Banks, like Bear Sterns, were making short term loan to Hedge Funds invested in sub-prime mortgages and mortgage REIT (eg Real Estate Investment Trust). The loans were highly leveraged.
I have some stock in TMA, (eg Thornborg Mortgage, Inc.), which is a mortgage REIT. TMA makes loans on Jumbo and Super Jumbo mortgages above the Fannie Mae limit. TMA was financed heavily by Bear Sterns with short term loans, and MTA in turn made long term jumbo and super jumbo mortgage loans available to its customers. The jumbo and super jumbo mortgages were used as collateral to secure the loans from Bear Sterns which had provision for buy back or early repayment should the value of the mortgage paper collateral decrease below certain levels. The loans were on margin, (e.g. a percentage of the value mortgage values). REIT like MTA make money in the spread between the lower short term interest rate paid Bear Sterns, and the hinger long term rate it charged its mortgagees. As the mortgage crisis began to emerge, the value of MTA's mortgage paper declined to the point that Bear Stern began making mortgage calls to TMA, asking them to put up more money to pay down the short term loan to maintain margin contract. As the mortgage crisis worsened, the value of MTA's mortgage paper fell to the point MTA became insolvent, and MTA was not able to meet her margin calls. Bear Sterns as a result began to have liquidity problems as its customers withdrawing fund in a kind of runs on the bank, much like what took place during the Great Depression. The Government and JP Morgan step in to provided the liquidity need to keep Bear Sterns from failing. http://www.streetinsider.com/Equity+Offerings/Thornburg+Mortgage+(TMA)+Raises+$1.35B+Through+Offering/3504638.html or http://tinyurl.com/5b6k42 Regards, LelandJ ,borrowed mush of it short term what qualities for Stephen Russell wrote: > On Thu, Apr 24, 2008 at 9:03 AM, Ed Leafe <[EMAIL PROTECTED]> wrote: > > >> On Apr 24, 2008, at 8:54 AM, Stephen Russell wrote: >> >> >>> I have to call a bull shit on that. You bought securities that said >>> they >>> were paying 90% on time and it's rate was AMAZING. It was gold and >>> EVERYBODY bought it thinking that they were going to get rich. >>> >> EVERYBODY. >> >> Maybe you need to shout a little louder to make it true. >> >> Don't you find it interesting that the financial professionals >> (i.e., >> the ones who certainly knew what they were doing) are being bailed out >> by the government, but individuals are simply cut loose? >> >> > -------------------------------------------------------------------------------------------- > > Who is getting bailed out? > > The government is guaranteeing the funds within the bank so if you had money > there it was safe. > > Now the people who managed the bank and the employees are not so safe. So > you think that their performance generated the KILLER bonuses that these > banks gave themselves? Guess what no bonus. Oh and the value of the > company stocks that they owned? Heck all of that value is worthless paper > in your eyes. Purchased in the 30-75$ per share and now trading on the > street @ under 10$ > > I know that a lot of 401-Ks had these banks in their portfolios so those > investments are sucking eggs, but then you are either aware of what is > happening or your not. > > > > So can you elaborate more on this bail out and define pints that I have > missed? > > > > --- StripMime Report -- processed MIME parts --- multipart/alternative text/plain (text body -- kept) text/html --- _______________________________________________ Post Messages to: ProFox@leafe.com Subscription Maintenance: http://leafe.com/mailman/listinfo/profox OT-free version of this list: http://leafe.com/mailman/listinfo/profoxtech Searchable Archive: http://leafe.com/archives/search/profox This message: http://leafe.com/archives/byMID/profox/[EMAIL PROTECTED] ** All postings, unless explicitly stated otherwise, are the opinions of the author, and do not constitute legal or medical advice. This statement is added to the messages for those lawyers who are too stupid to see the obvious.
