Chapter 2248 Facing Bankruptcy

Bells and other companies are an 85-year-old "old shop" on Wall Street, and have always been known for their strong trading style.

In its subprime loan business, the proportion of zero down payment customers reached 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 of Bells and other companies are more exaggerated than those of other companies!

The interest rate in the early stage was only 1% to 2%, which was half lower than the provident fund interest rate of Daxia.

But after a few years, the floating rate can reach 8% to 10%, and by the repayment date in the last few years, this interest rate can reach up to 20%!

This interest rate has even exceeded most of Daxia's usury! ! !

It is conceivable that when it comes to the repayment in the last few years, how devastated the customers will be, and how many people will choose to stop paying.

Therefore, the floating rate loans of 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, but the subprime mortgage bond business!

That's right, this investment bank not only makes loans, but also sells subprime bonds, and the profit share of subprime bonds has been much higher than that of the loan business in recent years!

Bells and other companies packaged subprime loans into subprime mortgage bonds and sold them to individual investors, banks, pension associations, and well-known Fannie Mae and Freddie Mac in the whole country and even all over the world.

Therefore, Bells and other companies don't care whether the borrowers can repay the loans as required, because the mortgages have been sold to investors.

The risk of home buyers' loan defaults is also borne by these suckers who buy bonds.

In the era of economic upturn and skyrocketing housing prices, home buyers buy houses with zero down payment loans, and after the housing prices rise, they find intermediaries to settle the loans, and then mortgage them to get more money for consumption or buy the second or third house. This cycle continues indefinitely, and nothing is left.

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You can achieve wealth freedom by catching white wolves.

Intermediaries earn commissions, banks earn interest, and investment banks earn money from bond sales.

Hello, I am a big guy, everyone makes money.

But once the economy goes down, homebuyers can't pay back their loans, or even when the value of their houses is not as high as the value of the loans, there will be a big problem - everything will fall apart!

Since Chen Mo started shorting the stock prices of Bells and others, Bells and other executives have discovered a shocking fact: the company's liquidity is running out!

Once Chen Mo's short-selling real estate tricks came out, many investors were already worried about the real estate industry. In this case, who would still believe Bells and others if he shorted the stock prices of Bells and others?

At this moment, the CEO office of Bells and other companies was in chaos!

"Boss, our clients are demanding to cash in their bonds, even if they don't have to pay interest!!!"

"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 their investment today."

"The bank suddenly asked to recover the loan! They said that our investment bank's rating was downgraded and the risk of default is too high!"

"The stock price is being shorted continuously, and the panic has spread from the stock market to the market!!!"

"..."

The boss of Bells and other companies, James Ken, looked extremely ugly.

Not long ago, the collapse of two funds under the company's name that invested in subprime mortgage securitization products caused investors to lose 15 billion and caused the company to suffer a serious credibility crisis.

This quarter's profits fell 68%, and the company's book assets shrank to 42 billion.

Today, he went on the official TV station of the hegemony country to give a speech to appease investors, saying that the company currently has sufficient liquidity and expects the company to make a profit in the next fiscal quarter.

But he didn't expect to return to the company and found that the stock price was maliciously shorted! ! !

The investors are not happy!

The company has a run!

"How much cash do we have left?"

Jims asked, pinching his eyes tiredly.

"Only 3 billion left, which can't even meet the daily trading needs today."

The finance department answered truthfully.

"What?"

Jims' eyes widened, and he couldn't accept this result anyway.

"Boss, in fact, the securities manager who left before said that since 2000, the probability of default for people whose house values ​​have increased by 1-5% is 4 times that of people whose house values ​​have increased by more than 10%."

"This means that the value of houses does not even need to fall. As long as the high-speed increase is no longer maintained, a large number of subprime loan 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 Fed has been raising interest rates for more than a year before, and this interest rate will be added by 2-5%!

In this case, subprime loans and subprime bonds are already toxic assets!"

"He advised you to reduce your holdings of CDO and purchase a moderate amount of CDS for risk hedging, but you didn't believe him and scolded him away."

"As a result, it has become like this now..."

The financial resentment is also quite deep.

The company is facing bankruptcy and may not even be able to pay this month's salary. Why should we pamper the boss in this situation?

James remembered the professional manager named John Greeney.

After that guy left his company, he actually joined the camp of shorting real estate.

He even said that he predicted that the housing prices in the hegemony country would plummet by at least 40%!

Then he followed Chen Mo to buy CDS crazily.

However, from the time he left until yesterday

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day, the Abx index (a barometer of the subprime market, which can be regarded as the Dow Jones index of the subprime market) has not dropped at all. Although housing prices have begun to fall and the default rate has soared, this index has not fallen.

James naturally knows the reason for this.

It is nothing more than the three major rating agencies colluding with the government to madly give 3A ratings to worthless subprime bonds, and the government has also come out to constantly support the real estate platform and advocate rising housing prices.

James thought that with the official platform, this layer of window paper would never be broken, but who could have thought that the avalanche would come so quickly!

"What is the return rate and return cycle of the CDO we found?"

James asked.

"The investment cycle is 30 days, the interest rate is 50%-100%, and the annual return rate is 880%... To be honest, this return rate is too outrageous, and the money printing machine does not have a higher return than it."

As the finance department spoke, he couldn't help but complain.

High risk and high return.

But no matter how high it is, there must be a limit!

Annual return rate of 880%...

This really rubs people's IQ on the ground!

Only James knows that CDO is actually a collection of junk bonds with zero value. If the return rate is not reported high, of course no one will buy it.

"With that little money, can't we even pay the interest on the bonds for one day?" James asked knowingly.

"Yes." The finance department nodded.

"Go to Mogen Chase to apply for an overnight loan immediately! Hold on for today first! I'll think of other ways!" James gritted his teeth.

"Boss...if Mogen Chase doesn't apply for an overnight loan for us, we might go bankrupt..."

"Impossible! Absolutely impossible!!! The government won't let us go bankrupt, and the foundation won't let us go bankrupt!!! They won't watch the subprime mortgage crisis explode!!!"

However, James' hysterical roar was met with silence from everyone...