Bloomberg: 'Ghost of 1994' looms over Asia

[Temperament]

Hi Temperament,

I believe it was more than just that. The mortgages were packaged so complicatedly that people thought there were "AAA" rated products. It was most likely that the people/funds that bought them, did not know they bought junk. All they cared was that these "AAA" rated products were giving them good ROI.

Unlike in Singapore, in the USA, the companies that issue out mortgages were not banks. These companies will then sell these mortgages to investment banks, who in packaged it nicely as "CDOs" and sell it to retail investors (such as your dbs high note 5). The borrowers of these money were essentially paying their loan back to the retail investors and funds. Because lenders no longer hold any risks for giving out loans, lenders started giving out riskier loans. Banks did not hold any risks as well, as the only think they cared about was selling these CDOs. The true suckers were the people that bought the CDOs. Of cause it was more than that. Banks, in greed, took huge leverages to buy more CDOs to sell. As we all know, when the sh*t hit the fan, it went really really bad.

A good documentary narrated by Matt Dameon can be found in the youtube link below.
http://www.youtube.com/watch?v=jaQsULpKNQc

I do not think that Singapore will be that bad as the USA. Banks in Singapore have more than sufficient cash to sustain them. They are very conservative. If the interest rates went up, and consumers are not able to pay their monthly mortgages, banks are not in a hurry to get the houses from them. This is because they have no incentive for doing that. It will take more than interest rates going up to really hurt the property price in Singapore.

(not vested but I am hoping that prices do go down)

Securitization itself or CDOs are not evil. They have been in existence for very long, long before subprime crisis.

It is not that investors believe they are AAA-rated. It's Moody's, S&P and Fitch that rate them AAA. Worse comes to worse, even synthetic CDOs can be rated as AAA. CDS only accelerates the fall of the price of CDOs, so itself is not evil, either.

The 3 rating agencies have a significant role in the subprime crisis.

From what i understand is like this:

Since day one, US Banks will have housing mortgage loans repackage as CDO bonds to sell to anyone interested. i think till today it is the same. If not banks will soon run out of liquidity. We can consider this just one of the bread & butter business of banks. So far so good.

The problem started from 2005 (i think) when Banks started to extend housing loans to people without any down payment or collateral. Just imagine finally, even a cleaner could own 3 properties at one go without any collateral or cash down payment. Why? So banks can have more housing loans to repackage into CDO bonds to sell it to anyone who is interested. By now big brokerage houses and financial institutions like Morgan Stanley all get involved. And all of them somehow managed to persuade Credit Agencies to give a AAA rating to this CDO bonds. From here, the rest is history now.
So i wonder how US Banking Regulations work on housing loans to the people. Us really is a "FREE" country in this sense. Is housing loan still the same? Anyone can just go to the bank and borrow without cash down payment or collateral? i want but first i make sure i have nothing to my name. Ha! Ha!