Mortgage mess TV

By Felix Salmon
October 14, 2010

I’ve been getting a lot of good feedback about my post yesterday on the way in which just about every major investment bank in the world might have huge legal risk surrounding the way that they built their mortgage bonds. The stock market in general might be relatively sanguine about the mortgage mess, but bank stocks are falling, and I suspect that the worst is yet to come. Certainly the tail risk to the banking industry as a whole is as high as it’s been since TARP was first unveiled.

In any case, if the post was a bit tl;dnr for your tastes, here’s a jerky video version, complete with libel-conscious bleepage. You’ve heard of the foreclosure mess. Here’s a mortgage-bond mess to layer on top:

15 comments

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You’re inspiring me to try doing videos like this to explain concepts.

I expect this will end with some sort of settlement or consent fee paid to bondholders. Just a gut feeling.

Posted by DavidMerkel | Report as abusive

The videos are great! Keep ‘em coming. I’m not sure I agree with your conclusion here. Worst case is prolly they wind up negotiating some settlement deal such as DavidMerkel sugguests.

Posted by Shnaps | Report as abusive

felix, you should wear that purple suit in your next video.

Posted by GregHao | Report as abusive

I can read faster than anyone can speak intelligibly. Mike Konczal’s pix on his rortybomb blog are a better addition to prose on this subject. Good try though. I admit that perhaps i am in the minority w my opinion, LOL. Keep up your good work :-)

Posted by frank_mcg | Report as abusive

I’m a big fan of the purple suit, too, @GregHao.

Posted by lyoungny | Report as abusive

really nice shirt, too. On the issue of the structuring, let’s not get too excited. The collateral disclosures in the bond indentures, at least by the big names, are pretty extensive, the problem was that no one was really reading them at the time. what I wonder is exactly how much money are the bond insurers spending right now to convince the world that it was not really that they did not know what they were doing in their main line of business (or they were too busy to read the indentures), but that all this was a monstrous conspiracy…..

Posted by Tseko | Report as abusive

@ David Merkel I don’t think the bondholders will be able to show harm from Salmon’s video…

Posted by johnhhaskell | Report as abusive

Great job… When to the lynchings start?

Posted by ImIRate | Report as abusive

Excellent. Sartorially, I’d suggest a low-cut dress and Elmo.

Posted by gnarlytrombone | Report as abusive

Felix,
These banks have been insolvent even without your latest discovery.
They had to change the accounting rules just to save the banks from immediate, total collapse, remember?

Posted by yr2009 | Report as abusive

Felix,
Whatever happens I just hope Goldies don’t get hurt.
They’ve been through a lot these last few year and I don’t think the partners can take much more.

Posted by johnnysocco | Report as abusive

The good banks and credit unions will survive. The crooked ones will wither and die. Good riddance. Just today we discovered that a mortgage company is still showing an asset on our property 3 years after it was paid off. I wonder how many more of these shadow assets are still around.

Posted by fred5407 | Report as abusive

I got seasick watching this video, but the content was great.

Looking forward to next video.

Posted by Developer | Report as abusive

Statute of limitations has run….

Posted by Derrida | Report as abusive

Hey Felix,

Loved the video, perfect example of asymmetric information. I am currently a student studying Banking and Finance with the LSE internation program. I had thought of re doing your skit in class for a presentation of asymmetric info, but would honestly believe that would not be doing justice. I would like permission to play this clip and is there anyway I can download it?.

Posted by zegham | Report as abusive