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President Obama

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a point of view on the financial crisis

a point of view on the financial crisis

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President  Obama President Obama Presentation Transcript

  • OPEN WEB SITE FOR PRESIDENT OBAMA FI CR SU NA IS HIS ADMINISTRATION NC IS BPR MEMBERS OF CONGRESS IA L IME AND S THE AMERICAN MO IS IS TAXPAYERS CR RTG IC OM N CO AG E ES TOXIC ASSETS •THE US TAXPAYER AND THE FINANCIAL CRISIS •THE US TAXPAYER AND GOVERNMENT •ONE OF VERY FEW SOLUTIONS TO THE CURRENT CONFIDENCE CRISIS •IS ETHICAL PROFITABLE CONSUMER BANKING A MYTH? 1 cdecarbonnel@alum.mit.edu
  • EMAIL LIST  PRESIDENT OBAMA FEBRUARY 5, 2009  US ADMINISTRATION FEBRUARY 7, 2009  MEMBER OF CONGRESS FEBRUARY 9, 2009  US TAXPAYERS MID FEBRUARY CAVEAT  THE AUTHOR(S) OF THIS SITE AND OF THE INFORMATION CONTAINED ARE INDIVIDUAL US TAXPAYERS.  ALL THE INFORMATION AND DATA COMES FROM PUBLICLY AVAILABLE SOURCES, MAINLY IF NOT ALWAYS, FROM THE INTERNET  THE AUTHOR MAY HAVE MADE NUMERICAL ERRORS IN THIS DOCUMENT, BUT BELIEVES THAT THEY WOULD HAVE LIMITED IMPACT ON THE ANALYSIS AND CONCLUSION. 2 cdecarbonnel@alum.mit.edu
  •  “We start 2009 in the midst of a crisis unlike any we have seen in our lifetime, a crisis that has only deepened over the last few weeks. Nearly 2 million jobs have been now lost. And on Friday, we're likely to learn that we lost more jobs last year than at any time since World War II. Just in the past year, another 2.8 million Americans who want and need full–time work have had to settle for part–time jobs.“ 3 cdecarbonnel@alum.mit.edu
  • NEVER SO FEW HAVE DONE SO MUCH DAMAGE TO THE WORLD FINANCIAL MARKETS AND THEIR ECONOMY FEW NEVER SO 4 cdecarbonnel@alum.mit.edu
  • MR. PRESIDENT  WE TAXPAYERS HAVE LOST CONFIDENCE – WITH OUT IT, IT IS GOING TO BE DIFFICULT TO RESUME NORMAL ECONOMIC LIFE  WE ORIGINALLY HAD LOST CONFIDENCE AS A RESULT OF THE FINANCIAL CRISIS  THEN,WE HAD LOST CONFIDENCE AS A RESULT OF THE ECONOMIC CRISIS  BUT AT THIS STAGE WE HAVE LOST CONFIDENCE BECAUSE THERE DOES NOT APPEAR TO BE A VIABLE UNDERSTANDABLE SOLUTION 5 cdecarbonnel@alum.mit.edu
  • MR PRESIDENT AS YOU WELL KNOW:  THE US TAXPAYERS – DECLARES $8.0TRILLION IN AGI DOMESTIC DEPOSITS – HAS OVER $40TRILLION IN ASSETS  $ 7.5TRILLION IN SHORT TERM $9.0 ASSETS $8.0 A.G.I. • $15.5TRILLION IN SECURITIES $7.0  HAS BECOME MUCH MORE SOPHISTICATED FINANCIALY OVER $6.0 THE PAST DECADE. $5.0  WHILE WE MAY NOT UNDERSTAND (WHO DOES) ALL THE REASONS FOR $4.0 DEPOSITS THE CURRENT CRISIS, WE ARE STILL $3.0 ABLE TO GRASP THE FOLLOWING FACTS: $2.0 – THAT FINANCIAL INTERMEDIARIES $1.0 (WALL STREET) HAVE AGAIN ABUSED THEIR FRANCHISES $0.0 – THAT IT HAS AN UNBEARABLE 1990 1992 1994 1996 1998 2000 2002 2004 2006 FINANCIAL IMPACT ON OUR DAILY LIVES AND THE FUTURE OF OUR DOMESTIC DEPOSITS A.G.I. ECONOMY 6 cdecarbonnel@alum.mit.edu
  • MR PRESIDENT THE US TAXPAYERS, SINCE THE EARLY 90’S, HAVE BEEN “GOOD CITIZENS”. AS A RESULT, WE INCREASED OUR HOUSEHOLD SIZE BY 16 MILLIONS SINCE 1990., REACHING OVER 110 MILLIONS.  “GOOD CITIZENS” US HOUSEHOLDS – WE HAVE LEVERAGED THE NEW TECHNOLOGIES TO CREATE NEW 120 BUSINESS SECTORS CREATING MILLIONS OF JOBS – WE HAVE DEDICATED OURSELVES TO HARD WORK 110 – WE HAVE PAID SUBSTANCIAL TAXES – WE HAVE SAVED (JUST THROUGH BANK DEPOSITS) $3.3TRILLION DOLLARS FROM 1995 TO 2007 100  AND AS A RESULTS WE WANTED – TO MOVE UP IN HOMES OR TO BUY OUR FIRST HOME 90 – TO PURCHASE A NEW CAR – TO GET NEW WHITE GOODS 80  AND WE EXPECTEDED THE FINANCIAL INTERMEDIARIES AND THE US 1980 1985 1990 1995 2000 2005 2010 GOVERNEMENT TO DO THEIR JOB US HOUSHOLDS 7 cdecarbonnel@alum.mit.edu
  • MR PRESIDENT DESPITE OUR DEPOSIT OF MORE THAN $7.0TRILLION (60% FDIC INSURED),THIS HISTORICALY HIGH DEMAND FOR HOME FINANCING OF MORTGAGES WAS ONLY PARTIALY FINANCED, AS HISTORICALY, FROM THE BALANCE SHEET OF THE TRADITIONAL BANKING SYSTEM HOUSEHOLDS COMMERCIAL BANKS DEPOSITS HOME OWNERSHIP (FDIC) HOME OWNERSHIP 7,000,000,000 70.00% 6,000,000,000 69.00% 5,000,000,000 68.00% 4,000,000,000 67.00% 3,000,000,000 66.00% 2,000,000,000 65.00% 1,000,000,000 64.00% 63.00% 0 1975 1980 1985 1990 1995 2000 2005 2010 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 HOME OWNERSHIP 1-4 FAMILY RESIDENTIAL NET LOANS AND LEASES 8 cdecarbonnel@alum.mit.edu
  • BUT A VERY LARGE AMOUNT ($2.0 TO $3.5TRILLION) WERE FINANCED WITH EXOTIC FINANCIAL INSTRUMENT THAT ORIGINATED MUCH MORE FEE INCOME FOR THE COMMERCIAL BANKS U.S. Mortgage Market OUTSTANDING MORTGAGES  THE BANKS GROUPED (Dolla inM rs illions) SECURITIZED A LARGE PART OF Total N on- Total Residential Total M Sas B THEM (ABS, RMBS,..) Year GA NM FHLM C FN A M Agency A gency MS B Mortgages %of R M esi tg 1980 93,874 16,962 110,836 110,836 962,2 59 11.5  THE MAIN PURPOSE FOR A BANK 1981 105,790 19,897 717 126,404 126,404 1,034,8 57 12.2 1982 118,940 42,952 14,450 176,342 176,342 1,074,9 95 16.4 TO GO THROUGH THESE 1983 159,981 57,720 25,121 242,822 242,822 1,191,6 48 20.4 EXPENSIVE STEPS 1984 179,981 70,025 36,215 286,221 11,000 286,221 1,326,0 92 21.6 1985 212,145 99,908 54,987 367,040 24,016 367,040 1,523,5 90 24.1 (SECURITIZATION) IS TO BE ABLE 1986 262,698 169,186 95,778 527,662 16,617 527,662 1,726,4 60 30.6 1987 TO TRANSFER THE UNDER LYING 315,832 205,992 137,330 659,154 27,800 686,954 1,924,2 18 35.7 1988 340,527 219,701 172,259 732,487 34,865 767,352 2,157,7 49 35.6 LOAN TO A NEW PARTY, USUALLY 1989 369,687 266,060 219,577 855,324 43,325 898,649 2,382,9 54 37.7 1990 401,278 308,369 291,194 1,000,841 55,193 1,054,176 2,619,0 09 40.3 A NONE BANK ENTITY, OUT OF 1991 425,241 351,906 362,667 1,139,814 98,183 1,223,814 2,787,1 86 43.9 YOUR OWN BALANCE SHEET SO 1992 419,516 401,525 435,979 1,257,020 146,146 1,389,020 2,955,0 12 47.0 1993 414,066 434,499 486,804 1,335,369 174,571 1,519,069 3,116,5 00 48.7 THAT YOU FREE UP FUNDS TO DO 1994 450,934 460,656 530,343 1,441,933 192,637 1,647,933 3,296,2 49 50.0 NEW LOANS. 1995 472,283 512,238 569,724 1,554,245 206,487 1,778,545 3,467,2 57 51.3 1996 506,340 551,513 633,210 1,691,063 232,206 1,947,263 3,695,1 59 52.7  BUT THE COMMERCIAL BANKS 1997 536,810 576,846 687,981 1,801,637 276,930 2,112,337 3,935,9 95 53.7 1998 537,431 640,471 804,205 1,982,107 355,470 2,390,251 4,294,7 68 55.7 KEPT (31/2/2007) $1,0TRILLION OF 1999 582,263 740,157 924,941 2,247,361 394,559 2,706,828 4,716,5 58 57.4 2000 611,553 810,894 1,016 ,398 2,438,845 426,265 2,865,110 5,126,3 12 55.9 THESE SECURITIES ON THEIR 2001 591,368 940,933 1,238 ,125 2,770,426 496,101 3,266,527 5,635,7 91 58.0 BALANCE SHEET. 2002 537,888 1,072,990 1,478 ,610 3,089,488 551,806 3,641,294 6,309,6 23 57.7 2003 1,156,188 473,738 1,851 ,728 3,481,654 683,231 4,164,885 7,105,0 53 58.6 2004 1,199,290 1,984,21 7 4,696,746 441,345 3,624,852 1,071,894 8,071,0 89 58.2 20 3 411,870 05-Q 1,284,393 2,226,00 0 5,332,263 3,922,263 1,410,000 8,784,3 00 60.7 Source: Insid M &AB e BS S Estim tesinitalics a 9 cdecarbonnel@alum.mit.edu
  • MR PRESIDENT THE BANKS TOOK THE RISK OF RECATEGORIZING RESIDENTIAL MORTGAGES ON THEIR BALANCE SHEET FROM LOANS TO SECURITIES FOR INCREASE FEES  AS A RESULT THESE RESIDENTIAL MORTGAGES CHANGED IN ACCOUNTING RULES FROM LOAN ACCOUNTING TO SECURITIES ACCOUNTING (MEANING MARK-TO-MARKET)  TO COMPOUND THIS, THEY INVESTED ON THEIR BALANCE SHEET $1.1TRILLION 60% OF THEIR EQUITY BASE IN MORTGAGE BACKED SECURITIES ($970BILLION).  NO INVESTMENT FIRM OR INVESTOR WOULD COMMIT 60% OF HIS NET WORTH TO A SINGLE INDUSTRY  WHY? THE MAIN REASON I CAN THINK OF IS THAT IT GENERATED ENORMOUS FEE INCOME (FOR THEM AS FOR WALL STREET). THIS INCREASED FEE INCOME PROBABLY CONTRIBUTED SUBSTANCIALLY TO THEIR COMPENSATION PACKAGE. 10 cdecarbonnel@alum.mit.edu
  • Enhancement Reflects Collateral Differences Collateral “Six-Pack” Deal Deal with XS / OC  In Non-Agency MBS, credit enhancement structures come mainly in two flavors Deal Collateral Face Value - AAAs Total Principal Payments “Six-pack” structures where AAAs several locked-out subs provide credit enhancement. Mainly used on Jumbos and AA “M1” Alt-As Credit Enhancement A “M2” Classic “Six Pack” Excess-spread / Over- AA “M1” Excess-Spread O/C-based collateralization structures, BBB “M3” Credit Enhancement where locked-out subs are BB “B1” A “M2” complemented by excess interest from the collateral to B “B2” cover losses. Mainly used in BBB “M3” N.R. “B3” Subprime, High-LTV, Scratch & Dent, sometimes XS – OC Payments IO Interest Alt-A Residual Interest on Interest on the bonds the bonds 11 cdecarbonnel@alum.mit.edu
  • BUT  LIKE ANY AND MANY ECONOMIC CYCLES, ON THE PART OF THE US TAXPAYERS THERE WERE SOME EXCESSES.  SOME TAXPAYERS OVEREXTENDED THEMSELVES  SOME TAXPAYERS RAN THEIR CREDITCARD BALANCE  SOME OVERPAID FOR THEIR HOMES… • IT SHOULD HAVE RESULTED IN A CORRECTION, BUT NOT IN A WORLD FINANCIAL CRISIS 12 cdecarbonnel@alum.mit.edu
  • OPEN WEB SITE FOR PRESIDENT OBAMA HIS ADMINISTRATION MEMBERS OF CONGRESS AND THE AMERICAN TAXPAYERS •THE US TAXPAYER AND THE FINANCIAL CRISIS •THE US TAXPAYER AND THE GOVERNMENT •ONE OF VERY FEW SOLUTIONS TO THE CURRENT CRISIS •FINANCIAL CRISIS •CONFIDENCE CRISIS •IS ETHICAL PROFITABLE CONSUMER BANKING A MYTH? cdecarbonnel@alum.mit.edu
  • IN 2008, THE US TAXPAYERS CONTRIBUTES $1.1TRILLION OUT THE FEDERAL GOVERNMENT RECEIPTS OF $2.5TRILLION 14 cdecarbonnel@alum.mit.edu
  • WHEN CALCULATED AS A PERCENTAGE OF INCOME TAX RECEIPTS, THE FEDERAL DEBT IS NOT OVERWHELMING. INCOME TAX RECEIPTS AS PERCENT OF GDP 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 INCOME TAX AS % GDP DEBT SHOULD NOT BE CALCULATED NOT AS % OF GDP (REVENUES IN CORPORATE WORLD), BUT AS % OF INCOME TAXES (EQUIVALENT TO NET INCOME IN THE CORPORATE WORLD) 15 cdecarbonnel@alum.mit.edu
  • MR. PRESIDENT  THE US TAXPAYER IS PROVIDING THE CASH FLOW FOR THE FEDERAL GOVERNMENT TO BE ABLE TO BORROW $10,000BILLION IN FEDERAL DEBT – $76,000 PER TAXPAYER  THE US TAXPAYER IS THE ULTIMATE PAYER FOR THE $452BILLION IN YEARLY INTEREST COST – $3,476 PER TAXPAYER 16 cdecarbonnel@alum.mit.edu
  • THE S&L CRISIS COST BETWEEN $50-100BILLION FOR THE TAXPAYERS, THE CURRENT CRISIS MAY COST $400-800BILLION IF THE GOVERNMENT RELIES ON THE SAME OR SIMILAR ACTIONS  The thrift cleanup was Congress's response to the greatest collapse of U.S. financial institutions since the 1930s. – From 1986 to 1989, the Federal Savings and Loan Insurance Corporation (FSLIC), the insurer of the thrift industry, closed or otherwise resolved 296 institutions with total assets of $125 billion (table 1).3 – An even more traumatic period followed, with the creation of the Resolution Trust Corporation (RTC) in 1989 and that agency's resolution by mid-1995 of an additional 747 thrifts with total assets of $394 billion. – The combined closings by both agencies of 1,043 institutions holding $519 billion in assets contributed to a massive restructuring of the number of firms in the industry. From January 1, 1986, through year-end 1995, the number of federally insured thrift institutions in the United States declined from 3,234 to 1,645, or by approximately 50 percent AND, LET US MAKE NO MISTAKE, THE SAME MINORITY WILL BE THE ONE WHO WILL REAP MOST IF NOT ALL THE $400-800BILLION, LIKE LAST TIME 17 -http://www.allbusiness.com/business-finance/business-insurance/977722-1.html cdecarbonnel@alum.mit.edu
  • MR PRESIDENT PLEASE DO NOT LET YOUR ADMINISTRATION ELIMINATE MARK-TO-MARKET ACCOUNTING  AS THIS CRISIS SHOWS, IT PROTECTS US TAXPAYERS AND MAIN STREET  IT WOULD NOT HAVE CHANGED ANY OF THE FINANCIAL DEALS (MORTGAGE SECURITISATION) DONE BY WALL STREET IN THE PAST FEW YEARS  IT WOULD NOT HAVE IMPACTED THE EXCESSES IN COMPENSATION AS THE LAST $18.3BILLION SHOWS 18 cdecarbonnel@alum.mit.edu
  • THE TRADITIONAL MORTGAGE LOAN PROCESS COMMERCIALBANK All real estate loans 3,863,973,479 8 Real estate loans in domestic offices: 3,794,965,620 9 Construction and land development 554,447,534 10 Commercial real estate 935,093,951 11 Multifamily residential real estate 149,177,231 12 1-4 family residential 2,094,503,559 13 Farmland 61,743,345 COMMERCIAL BANKS 19 cdecarbonnel@alum.mit.edu
  • WALL STREET BONUS FOG. EACH LEVEL OF COMPLEXITY GENERATED (AND STILL GENERATE) SUBSTANCIAL FEES AROUND 2-3% OF SECURITY VALUE. FOR THE BENEFIT THE MORTGAGE HOLDER? COMMERCIAL BANKS LEVEL 3: CDOXCDO Asset manager LEVEL 1: LEVEL 2: Bond insurer RMBS LEVEL 3: Silver Marlin Sailfish CDO Co-issuer CDOXCDO KLEROS Preferred Rating agencies South Coast Funding IX Swap provider Maxim High Grade Trustee, collateral LEVEL 3: custodian and CDOXCDO servicers $275M $300M $190M and paying agent LEVEL 3: $250M CDOXCDO Underwriter and placement agent 20 cdecarbonnel@alum.mit.edu
  • THE RESULT IS THAT THERE IS A MARK-TO-MARKET ACCOUNTING LOSS OF $1.8TRILLION DOLLAR AGAINST THE EQUITY OF THE COMMERCIAL BANK SECURITIZED MORTGAGE OUTSTANDING 3,500 MORE THAN $3TRILLION ISSUED 3,000 LOAN ACCOUNTING: LOSS IN 2,500 VALUE BETWEEN $ B IL L IO N 10-15%? 2,000 1,500 MARK-TOMARKET ACCOUNTING: LOSS IN VALUE BETWEEN 1,000 40-50% 500 0 2004 2005 2006 2007 2008 2009 2010 YEARS SECURITIZED MTG OUTSTANDING MARK-TO-MARKET VALUE OF UNDERLYING MTGS 21 cdecarbonnel@alum.mit.edu
  • MANY ACTIONS ARE PROPOSED AND SOME ARE IMPLEMENTED. BUT THEY DO NOT ADDRESS THE CORE AND THE OVERWHELMING SIZE OF THE PROBLEM 22 cdecarbonnel@alum.mit.edu
  • OPEN WEB SITE FOR PRESIDENT OBAMA HIS ADMINISTRATION MEMBERS OF CONGRESS AND THE AMERICAN TAXPAYERS •THE US ECONOMY •THE US TAXPAYER •ONE OF VERY FEW SOLUTIONS TO THE CURRENT CONFIDENCE CRISIS •IS ETHICAL PROFITABLE CONSUMER BANKING A MYTH? cdecarbonnel@alum.mit.edu
  • MR PRESIDENT WHY NOT TURN A LOSING SITUATION WHERE THE US TAXPAYER EXPECT THAT HE WILL END UP PAYING FOR THE EXCESSES TO A SITUATION WHERE HE WILL PARTICIPATE IN THE SOLUTION BOTH AT THE IMPLEMENTATION OF THE POLICY AND AT THE FINANCIAL IMPACT OF THE RECOVERY  HISTORICAL LOSS IN US TAXPAYER CONFIDENCE  SUBSTANCIAL INDIVIDUAL FINANCIAL HARDSHIP – LOSSES IN HOME EQUITY VALUE (15%-30%) – LOSSES IN STOCK MARKET VALUE FROM 14,000 TO 8,500 – LOSSES IN EMPLOYEMENT INCOME – LOSSES IN NON EMPLOYEMENT INCOME (INTEREST INCOME GOING TO BELOW 1%)  RESTORING CONFIDENCE WILL HAVE TO BE DONE THROUGH MORE THAN TRADITIONAL STIMULUS PACKAGE AND WITH DETAILED TRANSPARENCY AND EXPLANATION, AND HOPEFULLY PARTICIPATION – EXPLAIN WHAT HAPPENED – EXPLAIN WHY IT WILL NOT REOCCUR – TELL THEM THEY WILL PARTICIPATE IN OTHER WAYS THAN SEE THEIR TAX MONEY DISAPPEAR 24 cdecarbonnel@alum.mit.edu
  • MR. PRESIDENT: YOUR ADMINISTRATION IS SUGGESTING A BAD BANK?  5,000,000 TO 7,000,000 MORTGAGE CUSTOMERS ($1,500t/$300,000) THAT ARE NOT GOING TO BE HAPPY TO BE CONSIDERED PART OF A “BAD BANK”. – BEING OWNED OR PART OF A “BAD” SECURITY, DOES IN NO WAY MEAN YOU ARE PART OF “BAD SUBPRIME LOANS”.  IN THE MEAN TIME THEIR MORTGAGE MONTHLY PAYMENT STILL PAY FOR THE SERVISERS, THE TRUSTEES, THE LAWYERS, THE ACCOUNTANTS…..  WALL STREET MUST BE SALIVATING. $1,500BILLION IN IDENTIFIED ASSETS THAT WILL HAVE TO BE RECYCLED THROUGH THEM. A MAJOR IMPACT ON THEIR COMPENSATION AND BONUS. 25 cdecarbonnel@alum.mit.edu
  • MR PRESIDENT EMPOWER THE TAXPAYERS TO PARTICIPATE IN THE SOLUTION TO A PROBLEM THEY DID NOT CREATE  YOU WOULD ADDRESS A NUMBER OF ISSUES – ADDRESS THE CONFIDENCE GAP – ADRESS THE TOXIC ASSETS – PUT TO REST THE ACCOUNTING DEBATE ABOUT MARK-TO-MARKET ACCOUNTING – PROVIDE A MULTI YEAR STIMULUS PACKAGE IN ADDITION TO THE CURRENT ADMINISTRATION STIMULUS PACKAGE – PROVIDE TOTAL TRANSPARENCY IN THE FINANCIAL CRISIS  THEY WOULD FINANCIALY PARTICIPATE IN THE “RESCUE” OF THEIR ECONOMY AND OF THEIR “FINANCIAL INSTITUTIONS”  THEY WOULD DEPOSIT $500BILLION TO $1,000BILLION IN THE “BAD BANK” DIRECTLY, TO INVEST IN “TOXIC ASSETS” – EARNING 6 TO 8% INTEREST – GETTING THE RECOVERY IN PRICES – BENEFITING FROM THE RECOVERY THAT THEY WILL CREATE  IT ,OBVIOUSLY, WOULD BE ON A VOLUNTARY BASIS 26 cdecarbonnel@alum.mit.edu
  • MR. PRESIDENT: YOUR ADMINISTRATION COULD HAVE A FAIR WAY TO RESOLVE THE CURRENT FINANCIAL CRISIS WITH THE SUPPORT OF THE TAXPAYERS  THE GOVERNMENT COULD SPONSOR ONE OR MORE SINGLE PURPOSE TAXPAYERS FINANCED AND OWNED BANK (CREDIT UNION)  THE GOVERNEMENT COULD FOR THESE SINGLE PURPOSE BANKS: – ALLOW TO TRANSITION FROM MART-TO-MARKET ACCOUNTING TO LOAN ACCOUNTING  WITH VERY STRINGENT CONDITIONS – OWNERSHIP OF BANK HAS TO BE WITH U.S. TAXPAYERS WITH A MAXIMUM LEVEL ($50,000)  A CONDITION FOR THE ACCEPTANCE OF THE TRANSFER OF THE “TOXIC ASSETS” WOULD BE – ALL LEGACY STRUCTURE OF WALL STREET (TRUSTEE, LAWYERS, ..) WILL BE NULLED AND VOID  ALL FINANCIAL BENEFIT (INTEREST, LOAN VALUE RECOVERY..) WILL BE PASSED THROUGH IN TOTALITY TO THE US TAXPAYERS/OWNERS 27 cdecarbonnel@alum.mit.edu
  • THE MULTILAYERED SECURITISATION WILL BE CANCELLED AND MORTGAGES WOULD BE RECATEGORIZED AS LOAN AND ACCOUNTED FOR ON THE BASIS OF LOAN ACCOUNTING COMMERCIAL BANKS LEVEL 3: CDOXCDO Asset manager LEVEL 1: LEVEL 2: Bond insurer RMBS LEVEL 3: Silver Marlin Sailfish CDO Co-issuer CDOXCDO KLEROS Preferred Rating agencies South Coast Funding IX Swap provider Maxim High Grade Trustee, collateral LEVEL 3: custodian and CDOXCDO servicers $275M $300M $190M and paying agent LEVEL 3: $250M CDOXCDO Underwriter and placement agent 28 cdecarbonnel@alum.mit.edu
  • BANKS/INSTITUTIONS THAT NEED GOVERNMENT/TAXPAYER BAIL OUT WOULD BRING THE “UNDERLYING ASSETS” BUT WITHOUT THE TOXIC ENVELOPE COMMERCIAL BANKS “TOXIC MORTGAGE BANK”  ASSETS $500B TO $1,000B IN “TOXIC Silver Marlin Sailfish ASSETS” Kleros Preferred • TOTAL PASS THROUGH OF INTEREST • TOTAL PASS THROUGH South Coast Funding IX OF PRINCIPAL Maxim High Grade REPAYMENT  LIABILITIES – US TAXPAYERS DEPOSIT • FDIC INSURED • TAX FREE INTEREST(?) 29 cdecarbonnel@alum.mit.edu
  • MR. PRESIDENT: IN YOUR CAMPAIGN YOU MENTIONED JOB CREATION.  $1,500BILLION ASSETS WILL NEED TO BE WORKED OUT. IT WILL END UP COSTING 1 OR 2% OF ASSETS A YEAR $15 TO $30BILLION PER YEAR.  WORKING WITH MAIN STREET WILL CREATE 300,000 JOBS ($30B/$100,000) 30 cdecarbonnel@alum.mit.edu
  • MR PRESIDENT: IF THIS ACTION (FOR US ASSETS BASED SECURITIES) WERE EXTENDED TO THE ASSETS HELD OVERSEAS IT WOULD GREATLY IMPROVE US STATUS OVERSEAS  UBS AG investment bank $18.700  Crédit Agricole bank $ 4.800 •THIS ACTION COULD ALSO BE  HSBC bank $ 3.400 EXTENDED TO SECURITIES  Deutsche Bank investment bank $ 3.100 CURRENTLY OVERSEAS.  Credit Suisse bank $ 3.080 •IN THIS WAY IT COULD ALSO  BayernLB bank $ 2.800 CONTRIBUTE TO STABILIZING THE  Barclays Capital investment bank $ 2.700  RBS bank $ 2.600 INTERNATIONAL BANKING  Natixis bank $ 1.750 SYSTEMS.  Commerzbank bank $ 1.100  Swiss Re re-insurance $ 1.070  BNP Paribas bank $ 0.870 31 cdecarbonnel@alum.mit.edu