Comments on: Seven Notes, Primarily on the Financial Sector

By: David Merkel

David Merkel — Fri, 10 Jul 2009 04:09:08 +0000

Insurance company underwriting standards on commercial mortgages have generally been higher than those of the banks, but yes, this is an issue. The insurance companies have greater transparency, though. Every loan is listed in their statutory annual statements, which are usually available to the public.

By: SportsBiz

SportsBiz — Fri, 10 Jul 2009 00:27:27 +0000

It’s not just banks with commercial mortgage exposure carried on the books at par that we need to be concerned about. Insurance companies have large exposures to the commercial mortgage market, perhaps in larger numbers than the banks. How much exposure and to what extent are those mortgages underwater? Again, who knows, because they are certainly not being forthcoming about it to investors or regulators (at least in public filings).

By: David Merkel

David Merkel — Wed, 08 Jul 2009 05:47:09 +0000

You can’t have a secondary market then. Thanks for telling me about this; I hadn’t heard about it.

By: matt

matt — Tue, 07 Jul 2009 22:50:35 +0000

How can you have a secondary market with this:

“California’s treasurer is telling recipients of the IOUs that if they sell them to third parties, they will be redeemed by the state treasurer’s office only if accompanied by a notarized bill of sale signed by their listed payee.”

By: But What do I Know?

But What do I Know? — Tue, 07 Jul 2009 12:46:07 +0000

Thanks as always for the comments, David. Regarding Point 5: CA is running a real-time experiment in the workings of Gresham’s Law. It should provide some fascinating data for a study a few years hence.

Another interesting development to observe would be the speed at which counterfeit IOU’s appear and develop, especially if the banks refuse to redeem them and a private market emerges.

CA at this point reminds me of a guy who gets into a bar fight thinking that the bouncers/bystanders are going to break it up before it gets too bad. . .