Wednesday, May 5, 2010

2,000 X Leverage - UNAVOIDABLE result of implicit and explicit leverage in MBS derivatives - why it's still a casino until US creditors wake up

A buyer who puts down 20% $100k allows purchase of a $500k house = 5 times leverage.
A different buyer who puts down the same $100k but as 10% down can buy a house for $1MM = 10 X leverage.
A buyer who puts ZERO $ down = 100 X leverage.

And when Wall St Banks or CSE's then underwrote, issued securities or derivatives - distributed to reliant buyers, then amassed same on balance sheet at 20 or more X leverage = what?

Minimum, 2,000 times total leverage (20 times 100 x leverage in the case of zero down mortgages) when underlying mortgages were interest only or made for more than 100% of property value - GREATER than 2,000 x economic and financial leverage!

Regulators - personally unaware?
No regulator - Mr Bernanke, Mr Greenspan, Mr Geithner, Mr Paulson, others? They drove to work with eye's closed, entered their neighborhoods then homes each evening - UNAWARE OF - HOUSE FLIPPING?????

Perhaps Regulators were in a bubble - a MENTAL, MODEL bubble - indeed one of their OWN choice and creation.

Upon one asset class - REAL ESTATE - overvalued by any measure - come on - no one in authority or CEO leadership could see this?

Ending the siesta on the US taxpayers' dime one little, easy to read blog at a time.

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