Ginger Yellow

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    • Wed Mar 5th 10:53 AM | Rating: 0 0
      Commented on:
      Interview with Joseph Mason: No True Sale with Prime Brokers, Hedge Funds
      It sounds like he's proposing the US move closer to the European model of IFRS and Basel II. Most European securitisations involve the originator retaining the first loss piece and accounting for it to the extent that it represents the risks and rewards of the assets. Also any under Basel II implicit support to a securitisation is harshly punished - all existing securitisations are treated as unsecuritised assets for capital purposes and you can't get securitised treatment for future deals in that asset class for at least five years. That's what happened to Egg in the UK when they repurchased a bunch of delinquent receivables from their credit card master trust.

      There has been a lot of mud thrown at securitisation in general that would more properly directed toward abuses of securitisation and the people who carried out and condoned those abuses. It's entirely possible to have a securitisation market that doesn't create perverse incentives, as long as investors and regulators are vigilant to ensure that lenders and structurers act responsibly.

      "Thirdly, investors need to be able to connect bonds sold in the securitizations with the other related bond and securities that provide their credit support. You need to know how much of a given deal your paper represents and how much of the rest of the deal supports your paper."

      I'm not sure what he's saying here. It's not at all difficult to find out how much subordination you have - it's in the offering circular, in the marketing materials and in the pre-sale report.
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    • Tue Feb 26th 08:38 AM | Rating: 0 0
      Commented on:
      Monoline Duoline Rescue Plan: 5th Time the Charm?
      "The current rescue operation is for but $3B. This small sum is intriguing -- not just relative to the prior rumors. First, the duolines have potential exposure anywhere from $30 to $75 billion dollars. On top of that, the bank's counterparty and hedging exposure has been estimated at $150B to $200B. Can $3B really solve this problem?"

      Well, S&P puts Ambac'scurrent capital shortfall at just $400m, so in principle there's no reason why $3bn wouldn't be enough to save its AAA rating (assuming Moody's is roughly of the same opinion). Of course, whether or not it's enough to restore investor confidence is another matter.
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    • Thu Jan 17th 11:44 AM | Rating: 0 0
      Commented on:
      Should BMO Be Worried About Moody's Valuation of Its SIV Exposure?
      There's a fundamental misunderstanding here. NAV does not mean the value of the SIV's assets. It means the amount the assets exceed senior liabilities, expressed as a percentage of capital. A NAV of 50% can mean a decline in asset value of only 2%, because SIVs are highly leveraged.

      Secondly, the $1.25bn BMO invested was senior debt, not capital notes. The NAV calculation is relevant, because it provides a measure of the credit enhancement for senior debt, but it does not serve as a proxy for the value of the senior debt (whereas it does for the value of the capital notes).
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