How credit cards become asset-backed bonds
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- เผยแพร่เมื่อ 14 พ.ค. 2024
- Mortgages aren't the only financial instruments that get turned into securities. Paddy Hirsch explains how companies make money by buying credit card debt and bundling it. #MarketplaceAPM #GreatRecession #EconomicExplainers
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Good presentation. What's not mentioned is that we can trade and sell those securities. The top portion of the CC statement is the security, the lower is really the dividend check you'll receive if you convert the top section to a bond and send to the trustee of that bank with instructions to offset the account through your treasury direct account. Once the security gets through the market, it goes to the secondary market which pays out every 4 weeks as dividends. Notice how all your "bills" come every 4 weeks?
There quite a bit more to this process but, that's the jist of it. 😊
How would we read this in a Prospectus Report??
@@_Israelite_12Great Question
Top marks, Paddy. There is a lot of information out there, but none of them employed such useful and easy to understand metaphors as you did in this video. It's exemplary, I find, that the senior editor of Marketplace has managed to explain this phenomenon in a way that anyone might be able to understand regardless of their background. Far too many media outlets have lost sight of smaller investors and ordinary citizens.
Absolutely exquisite. I could have listened to an even longer and more detailed explanation.
Thank you so very much!
That marker drop at the end of every video...
Your videos are changing my life. Thank you.
Truly a great teacher. Thanks
What a beautiful video!!! Bravo
I love how you uses analogies on your presentation
I really enjoy your teachings! I am somewhat new (embarrassed to say) to the investing world but I understand you perfectly. Please continue to provide the wonderful service that you do.
Watching in 2021 and loving his presentations as i thank God for him..
thank you for posting your videos. there are a lot of information that is clear and easy to understand.
The metaphor with the bottle - and the pyramid of glasses of is very insightful and intuitive.
I think this is excellent, very simple to follow and yet perfect reflection of the reality. Thank you/
Love the vídeos- especialy the endings
I love this guy! Paddy explains things so well. And at least he has a solution to all these scenarios - Everybody is needing a drink!
Securitization is an interesting term to describe how debts are turned into assets.
excellent. thank you sir.
I love the way you present and I wish if camera quality is the much better resolution then it will fantastic!
Thank you very much paddy , u are awesome
I love how this guy always seems to make interesting analogies and illustrations
excellent presentation
you are a great professor
Thank you, Sensei!!
excellent explanation!
Hay you guys don't forget to give him a thumbs-up for his effort to break this down and share his knowledge with us.
Is it possible for you to make another video about how to price an ABS? Thank you so much.
hmmm... this reminds me of something that happened in 2008....
Thanks for posting this video. What does Dave do with the 1 Billion Dollars? Is it used to further securitize the investment model?
Good video!
2 thumbs up good and reliable content From this host consistently videos recommended.
Brilliant!!
Thanks
how do the ABS handle the differing maturity(repayment)of the loan?
a bit off topic. Do accounts receivables, in case of contracts between consumers and utility companies, show up on the asset side of the balance sheet (on annual statements)?
very nice
I wanted to know if there is still a bond market in credit card companies and how big is it.
Paddy Hirschs presentation on this channel are all 1st rate content. And he finishes each presentation with a statement about needing a drink😂
Watching this in 2021
nice video
Nice- you threw the sketch... felt I did guys 👨
where do you buy these bonds from? Are they traded on an exchange?
Ryan Gosling explains this structure exactly as Jared Vennet in The Big Short with jenga blocks
Yes, I would think so.
Are birth certiifcates securities that are traded on the stock exchange?
The capital structure is not explained correctly. the Rating is related to debt owner, not holders.
Subscribed you sir are a beast at simplicfication.
Do the people falling in the senior tranches have to invest the most ?
thank you sir, without your explanation, i might need a drink.
I assume the original credit card written agreement (fine print) allows such securitization. But where do the legal enforcement rights reside, where a debtor defaults? Presumably they are assigned from the original issuer to the securitizer, with some consent clause in the fine print? Or does the original issuer remain entitled (and obliged, so far as the securitizer is concerned) to enforce the contractual debts? Is it usual, in practice, for the issuer to advance any guarantees as to repayment percentages?
Excellent points!!
I too am curious about all you noted.
Particularly, if it is not divulged, and hence, not consented to, by the signor.
It also brings into question:
If one has on-sold a debt, then, clearly the originator no longer owns the debt- so- should have no “right” to claim it/ recoup it/ or enforce action for it.
This is where the “criminals” take advantage of the securitisation process.
The system is disgusting. This needs to end.
Absolutely agree. It's all gonna come down like a house of (credit) cards. No longer sustainable. It will cascade ok, just wait. A DEBT BASED SYSTEM that stinks. No intrinsic value. Corrupted Risk agencies and banks.
I ran my credit cards up just to build credit but it only stays good as long as you pay on time, you could be in maxed out values but as long as you pay everything your supposed to it basically ok to have a debt threshold
initially the bank fund manager leverages or lends from the group of investors to buy the credit cards. So it goes as debt or liabilities into the balance sheet of bank, first and an equivalent credit card receivables as current assets along with its interest payments. how does the spread in the interest received and paid to its customers/investors managed by the bank's fund manager or by special entity as depicted. ? Certainly there will be difference in the interest on time of lending from investors to buy credit cards and to its credit card receivables as asset backed bonds or securities . There's more problem if there's is default risk with the receivables
Very interesting indeed.
Thank you for sharing.
So how does a fund manager find the investors?
How does s/he decide which cards to buy?
Do the investors actually know exactly what they are investing in? Or perhaps they just blindly agree to “ABS securities” ?
Any additional details you can offer about the more intricate details would be appreciated.
Good video. But there is nothing secure about credit card debt.
Paddy for chancellor of the exchequer
Just when I think I know something, I find out I don't. Thanks.
Brilliant brilliant brilliant....
Just one question,
Because I signed an application to acquire a credit card, and they securitize it the way you've amazingly described, would this mean I would be also an investor in these bonds? Or a share holder ?.
If so can you explain how so?.
Sincerely grateful.
Great question! Anyone have a decent answer??
@Eddie Atum @In-Justice listen to Reclaim Your Securities
@@intherabbithole5850 thank you and yes Adam of RYS is exactly on par.. really appreciate your guys feed back. Peace and blessings to yous.
Unpaid total assets are turned into securities bonds or shares depending on who is the issuer? And sell at discount, for bonds you have interest income for shares you got interest income. The main profitability depends on the recovery of the asset ( bad debt or loan or whatever). You save your company and transfer the risk to another company who can ensure asset recovery, more simple is selling your AP or AR. ( guns & roses). Cayman island.
I really wish I could comprehend this.
Could you explain who are the typical investors on each trench?
Tranche
I have sent an email request to Marketplace APM, I translated and put a Hungarian subtitle on this, waiting for approval to share it:)
Thats what I am saying
So where is the collateral? Isn't that the asset in ABS? Also, I'd like to see how a glass of champagne turns into a bottle of champagne to create a CDO. That would be fun...
I would estimate that soon from now the investors will not be drinking champaign anymore!
Can anyone tell which major in academics teaches all these concepts ?
finance I think
Freedom
Credit card ABS probably wasn't the best because Credit Card ABS are massive revolving trusts.
Nice... I hate credit cards and now I know why.
great explanation. but he did not explain how "dave" earn profit for himself? is it based on commission? percentage of A/R? or what?
I want to know.
Interest
theres a flaw here.the credit card receivables will reflect as assets in the balance sheet of citi bank, and not as debts.thats why assets backed securities are created.
+sunil beniwal there is no flaw, initially the bank fund manager leverages or borrows from the group of investors to buy the credit cards. So it goes as debt or liabilities into the balance sheet of bank, first and an equivalent credit card receivables as current assets along with its interest payments.
@@vbg1980 I am very interested in what you write, but am a novice, really wanting to comprehend this securitisation process.
So can you please explain:
How is it possible a debt can be considered an asset?
Then how is it “traded”?
This guy knows how to teach. Where is this guy right now?
Yes I agree! I would like to know to watch more feom him.
Anyone know??
...of the credit card company. Second of all there was no asset that was lent to the holder of the credit card. The so-called "credit" was created out of thin air with the permission of the FRB (Fed. Res. Bank) rules. As a result, the holder of the credit card has no obligation to pay back something that was a fraud to being with. For example, if your neighbor printed $10k "worth" of FRNs (Fed. Res. Notes) in his basement and then "lent" them to you at an apr (interest rate) of 5% would...
"credit" was created out of thin air. What do you mean?
AKA ... Pyramid Scheme ...
✅
The Kicker is $18.7 Trillion is Personal Debt Americans (Student Loan, Auto Loan, Credit Cards, & Home equity Loans. 2.6% Credit Card default 90+ days last Month? 7 milllion Auto Loans are 90+ days overdue. 51% Americans Make $33k below per year. Cost living Always going Up. Last 2 years 9000 Amercians stores have closed with Workers taking 2-3 Temp Jobs but what happens when X -Mas season is over???
I buy credit card-backed bonds :)
Oh! How???
Is it possible to privately communicate with you??
I really wish to comprehend this process.
there is a deep and serious flaw in that way of thinking. and im going to tell you what it is.. in order for people to HAVE to use the credit cards to begin with. you have to make sure that they don't have enough money to begin with. and when they cant pay the bill because there is now an intrest added to it. what it boils down to is the people that create the money and get thier hands on it first use it to keep themselves in positions of power. and to charge people without money more for goods.
Explained in plain language.
...no one is asking or making a claim against you. The same thing is possible in our current situation. If credit card holders demand a signed copy of the non-existent contract from the credit card companies they will not be able to produce one and therefore will have no claim in court against you for the interest that you think you owe them. Again, you must understand how a contract works to be able to defend yourself against the scams. Don't be distracted by guys like Paddy...
He’s only explaining the process, not making any claims best I can see.
...you be required to pay him back once you found out he printed the notes himself? Of course not. You would threaten to expose him and obviously not pay the interest back. He has no recourse unless he wants to be picked up by the Feds. If you spent into circulation all the counterfeit notes that he "lent" you your obligation to pay back the interest evaporates as soon as you realize the fraud. If the notes never become exposed in the market place then you have no explaining to do because...
Lako je dizati novce,ali vratiti novce!?
why this guy is not teaching a college course?
A student loan is an asset??? So credit cards are backed up by... debts?
Funny I thought an asset was the opposite of a debt. Turns out they're both debts. zero times zero equals one...
@CrabApples Bodaciously Bitter Fruit's interesting read thanks for sharing
Credit cards are causing depth....pay them off cut them up...
Sounds like a pyramid scheme to me.
Bingo
Kahn website is better on financials
For Whos Benefit is all this Fraud, in aid of?