Thursday, August 23, 2007

Subprime Poker!

What would the "father of the Mortgage Backed Security" have to say on the current subprime crisis in the US? Thats something that struck me the other day, when I saw someone reading the Wall Street cult novel Liar's Poker.

Lewis Ranieri was one of the many "Big Swinging D**ks" at Salomon Brothers where he started the mortgage trading desk and thus shot the firm to its heady heights in the mid 1980s. I hadn't seen him on the US edition of CNBC yet, so I ran a search and found this 'rough transcript' of his thoughts on the issue. Spoiler: The system's broke!

"We're restructuring a loan around a borrower; he can't afford the loan and now we're going to take the NPV of the change and send him a tax bill so the IRS can chase him . . .?" Read more (courtesy: Calculated Risk blog)