devbodaghe (November 30, 1999 at 12:00 am)

When the bank Sells their mortgages to investment banks dont they charge a lil interest that way there not just making their not just making their money back

helloworld0714 (November 30, 1999 at 12:00 am)

I just want to clarify, the investment bank creates new corporation/ entity? what are example of this newly created corporations?

01agni1 (November 30, 1999 at 12:00 am)

@tcg4111 The 2 billion dollars are cashflows over 10 years.Hence they are not comparable to 100 M made now.To understand this further go to the concept of time value of money.

kweezyyy (November 30, 1999 at 12:00 am)

@tcg4111 it's just a matter of the investment banks pushing the risk off their own plates. once IB's sell all the "corporation" shares, it doesn't matter as much to the IB if people default on their mortgage payments and the corporation's cash flow dries up

rond02kg (November 30, 1999 at 12:00 am)

who are some of these "special purpose entities" you speak of?

chocoboblue99 (November 30, 1999 at 12:00 am)

The math and the model looks fun to play around with until someone defaults. Then, a few more defaults and then there's a domino effect and everyone has a sad face now. :(

tcg4111 (November 30, 1999 at 12:00 am)

just got one question and hopefully you can answer it soon enough for it to help... why does the INVESTMENT BANK (green bank) make up a corporation which sells shares letting investors bank off the interest and principle payment as well? and therefore making only 100 M (in this case), when, if they kept the rights to the mortage payments to themselves, theyd eventually be making 2 billion dollars (in this case)? provided the investmEnt bank had enough money to buy the rights from the LOCAL BANK

tcg4111 (November 30, 1999 at 12:00 am)

just got one question and hopefully you can answer it soon enough for it to help... why does the INVESTMENT BANK (green bank) make up a corporation which sells shares letting investors bank off the interest and principle payment as well? and therefore making only 100 M (in this case), when, if they kept the rights to the mortage payments to themselves, theyd eventually be making 2 billion dollars (in this case)? provided the investmEnt bank had enough money to buy the rights from the LOCAL BANK

tcg4111 (November 30, 1999 at 12:00 am)

just got one question and hopefully you can answer it soon enough for it to help... why does the INVESTMENT BANK (green bank) make up a corporation which sells shares letting investors bank off the interest and principle payment as well? and therefore making only 100 M (in this case), when, if they kept the rights to the mortage payments to themselves, theyd eventually be making 2 billion dollars (in this case)? provided the investmEnt bank had enough money to buy the rights from the LOCAL BANK