Those are essentially derivative securities that are derived from mortgage backed securities.

Welcome to my presentation on mortgage backed securities.

I have a whole video on mortgage backed securities.

And they rate these assets, these mortgage backed securities.

CDOs, collateralized debt obligations, are derived from mortgage backed securities.

And so money came from when the owners of each of these mortgage backed securities each, let's say, paid 1,000 for the mortgage backed securities.

Maybe they'll buy mortgage backed securities, so it makes the mortgage market a little bit looser, a little bit more liquid.

You call them stock, or stock options, derivatives, mortgage backed securities.

Welcome back to my series of presentations on mortgage backed securities.

And these shares would be called Mortgage Backed Securities. or sometimes MBSes.

Well it comes from the investors in the actual mortgage backed securities.

And this is what this mortgage backed security market allows.

This is highly rated mortgage backed securities, maybe they have a slightly higher interest rate.

Which implicitly means that the market value of this asset is 210,000.

These were conforming loans, there wasn't this whole CDO and mortgage backed security market.

They will give this money to the market, and in exchange they will usually buy treasury securities, sometimes something slightly different, but usually very safe securities.

You might just want to watch the video on mortgage backed securities and collateralized debt obligations if you need a refresher there.

There are a part of a general class called Asset Backed Securities because what is going to happen now is that all of this money flowing from home owners will go the mortgages which is now on the Specail Purpose Entity.

So people are arguing that the market price is not reflective of the true value of these securities.

And this is what you probably read some articles about, these hedge funds with these computer models to value their mortgage backed securities.

Something about phony securities.

They're fairly liquid securities.

It can buy Treasury securities, so instead of short term Treasury securities, maybe it could be longer term Treasury securities.

And they way they get this into circulation is that they'll take these four dollars and they'll go buy securities in the open market, normally very safe and very liquid securities

Or, it could even buy completely different assets, it could maybe buy mortgage backed securities, and the point here isn't just to increase the money supply the point in quantitative easing is maybe to kind of smooth over what's happening in certain parts of the market and so they thing that there's log jam in the mortgage backed security market that's why they're participating there.

Mortgage backed security.

Totally backed up.

But essentially what happened is the investors in the mortgage backed securities provided the money to the special purpose entity to essentially loan to the borrowers.

Essentially when the market price of my asset dropped, all of that value came out of my equity.

Liquid securities means that there's a market in them and that you can find buyers who are willing to buy them.

He backed abruptly away.

LDB backed for KConfig

And I know that you have some type of assets, you have some of these residential mortgage backed securities, or you have some of these derivative assets there.

I would have backed up.

Would you rather have something backed by gold or backed by the U.S. government?

So the 1 million asset would really become an 800,000 asset.

But you should watch the videos on mortgage backed securities and collateralized debt obligations, if you want to get a better understanding of exactly how the money flows go.

So in exchange it gets treasury securities.

And equity securities you're probably familiar with.

We're from the Securities and Exchange Commission.

It's the same asset.

So that's the asset.

So it's an asset.

That's an asset, right?

They backed me up in everything.