europe-credit-default-swaps-show.html>.
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