FAST FIVE: America's Biggest Banks Are Rehabilitating The Mortgage Bonds That Crashed The Economy In 2008
America's Biggest Banks Are Rehabilitating The Mortgage Bonds That Crashed The Economy In 2008 10 years after a blowup in the private-label MBS market nearly brought down the global banking system, the biggest, most systemically important banks (who were ultimately forced to accept a government bailout and a round of consolidation during the fallout) have apparently decided that enough time has passed, and that now would be a good time to revive it, as they close deals on billions in newly issued mortgage-backed bonds, WSJ reports.
After many of their investors got stuck holding – as Jeremy Irons' character in “Margin Call” so eloquently put it – “the biggest bucket of odorous excrement in the history of…capitalism,” the private label MBS virtually disappeared in the wake of the crisis.
Over the years, smaller banks that weren't burdened by all of the regulatory hangups of their SIFI peers have tried to revive the business, but to no avail.
This risks a return to the pre-crisis days, when banks would bid on mortgages, incentivizing lenders to relax their standards to meet growing demand.
With home prices already at such unaffordable levels, and with millennials putting off decisions like buying a home, we're curious: Where are these banks going to get all of these mortgages.