muses of the moment

March 22, 2009

Second Wave of the Financial Tsunami

I was listening to NPR morning report last Friday and the guy was explaining what “a toxic debt” was. He had the 100+ page paperwork of a derivatives contract based on 5000 mortgages.

He said they aren’t that scary, and if you hold onto them through this last bump, they will pay out.

Hogwash.

Take a look at this chart, the high volume of the worst toxic mortgages (option arm) has not rolled over yet.

mmr2
AIG is clearing these mortgage-backed securities right now for big banks and hedge funds. The large investors are taking taxpayer money to get full value now, because they know what it coming.
Remember the video of the Tsunami on December 26th. The first wave came out of nowhere, thousands drowned. When 30 minutes later when people were coming out of hiding and down from trees, the second wave hit, drowning twice as many people.
Looking at the chart above, 2010-2011 will be the second wave of toxic debt to wreck havoc on the market. AIG will be out of business by then. They are paying off their best customers with taxpayer money and closing shop before the next phase.
Taxpayers will never see a dime of their money.
And everyone from Tim to Ben to Liddy knows this is coming.

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