mikeg3

Pre-Payments Reducing Value of Mortgage-Backed Securities

Under normal conditions, you'd be correct. However, banks are currently starved for capital and any way they get more cash without diluting their common stock is a good thing. The problem you describe was the original reason tranche's were created, so the holders of the "equity tranche", the riskiest 5%, get a lot of the prepayment. Since this tranche is selling for peanuts right now, investors who accept your analysis have an interesting speculation available.

Bank Nationalization: It's Just Plain Wrong

BTW, Japan, after the miracle cure of bank nationalization, is much worse off than the US with its banks particularly hard hit.
www.nytimes.com/2009/0...

Bank Nationalization: It's Just Plain Wrong

It took some courage to post this piece on a board full of short sellers and bank haters, but the points werre well taken.
Given time, the banks will earn their way out of the problem and housing prices will stabilize and begin to rise. Inflation, sure to follow the multi-trillion dollar deficit spending, will speed up the process.
Examples from socialist countries do not apply to the US. If the price of government help is nationalization, few companies will ask for help next time and few investors wil risk their capital in an industry where the house closes out the game while there are still chips on the table.
As for moral hazard, even here in Texas there are penalties short of capital punishment.

Large Banks' Net Income History

Please explain the headings FY1, FY2, and FY3.