posted on Feb, 12 2009 @ 07:00 PM
This also creates a change in the FDIC Board, details at link.
Seems there are at least 2 people that refuse to be onboard with Obama's stimulus and housing bailout plans.
But then again, real economists and people within the Mortgage industry realize that Obama's plan will absolutely slaughter the banks and Security
The AAA and super seniors would take a hit and be written down, rating action would likely take it down to A, in some instances to Equity/Non
50% of the AAA home-eq/Alt-A out there has the provision that a loan modification involving reduction in balance will be charged PRO-RATA, regardless
of seniority, to the loan structures.
when there is a loss, the bonds will take a hit from equity up to subordinate then super seniors.
When there is a loss DUE to modification, the entire structure will take the fair share per balance remaining of the hit. Also think about how big the
AAA right now considering much of the default has flown through the support over the years. This will also spill over into the ABS Card and autos.
When you jump the seniority in the capital structure, you put at risk the entire structure. People will no longer loan large sums of money at low
interest rates, because they will be afraid of assuming the risk of the more subordinate levels of debt, while assuming the ROI on the more senior.
IOW, it is a lose-lose for the most prudent money in the capital structure.
What Obama is trying to do will cause a Glacial Freeze of the global money supply.
(visit the link for the full news article)