No, actually, you don't. If it was just people defaulting on ARM's, that could be handled fairly easily. It would suck of course. But the amount of money involved is nothing compared to what we are dealing with and could have been manageable.
I linked before to figures showing what percentage of defaults were in play and what percentage of those were non-conforming loans. As of late last year we still had not even hit a 1.5% default rate. 2% of mortgages in default would not bring down the banking industry. The panic, the sudden loss of value, was all of the things tied to each mortgage. Take away the derivatives and we are not in a recession. Judah On Tue, Feb 3, 2009 at 3:21 PM, Robert Munn <[email protected]> wrote: > > Yeah, I get that. Derivatives did not cause people to take out loans they > could never repay or charge debt to credit cards they could never afford. > Derivatives work if the underlying assets are good, but when everyone bets > the wrong way on the underlying assets (e.g. home values will rise and > mortgages will be repaid) the system falls apart. Derivatives are part of > the problem, but not the root of the problem. Take away the derivatives and > you still have millions of people losing their homes and defaulting on > credit cards, sending the economy into a recession. > > On Tue, Feb 3, 2009 at 1:02 PM, Gruss wrote: > >> >> > RoMunn wrote: >> > >> > Derivatives - of mortgages. >> >> You couldn't be more wrong. That's simply the fact. >> >> Mortgage-backed securities have been around since the Johnson >> administration. >> >> Take a look into swaps. >> >> Then take a look into "credit" >> >> Then realize that mortgages are only one type of credit. >> > > > ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~| Adobe® ColdFusion® 8 software 8 is the most important and dramatic release to date Get the Free Trial http://ad.doubleclick.net/clk;207172674;29440083;f Archive: http://www.houseoffusion.com/groups/cf-community/message.cfm/messageid:287253 Subscription: http://www.houseoffusion.com/groups/cf-community/subscribe.cfm Unsubscribe: http://www.houseoffusion.com/cf_lists/unsubscribe.cfm?user=89.70.5
