Tuesday, January 27, 2009

That Great Sucking Sound

Data for global CDO issuance (Collateralized Debt Obligations) were recently released by SIFMA. Astonishingly grim, as one can see in the chart below: amounts have collapsed from nearly $180 billion in the second quarter of 2007 to a paltry $5 billion in the fourth quarter of 2008.

The great sucking sound created by the sudden vacuum has been heard from mortgage originators, private equity funds and chop shops (aka securitizers), all the way to simple families desperately trying to borrow for a new house and car, or just to send junior to college.

Will the market for securitized loans ever come back? Best not hold your breath.


  1. Where did the money go?

    This is old (from the dotcom bomb days), but it seems apt for Hell's post today.

  2. ""Most of the money I made I spent on fast cars, drink and women, the rest I just wasted."

    - George Carlin

    Hell, if The Fed does this, isn't it quantitative easing? And if the answer is "yes", then how does an average Joe/Jane like most of your loyal readers follow whether the fed is doing a lot of this or just a little?

  3. paradigm shift in demand and expectations: new car? nah. new house? no, the mortgage burning party will make a comeback. And the big one...college?
    nope at least not in its current form. All of these will be seen as extravagances as people make do with less.

    What a great thing.

  4. I had a warm, fond thought for all of you today while I was lending my living, breathing body to the throng of the 60,000 or so other living bodies that marched through the streets of our provincial town to show the powers that be just how fed up we are with the status quo.
    God only knows how many bodies were on the streets in Paris...
    We were making history today, my friends.
    And what we said with our presence is so much more important than my teeny weeny vote for Obama would have said. (I didn't bother this time...)
    The powers that be HATE it when the people take to the streets.
    When are YOU GUYS going to take to the streets ?
    Still bowing down to the Constitution ?
    (I hasten to specify that I DO NOT FAVOR A REVOLUTION. I have too much to lose in a revolution. And I'm not playing a game with this either. Well, at least, not too much...)

  5. what are they marching for in Paris this time? a guaranteed job or is it a christmas bonus for the unemployed?

    Brings an old song to mind:Its a world of laughter a world of tears

    Its a world of finite resources and declining wages

    its a small world after all...

    Aint nothing wrong with the constitution that simple application of principles would not fix.

    I just wish someone would point out that a Bill of Entitlements was never officially created.

  6. March to till your heart's content!!!

    The only thing Obama is going to change is the verbage. The course remains the same.

  7. "We were making history today"

    Please elaborate. Who was demanding what of whom in this protest?

  8. Count on the securitization market coming back. There's no such thing as bad bonds, only bad prices. Grow up!

  9. goldie:

    "I just wish someone would point out that a Bill of Entitlements was never officially created. "

    I'll tell you where the "Bill" is, its in the money I've been paying through my payroll taxes for twenty odd years.

    Now that the Republican "destroy the government budget" regime is over I'm not in the mood to hear about cutbacks in promised "entitlements" until Hank Paulson and his ilk are taxed at 90% of their wealth.

  10. Right the &%*?!! on Debra. That's exactly what I thought from my perch here in Boston (once the epicenter of a great revolution) when I watched the protests in France. What is wrong with us here in the U.S.A. that we aren't takin' it to the streets right now?

    I ask you. Do we not have enough to vehemently protest? Do we not have enough flagrant fakarkte B.S. going on right now to move us, to inspire us to take the bull by the horns? Do we think Obama is going to do it for us? Given the people he has surrounded himself with, I'd say we have at least as much chance of him doing it to us as for us. What do you think? Do you all have something better to do while they are looting the Treasury and letting all the perps walk? Well, do you?

  11. THIS time the people in France, all of the UNITED unions, the private and the public sector alike, ecologists, ambulance drivers, doctors, nurses, teachers, were taking to the streets to say that "we have had enough of this system, and we want it to change."
    And over 68% of the French public is sympathetic to the cause.
    The largest mobilization in France, bringing together the largest number of diverse interests, in the past 20 years.
    Don't believe what the press will try to feed you this time. You've read your "Mein Kampf" and your Goebbels, haven't you about how the press, and the powers that be, by repeating lies, make them seem true ?
    Well. A lot of people over here (not necessarily the press, or the powers that be...) say that these demonstrations are very important.
    And that makes them very important. CQFD.
    And it's hard to navigate between the French, who very often smile indulgently, and consider Americans to be "les grands enfants", and the Americans, who smile indulgently, (or sneer), and consider the French to be "les grands enfants" when they take to the streets.
    The revolution started 10 miles outside of my town.
    Nobody has forgotten it here.

  12. Debra...

    The reason americans dont (generally) march is because we've been fed a steady stream of culture which values rugged individualism (cowboy, rebel, settler, hedge fund manager).

    MLKjr led a march. He united a group of oppressed peoples so that the rest of america would be forced to see them as equals, and judge them as individuals based on their character's content, not the color of their skin.

    So... what is the best a sullen mob of strikers can hope to achieve? At best, they will replace the current system of political oppression with another system which moves them and their interests to the top of the social heirarchy.

    And over time, this new "revolutionary" system will be every bit as oppressive as the last. The entirety of French history is based on this form of "oppression swap".

    It is my (humble) opinion, but REAL change can not happen at the point of a mob's pitchfork... but in the gradual (re)evolution of an individuals value system which, (because they are part of a socio-cultural feedback loop) will create the changes necessary in the character's content.

    And that is the evolution of real change.

    And it isn't voting for Obama. It is choosing to make the individualistic decisions that lead by example, and spread like a virus.

    This blog is REAL change... Hell has been "leading" us individuals by helping us form questions (about the unknown).. And sharing his knowledge about what he does know, to help breed wise ideas.


    I am leery of any and all mob mentalities.

  13. Very eloquent Cottonbloggin, and half true. You can't have a revolution-worthy of the name, without walking on the lawn. So, by all means, be wary of the mob, but unfortunately, to a greater or lesser degree, they go with the territory.