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How credit cards become asset-backed bonds
Mortgages aren't the only financial instruments that get turned into securities. Marketplace Senior Editor Paddy Hirsch explains how companies make money by buying credit card debt and bundling it.
Dark pools
Dark pools are exchanges where people trade stocks anonymously. Senior Editor Paddy Hirsch explains how they work, and why the SEC is considering regulating them.
The 'repo' market
Senior Editor Paddy Hirsch explains why the repurchase (or repo) market is a vital part of the financial system, and why the government is considering changes to it.
Meet Cap 'n Trade
Cap and Trade is the linchpin of the government's effort to curb carbon emissions. Senior Editor Paddy Hirsch explains how the cap and trade model works.
Capital structure
In stories about the auto companies and the banks, we've been hearing about debt-to-equity swaps and exchanging preferred shares for common stock. To understand how those work, you need to understand a company's capital structure. Senior Editor Paddy Hirsch explains.
Shadow banking
The shadow banking system is a key component of the U.S. economy, but the financial crisis has frozen it solid. Senior Editor Paddy Hirsch explains what shadow banking is and why it's important enough to warrant its own bailout, called the Term Asset-Backed Securities Loan Facility, or TALF.
The public-private partnership
The U.S. Treasury Department plans to recruit private investors to take toxic assets off banks' balance sheets. Senior Editor Paddy Hirsch explains how the plan is supposed to work.
Collateral calls
Millions of Americans are wondering why AIG has paid so much taxpayer money to other banks. One reason is because AIG has had to honor "collateral calls" -- demands made by banks on the insurance contracts it's written. Senior Editor Paddy Hirsch explains,
The Uptick Rule
Bankers have been debating bringing back the uptick rule for months, if not years. This week the debate made it to Capitol Hill. Senior Editor Paddy Hirsch gives a quick and dirty explanation of what the uptick rule is, and why it could be reinstated to turn the American taxpayer into one of Citigroup's biggest stockholders. Senior Editor Paddy Hirsch explains.
Cramdowns
A debate is raging in Washington, D.C., about how to deal with America's foreclosure problem. One proposal is to restructure the loans using a tool usually seen in bankruptcy courts: The "cramdown." Senior Editor Paddy Hirsch explains.
Write-downs
markets have deteriorated, "write-downs" have figured prominently in more and more corporate reports. What are write-downs all about? Marketplace Senior Editor Paddy Hirsch explains.
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Dark pools
Watch the videoDark pools are exchanges where people trade stocks anonymously. Senior Editor Paddy Hirsch explains how they work, and why the SEC is considering regulating them. Watch the video.
- Getting Personal »
Q: Borrow to invest?
Our house is paid off and we are without debt. He wants to take out a mortgage for 1/2 of the appraised value of our home, betting that inflation is inevitable and invest it in higher interest CDs. Safe bet or stupid investment? Thanks Mary, Towson, MD Read Chris Farrell's answer »
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Comments
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From Chicago, IL, 04/21/2009
I can see the analogy between credit card receivables and the securities with the example of bond ratings but couldn't get the 'asset-backed' part...???
From Boston, MA, 02/09/2009
Illuminating.
From palo alto, CA, 01/30/2009
I wonder if you can shed some light on why companies who are going to the US government for money to save their companies would be taking that money and handing some of it out in bonuses or buying new corporate jets?
Are they incompetent?
Are they stupid?
Are they greedy?
Are they legally bound?
Are they really in a position of strength and they know it?
Are they immune to any repercussions, and if so, why?
From richmond, VA, 01/24/2009
Where were you ten years ago. When I was calling everyone an idiot and kept loosing jobs. The experts were so "wacked out". I nor anyone else in their right minds can justify what they were doing. The big dummies.
From Moscow, ID, 01/24/2009
I am extremely pleased with your presentations. That said I would ask that you explain the action and purpose of wage fixing. Which I believe to be stalling our economy out of restarting.
From San Jose, CA, 12/24/2008
I think it's humorous (and appropriate) that Paddy ends the segments with "...leaving us badly in need of a drink."
Great whiteboards! A good use of time to check them out.
From singapore, 12/07/2008
i can't view the videos; they all say 'sorry, this video is no longer available'... does anyone have any alternative way to view the videos?
please send your ideas to premiumcarrot@gmail.com
From MD, 12/07/2008
Great Videos! Can you explain Structured Investment Vehicles (SIVs).
From Miami, FL, 12/06/2008
For what its worth... The Asset Back Securities behind this Fallout can be used to help homeowners arguments during a foreclosure. The Mortgage and Note were sold improperly and the holder can not prove possession. This can result in the case being dismissed. The Homeowner wins.
From Atlanta, GA, 12/04/2008
Keep doing the vids Paddy Hirsch. We Americans need to better understand our economy and how it works.
Hopefully, you explain one day on how hedge funds and private equity work on separate vids, but also how they both interlinked with one another.
My theory is that hedge funds and private equity firms are some how involved in the current crisis. If they are involved in the current financial crisis, I hope you could do a vid on this. If not, then I am wrong.
Thanks.
From Naperville, IL, 12/03/2008
Whiteboard videos on financial crisis are fabulous! Are you planning similar vidoes on oil price (supply demand vs speculation)?
12/03/2008
Mr Hirsch; Can you explain the effect of all these bail outs on the money supply?? Some people say government is pumping too much money in the economy with inflationary consequences; but others point out that in the curent market melt down & economic contraction significant amount of capital has been destroyed, therefore the Fed has enough room to rebuild the money supply. Which group is right?? Thanks
12/03/2008
Mr Hirsch; Can you explain the effect of all these bail outs on the money supply?? Some people say government is pumping too much money in the economy with inflationary consequences; but others point out that in the curent market melt down & economic contraction significant amount of capital has been destroyed, therefore the Fed has enough room to rebuild the money supply. Which group is right?? Thanks
From Duluth, MN, 12/02/2008
Really great! Helps make this murky subject a bit less cloudy. Still find it hard to believe people invest in these sorts of things, but perhaps I am and don't know it!
From Chicago, IL, 11/30/2008
This video is fantastic. Thank you very much for this invaluable resource. I'm sure I will check back here again and again.
From Hillsborough, NJ, 11/29/2008
Help me understand . . .
So if everyone pays their cards in full on time, the bond holder gets 0 interest, but still has their equity?
Or said another way the bond holders only earn money if some percentage of card holders pay late.
What are the statistics on the number of people who pay late and the balances they carry? Where can I find them?
From San Diego, CA, 11/29/2008
This is absolutely fabulous! The whiteboard demonstrations and explanations are clear and easy to understand. It's especially memorable with the use of metaphors to describe the complexities of today's financial structure, mechanics and dynamics.
From Dallas, TX, 11/28/2008
I think these videos are very well done. However, I think you should make the point that the credit default swaps were called that so that they would not fall under the insurance industries strict regulations. Indeed banking officials lobbied congress to not consider them insurance as then it would have be more controlled. They wanted the cds system to not be regulated so they could make more money. While they may have not understood the complexity of the system that resulted they most certainly knew that regulation would have curtailed their ability to make huge profits. Now we are left holding the bag. Let's hope the new administration sees fit to call an insurance contract what it is.
From Ottumwa, iowa, IA, 11/28/2008
All of your pod casts say "Sorry Video no longer exists"
From NY, 11/27/2008
As a finance student, I find your instructional videos absolutely essential in understanding the aspects as of this complicated industry. Thank you so very much.
From South Miami, FL, 11/27/2008
I greatly appreciate these short but very instructive videos. Thanks for doing them.
From Sioux Falls, SD, 11/26/2008
What does "Asset backed Security" mean? Can the term be applied to credit card debt?
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