When I am reborn in Hong Kong, I just want to lie down

The wind rises at the end of Qingping, and the waves form between gentle waves.

The real source of some things is not, as it seems on the surface, those greedy banks or speculators. It is often the people who open the floodgates and release the water.

If the Federal Reserve hadn't released the water and asked downstream banks to find the direction of the water, those in the credit department wouldn't have been able to target people with subprime credit.

And all Li Bu did was just to make a little money, and help these funds find their way.

Because of the attacks, the Federal Reserve believed that the country needed stimulus, so it launched various measures to release money.

Wall Street has discovered something strange recently. Some bank bonds have been particularly active recently, and the scale is very large. Of course, it is huge at this time, but it will be nothing compared to a few years later.

"Hey, have you heard? Some bonds are very easy to sell, and the return potential is very large." A senior trader mentioned a new bond while chatting with another trader.

After hearing what the senior said, he also thought of that kind of bond and said, "I've heard about it too. It's a derivative product that debentures mortgage loans. I heard that the risk is very low."

"I have also heard people say that the profit margin is very low, but the base is very large." The old man seems to like this kind of product.

There are many people discussing this kind of thing, because there are many small and medium-sized investment banks in the market that resell this kind of product.

In North America, there are many small banks. The only hope for these small banks to survive is loans. If they want to make big money, they have to lend money.

A newly emerging investment bank on Wall Street found a small and medium-sized bank in California, California Community Bank. The bank has more than 20 branches in California. Its business is not complicated, but appears to be very simple.

It relies on taking in deposits and lending, earning the difference, as well as credit card processing fees. The loans are mainly housing loans, with a loan balance of US$[-] million every year. Over the years, the stability of real estate has kept its business going strong. Stable, make money while lying down, and live a nourishing life.

At ten o'clock on a Tuesday morning, Kent, the president of California Community Bank, received a guest from his Wall Street, Jimmy, a partner of Anderson Bank.

Kent is a typical old white North American man, conservative and stubborn. He doesn't like people on Wall Street, although he is engaged in the banking industry, which North Americans call vampires.

"Hello, Mr. Jimmy, can you tell me the purpose of your visit?" Kent went straight to ask about the purpose of his visit.

When Jimmy saw the other party like this, he was also straightforward and said: "We serve banks and provide financing for banks. We have observed that your bank has not expanded its business scale in the 30 years since its establishment. Among them, The crux is that your financing channels are too single, which hinders your development. Now, we will help you solve this problem."

Kent heard what the other party said, which made him a little angry. As soon as he graduated, he joined such a bank. It took him 20 years to go from being a lobby manager to his current position. He also always followed the instructions written when the bank was established. Rules, regulations and corporate culture mean not to take risks, so there is no risk.

"We don't need the risk." Kent refused.

Jimmy said: "President Kent, there will be no risk in our financing channels. As long as the loans you grant are risk-free, then there will be no risk in the financing channels."

Only after hearing that there was no risk did Kent become interested in listening to him. He said, "Then tell me."

Jimmy took out a document, which was a plan for the securitization of existing loans, and then handed the plan to Kent.

Kent took it and began to read it, while Jimmy next to him began to explain.

There is nothing about subprime mortgages in this planning document. It mainly talks about packaging existing loans into a financial product, that is, mortgage-backed securities (mbs). The income is the interest difference, and this interest difference is absorbed. The difference between the interest paid on depositors' deposits and the interest on loans.

After packaging it, it is sold to investors, which include individual investors and institutions. These institutions also include companies or countries. Of course, in this process, investment banks will charge certain fees and management fees.

As elites on Wall Street, of course they will not earn just one point or a few points of profits or handling fees. They will develop derivatives in addition to derivatives that they are good at, so that leverage becomes bigger.

Whether these derivatives are safe or not depends on whether the bank's loans are safe or not. Derivatives are highly targeted. Once there is a problem with the loan, the derivatives pyramid rooted in the loan soil will collapse.

He definitely didn’t understand the various terms, such as MBS and CDOS, but he knew one thing. The founders of the bank tended to cooperate with Anderson Bank. If he didn’t understand these, he might be eliminated. .

"Mr. Jimmy, you can leave this information. I want to understand it in detail and give you an answer the day after tomorrow."

After Jimmy left, President Kent immediately called over a few finance college students who had been recruited in recent years and asked them to analyze the feasibility of this plan. Of course, he would not let anyone know that he was out of date and did not understand. something inside.

In fact, this is a fairly normal and risk-free financial derivatives plan. It is very safe. As long as there are no problems with the bank, there will be no risk in the things in the plan.

Will the bank admit that it is risky?Of course not, then everything in the plan is risk-free.

A few finance graduates used the knowledge they learned in second- and third-rate universities to start to understand and examine. Of course, they would not know what the hearts of Wall Street elites are like.

Soon, they came to the conclusion that there was no problem.

After hearing what they said, Kent nodded, indicating that he understood, and asked them to explain the content. The principle was to take out their loans as collateral, and then the bank would give them a portion of its interest income every month. And they use the financing money to make loans, and then use these loans as collateral, and the cycle continues until infinity.

After Kent learned about it, he mentally cursed that these Wall Street people would engage in such fancy things. However, he also had a good mentality. The shareholders had long been dissatisfied with his stable operation. Now, there is a risk-free operation. With the plan in front of him, he naturally had an explanation for the shareholders.