Chapter 2248 Facing bankruptcy
Bells and other companies are an 85-year-old Wall Street "old shop" that has always been known for its strong trading style.
In its subprime loan business, zero down payment customers accounted for 38%.
The proportion of loans with incomplete supporting documents or even no income supporting documents is as high as 65%!
Moreover, 79% of these subprime loan businesses are floating rate loans.
The floating rate loans offered by Bells and other companies are even more exaggerated than other companies!
The early interest rate was only 1% to 2%, which was half lower than the provident fund interest rate in Daxia.
But after a few years, when the floating interest rate rises, it can reach 8% to 10%, and by the time of repayment in the last few years, the interest rate can reach up to 20%!
This interest rate has even exceeded most loan sharks in Daxia! ! !
It is conceivable that when it comes to repaying the loan in the last few years, customers will be devastated and how many will choose to cut off their payments.
Therefore, the floating rate loans offered by Bells and other companies are also nicknamed "balloon loans", which means that the interest rate will rise higher and higher like a balloon, and finally...
Boom! ! !
But what made Chen Mo dare to go all out this time was not the subprime loan business of Bells and others, but the subprime mortgage bond business!
That’s right, this investment bank not only makes loans, but also sells subprime mortgage bonds, and the profit ratio of subprime mortgage bonds has been much larger than that of the loan business in recent years!
Bells and other companies packaged subprime mortgages into subprime mortgage bonds and sold them to individual investors, banks, pension associations, and well-known companies like Fannie Mae and Freddie Mac all over the country and even around the world.
Therefore, companies such as Bells don't actually care whether the borrower can repay the loan on time, because the mortgage has been sold to investors.
The risk of home buyers having their loans cut off is also borne by these scammers who buy bonds.
In an era when the economy is booming and house prices are skyrocketing, home buyers buy a house with a zero-down payment loan. After house prices rise, they find an intermediary to pay off the loan, and then take out a mortgage to get more money for consumption or to buy a second or third house. , and this loop continues indefinitely, empty-handed
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You can achieve financial freedom by trapping Bailang.
The intermediary earns handling fees, the bank earns interest, and the investment bank earns money from bond sales.
Hello, I’m a big guy, everyone can make money.
But once the economy goes down, and home buyers cannot afford to repay their loans, or even the value of the house in their hands is not as high as the value of the loan, a big problem will arise - all at once!
Ever since Chen Mo started shorting the stock prices of Bells and others, the executives of Bells and others discovered a shocking fact: the company's liquidity was almost running out!
As soon as Chen Mo's short-selling real estate losses came out, many investors were already worried about the real estate industry. Under such circumstances, if he shorted the stock prices of Bells and others, who would still believe Bells and others?
At this moment, the offices of CEOs of Bells and other companies were in chaos!
"Boss, our customers are asking to cash in their bonds one after another. Even if they don't pay the interest, they have to cash in and leave!!!"
"Our investors are also going to withdraw their capital and run away. They said they no longer trust our company and asked us to settle our investment today."
"The bank suddenly asked to take back the loan! They said that our investment bank's rating was downgraded and the risk of cutting off the supply was too great!"
“The stock price is continuing to be shorted, and panic has spread from the stock market to the market!!!”
"..."
James Ken, the boss of Bells and other companies, looked extremely sad.
Not long ago, two funds under the company's name that invested in subprime mortgage securitization products collapsed, causing investors to lose 15 billion, and the company encountered a serious credibility crisis.
Profit for this quarter plummeted 68%, and the company's book assets shrank to 42 billion.
He just finished his speech on Baguo's official TV station today, calming investors' sentiments, saying that the company currently has sufficient liquidity and expects the company to achieve profitability in the next financial quarter.
Unexpectedly, when I returned to the company, I found that the stock price had been maliciously shorted! ! !
Investors quit!
There was a run on the company!
"How much cash do we have left?"
Jims pinched the corners of his eyes tiredly and asked.
“There are only 3 billion left, and we can’t even meet today’s daily transaction capital needs.”
Finance answered truthfully.
"What?"
Jims eyes widened, unable to accept this result no matter what.
"Boss, in fact, the securities manager who resigned before said that since 2000, the probability of default for people whose home values have increased by 1-5% is four times that of people whose home values have increased by more than 10%."
"This means that home values do not even need to fall. As long as they no longer maintain a rapid increase, a large number of subprime mortgage users will stop repaying their loans."
"Also, this year the company will have 70 billion balloon loans with interest rates rising from 5% to 10-15%. The Federal Reserve has been increasing interest rates for more than a year, and this interest rate will be increased by 2-5%. %!
In this case, subprime mortgages and subprime bonds are already toxic assets! "
"He advised you to reduce your holdings of CDOs and purchase an appropriate amount of CDS for risk hedging, but you didn't believe him and scolded him away."
"As a result, it turned out like this..."
Financial resentment is also deep.
The company is facing bankruptcy and may not even be able to pay this month's salary. In this case, why do you still tolerate the boss?
Jims remembered the professional manager named John Greaney.
After that kid left his company, he actually joined the camp of shorting real estate.
He even went so far as to say that he predicted that housing prices in Hegemony would plummet by at least 40%!
Then he followed Chen Mo to buy CDS crazily.
It’s just that from the time he left his job to yesterday,
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So far, the Abx index (a barometer of the subprime mortgage market, which can be regarded as the Dow Jones Index of the subprime mortgage market) has not dropped at all. Although housing prices have begun to fall and default rates have soared, the index has not dropped.
Jims naturally knows the reason for this.
It’s nothing more than the three major rating agencies collaborating with the government to crazyly rate worthless subprime bonds AAA. The government also comes out to continuously support the real estate industry and promote rising housing prices.
Jims thought that with the official platform, this layer of window paper would never be pierced, but who could have imagined that the avalanche would come so fast!
"What is the CDO return rate and return period we found?"
Jims asked.
"The investment cycle is 30 days, the interest rate is 50%-100%, and the annual rate of return is 880%... To be honest, this rate of return is so outrageous that the money printing machine does not have as high a return."
As the finance officer talked, he couldn't help but make a comment.
High risk, high reward.
But no matter how high you are, you still have to have a degree!
The annual return rate is 880%…
This really rubs people's intelligence to the ground!
Only Jims knows that CDOs are actually a collection of junk bonds with zero value. If the return rate is not higher, of course no one will buy it.
"With the little money we have, can't we even pay one day's interest on the bonds?" Jims asked knowingly.
"Yes." Finance nodded.
"Immediately go to Mogen Chase to apply for an overnight loan! Get through today first! I'll think of other ways!" Jims said through gritted teeth.
"Boss... If Mogen Chase doesn't apply for an overnight loan for us, then we may go bankrupt..."
"Impossible! Absolutely impossible!!! The official will not let us go bankrupt, and the foundation will not let us go bankrupt either! They will not just watch the subprime mortgage crisis break out!!!"
However, Jims' hysterical roar was met with silence from everyone...
