My friend was saying –
“Invest in a luxury car, it’s as safe as a house”
Then after that he said: “Go tell that to the Americans”, which was quite funny. It got me thinking of mortgage securitisation. Truth is that securitisation has been around, probably far long before I was born, so how did the Americans get it so wrong???
I have a theory, and I think these are the steps that the big financiers thought of:
Step 1: Create a Special-Purpose Vehicle/Entity
Step 2: Get investors to buy a stake in it
Step 3: Buy mortgage loan books from banks
Step 4: ???
Step 5: PROFIT!!!
If you don’t find this funny, you need to spend a bit more time on the Internet 🙂