And then when we go and get the property because the

And you end up with a mortgage backed security.

I guess you could say non cash assets, right?

Mortgage backed security.

I've gone over all of it with your money managers.

So these shares each of these one million shares this is a mortgage backed security.

So let's make some very simple assumptions for ourselves.

I have a whole video on mortgage backed securities.

I think it's a distraction.

And this guy's an investment bank instead of a commercial bank.

We don't need to invent solutions because we have them cash flow loans based in income rather than assets,

Each share in this case once again, if you believe that the assets are worth 1 million are going to be 1 million.

And secured means there's actually some collateral on the asset side that they get if the company can't pay.

liabilities.

But when I talk about the asset, I'm talking about only the operating assets.

In this case, an EBlT might be a little bit more informative.

Leverage.

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

That's how loans worked before the mortgage backed security industry really got developed.

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.

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 this is a form of a collateralized debt obligation.

But we have to start with the basics.

Some of them are going to pay ahead of time.

Do Low Interest Rates Ensure High Asset Prices?

What the Fed was doing was, they were saying, OK, we'll take some of these assets that Bank C has.

So its assets.

So you can say assets of the firm.

And I'll be willing to give this as collateral.

That assets, A for assets, is equal to

But anyway, this isn't the crux of it either.

I make are to the bank.

Well there are, in a few suburbs.

It's not like when you go into bankruptcy the company just disappears.

You don't even need the loan.

Malibu Equity and Investments.

Central Europe, unsecured.

And that's why they are called derivative instruments.

I don't want to draw this box.

And rich, eh?

And the cash flow will come back to it.

You group them all together.

I'll do that in yellow.

But what's been happening now is when banks use this money to borrow from the Fed or to borrow any money, they used these assets as collateral, they just sit tight on that cash.

It should start to make a little bit of intuitive sense