The Subprime Debacle: Act2, Scene2, By John Mauldin
All of those subprime and Alt-A mortgages written in the middle of the last decade were packaged and sold in securities. Now, we know that they have had huge losses, even though they had representations and warranties about what was in them. Guess what: the "investment banks 'may have' stretched credibility about those warranties. (Is nothing sacred??). There is the real probability that the 'investment' banks that sold them are going to gave to buy them back, a potential for multiple hundreds of billions in losses that have to be eaten by the large investment banks. (Bon Appetit !!). This 'tragedy' might potentially run into multiple hundreds of billions of dollars in losses, for some banks to have "real problems." Seems the Fed, PIMCO, and others are suing Countrywide over this very topic. It's hard to know where to start, but let us begin with testimony from Mr. Richard Bowen, former senior vice-president and business chief underwriter with CitiMortgage Inc: These mortgages were not underwritten by us before they were purchased. My Quality Assurance area was responsible for underwriting a small sample of the files post-purchase to ensure credit quality was maintained.