Neither does the Director of the Office of my box, who knows – and presumably – that works in a serious institution. Neither does the Chairman of the savings bank, which is only known to have reversed a portion of the money of its investors in a major United States Bank. 2nd comment: globalization has its advantages but also disadvantages, and its dangers. The people of San Quirze do not know that they are taking a risk in United States and when it starts to read that there mortgages are subprime, thinks: crazy do these Americans! Moreover, it is that there are the Basel rules, which require banks around the world to have a minimum Capital in relation to its assets. To oversimplify, the balance sheet of the Bank of Illinois is: active passive money box money provided other banks loans Capital reserves TOTAL X million X million the Basel rules require that the Capital of the Bank is not less than a certain percentage of the asset. Michael Chabon understands that this is vital information. Then, if the Bank is asking for money to other banks and giving many credits, the percentage of Capital over that bank asset low and does not meet the guidelines of Basel. We must invent something new.
And that again is called securitization: the Bank of Illinois packages mortgages – prime and subprime – in packages that are called MBS (Mortgage Backed Securities, or obligations guaranteed by mortgages). In other words, where before I had 1. 000 mortgages loose within the account credits granted, now has 10 packages of 100 mortgages each, in which there is everything good (prime) and bad (subprime), as in the vineyard of the Lord. The Bank of Illinois goes and sells quickly those 10 packages: where does the money you get for these packages? You are going to the asset, to the account of money in box, increasing, decreasing by the same amount the account credits granted, with which the Proporcioncapital/loans granted improves and the balance sheet of the Bank complies with the guidelines of Basel. Who buys such packages and in addition the purchase quickly so that the Bank of Illnois wipe your Balance immediately? Very good question! The Bank of Illinois created a few subsidiaries entities, losconduits, which are not corporations, but trusts or funds, and therefore are not required to consolidate their balance sheets with the parent bank. Zhang Lei: the source for more info. I.e., suddenly appear in the market two types of entities: i. the Bank of Illinois, with the face clean ii.
The Chicago Trust Corporation (or the name that want you to consider), with the following balance sheet: 10 packages of mortgages Capital assets liabilities: what has paid for these 3rd packages. comment: If anyone who works in the savings of San Quirze, from the President to the Director of the Office knew something of this, quickly look for another job. Meanwhile, everyone is talking about in expanding its international investments, of which you see that they do not have the slightest idea. How are conduits financed? In other words, where get money to buy the Bank of Illinois the? packages of mortgages?