Who profited when securitization collapsed, and can the Treasury price the toxic assets that Wall Street could not?
Loading…
Insurance, downgrades and the rating agencies
Record who insured the tranches, the September 2008 AIG downgrade cascade, the independent-versus-objective distinction, the three agencies' 94% share, and the 83% of Moody's 2006 triple-A mortgage securities later downgraded.
The limit of a conservative correlation assumption
Contrast an assumed 25–30% correlation with the far higher realized one, and set the house-price index's worst prior annual fall (−2.2% in 1991) against its roughly 10% drop by September 2008.
Who won: the transfer to junior holders and short sellers
State the senior-to-junior value transfer in one line, then record the real winners, above all John Paulson's reported $3–4 billion 2007 pay from credit default swaps, and the opportunity crisis mispricing creates.
Pricing the rescue: TARP's design and outcome
List the advisory board, equity stakes, industry-paid insurance and recoupment, work the buy-for-$50-what-is-worth-$60 example, and record TARP's $475 billion authority, $443.5 billion disbursed and $31.1 billion net cost.