Mortgage Bonds Quotes

“Because the lenders sold many—though not all—of the loans they made to other investors, in the form of mortgage bonds, the industry was also fraught with moral hazard. “It was a fast-buck business,” says Jacobs. “Any business where you can sell a product and make money without having to worry how the product performs is going to attract sleazy people.”
― Michael Lewis, The Big Short: Inside the Doomsday Machine

“The creation of the mortgage bond market, a decade earlier, had extended Wall Street into a place it had never before been: the debts of ordinary Americans.”
― Michael Lewis, The Big Short: Inside the Doomsday Machine

“When Steve Eisman stumbled into this new, rapidly growing industry of specialty finance, the mortgage bond was about to be put to a new use: making loans that did not qualify for government guarantees. The purpose was to extend credit to less and less creditworthy homeowners, not so that they might buy a house but so that they could cash out whatever equity they had in the house they already owned.”
― Michael Lewis, The Big Short: Inside the Doomsday Machine

“These Ginnie Maes suck. They get longer [in maturity] when rates go up, and shorter when rates go down, and nobody wants them”
― Michael Lewis

“Many thrifts layered a billion dollars of brand-new loans on top of their existing, disastrous hundred million dollars of old loss-making loans, in a hope that the new would offset the old. Each new purchase of mortgage bonds (which was identical to making a loan) was like the last act of a desperate man. The strategy was wildly irresponsible, for the fundamental problem (borrowing short term and lending long term) hadn’t been remedied. The hypergrowth only meant that the next thrift crisis would be larger. But the thrift managers were not thinking that far in advance. They were simply trying to keep the door to the shop open. That explains why thrifts continued to buy mortgage bonds even as they sold their loans.”
― Michael Lewis, Liar's Poker

“This completed the curious reversal in roles that occurred in the early 1980s, when thrifts became traders and traders thrifts.”
― Michael Lewis, Liar's Poker

“For though there was no chance of persuading a pension fund manager looking to make a longer-term loan to buy a Freddie Mac bond that could evaporate tomorrow, one could easily sell him the third tranche of a CMO.”
― Michael Lewis, Liar's Poker

“No longer were the prices of ordinary mortgage bonds allowed to roam inefficiently, for they were now linked to the CMO market, in much the same way that flour is linked to the market for bread. Fair value for CMOs (the finished product) implied a fair value for conventional mortgage bonds (the raw materials).”
― Michael Lewis, Liar's Poker