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Buy house = $130,000
Mortgage / Interest + principle = $350,000

sold on Wall Street (inside pkg.)
for $250,000

today – house won’t sell for $90,000

repackaged and sold (inside pkg.)
for $499,000

leveraged on loan for business (within packaged lot)
for $850,000

now – house going into foreclosure
at sale on courthouse steps = $8,000

not to be difficult but now how much is that mortgage worth?

and what is the real value of any of it, including the actual property with a house whose copper will be stripped out by someone for the money in a now desolate neighborhood with vacant uninhabitable homes?


what value does that $850,000 loan against its real value have?

but wait, there’s more

because some ninny decided to create a “credit default swap” financial derivative on it –

so –

another party made an unregulated, “insurance” on it for the value to pay out $850,000 (just in case it didn’t get paid and wasn’t worth that which it isn’t.)

and then,

this “insurance policy” called a credit default swap financial derivative instrument  or a mortgage-backed security was packaged and resold

since the premiums against the default were some portion of a +/- $2 million a year premium – the value of the hedge against loss was sold for $1.5 million to someone else so they could make $500,000 a year on it for awhile.

okay, let’s remember the word problems from school and add this up . . .

an $8,000 cash sale for a property where its unfit to live

$850,000 that has to be paid to somebody and part of $1.5 million in premiums to insure it is paid but nothing to back up paying it.

$350,000 for the original mortgage, if it continued to maturity and was actually paid off ever by anybody that is actually now owned for $850,000/ + interest.

but that’s okay because the business that owns the credit default swap pays the $850,000 for the mortgage that no longer exists on a house no one can live in that sold for $8,000.

(and still won’t sell for $130,000.)

Written by Cricket Diane C “Sparky” Phillips, 09-24-08, USA