STRUCTURED FINANCE INSTRUMENTS

Before we turn our attention to the global economic meltdown, we need to
examine the world of finance and financial instruments, specifically MBSs, CDOs
and CDSs (mortgage-backed securities, Collateral Debt Obligations and Credit
Default Swaps). Before all of these “innovations” there was the good ole world of
government bonds and corporate bonds.
A government bond is basically a promise by that government to pay a certain
amount (face value) by a certain date (maturity date) along with periodic interest
payments (usually in that country’s own currency). If it’s issued in a foreign
currency, it’s called a sovereign bond. The first Government bond was issued by
England in 1693 to raise money for a war against France. These bonds are
considered “risk free” since defaults by countries are rare-- Russia in 1998 and
Greece in 2011.
Corporate bonds are issued by a corporation to raise money. The maturity date is
generally greater than one year. Maturity dates of less than one year are sometimes
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referred to as “commercial paper.” The interest rate is often referred to as “The
Coupon.” Corporate bonds are frequently “listed” on stock exchanges. Corporate
bonds generally have a higher yield than government bonds because the risk of
default is higher.
So now comes the mortgage-backed security; MBS (aka, asset-backed securities –
ABS). These are bonds that are sold to investors who buy a portion of the stream
of income from a pool of thousands of home loans. A mortgage servicing
company collects the mortgage payments, subtracts their fee, and the remaining
principal and interest passes to investors.
By the way, Wall Street wasn’t the first to offer the MBS; it was the government.
As mentioned earlier, Fannie was split into two in 1968: Ginnie Mae was the
government arm and Fannie was half private, with shareholders and a board of
directors, and half G.S.E., while Freddie Mac was created to buy mortgages from
S&Ls and others.
Ginnie was the first to sell mortgage-backed securities in 1970-- bonds whereby an
investor could share in the income stream of hundreds of FHA and VA loans with
the principal and interest on the underlying mortgages guaranteed by the U.S.
government. In 1971, Freddie issued securities backed by conventional mortgages,
also guaranteeing the P&I. (Remember conventional loans were extended under
credit worthiness standards set by Fannie Mae). Attractive, risk-free securities.
Doesn’t sound bad, right? But they were fairly unpopular with investors. Why?
Because they weren’t truly risk-free to the investor-- the bondholder, because of
something known as “prepayment risk.” The mortgage owner (mortgagor) can
pre-pay the mortgage at any time. Why would a mortgagor pre-pay? The most
obvious reason, interest rates drop so the mortgagor wants to lower their payments
by refinancing. When that happens, the bondholders get cash, but they lose the
future interest payments. Now they are left with cash that is less valuable since
they have to invest that money garnering lower yields because interest rates in the
market are lower. The good fortune of the mortgagor is the bad fortune of the
bondholder. Because of prepayment risk, the investor doesn’t know how long an
investment will last; only that money will come back when it is least desirable.
This is where Wall Street came in to solve that issue and make MBSs more
attractive to investors.
Investment bankers, most notably, Lewis Ranieri, devised a product whereby the
pool of home loan payments were carved into pieces called “tranches,” which is
French for "slices." The buyer of the first tranch was like the owner of the ground
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floor of a building in a flood – that investor is stuck with the first wave of
prepayments BUT now gets paid a higher interest rate. The second tranch gets the
second wave of prepayments, but less of an interest rate. If there is a default or
foreclosure, the home is sold and the proceeds are divied up by the tranches. The
AAA tranch may get 100% of its investment back, but the AA may not (if the sales
price is less than the mortgage balance). Incidentally, this is one reason why it is
so difficult to renegotiate a mortgage if you are a homeowner-- the AAA tranch
holder may be OK with it, buy lower tranches may not since they will lose income.
By 1981, MBSs for single family homes grew to $350 billion. By the end of 2001
it reached $3.3 trillion. By 1983, the mortgage financing arm of Salomon Bros.
accounted for almost half of Salomon’s $415 million in profits.
Tranching wasn’t the only factor in the success of MBSs. Another vital part were
the rating agencies. Before MBSs, rating agencies such as Moody’s, Standard &
Poor’s and Fitch, built their business almost solely around corporate bonds. At
first, they resisted rating MBSs, but eventually came around. Soon after, this
“structured finance” became a key source of profit for them. A quick tutorial on
the ratings system: AAA, AAA-, AA, AA-, A, A-, BBB, and BBB- are all
"investment grade" ratings. The highest, AAA, is considered to be as safe as a
U.S. Treasury Bond, with almost no chance of default. Anything rated below
BBB- are considered "junk" and are deemed too risky to be purchased by pension
funds or other institutional investment investors that are legally bound to hold only
safe investments.
Remember the GSE guarantees on Fannie & Freddie mortgages meant that
investors were not bearing the risk of mortgage default– the government insured
those loans. For some investors, GSE-based paper was the only type of mortgages
investors were allowed to buy. For instance, many states had laws prohibiting
pension funds from buying “private” mortgage backed securities. States also had
“Blue Sky” laws designed to prevent fraud. They required Wall Street firms to
register with each of the fifty states to sell MBSs, and the firms had to repeat that
step with each new bond issued. However, MBSs issued by Fannie or Freddie
were exempt from blue sky laws because of the implicit government guarantee.
By mid-1983, the GSEs had issued $230 billion of MBSs while the private sector
had issued $10 billion.
Lewis Ranieri disapproved of the massive power of the GSEs. He wanted their
grip weakened, and being a strong “market” conservative – the market is always
right and self-correcting – he felt that the private sector should be able to issue
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MBSs without Fannie and Freddie. He had strong ties to the Reagan
administration, and, with Ranieri’s help, the administration drafted The Secondary
Mortgage Market Enhancement Act (SMMEA). (Direct loans are loans made
directly to a borrower, so they are considered primary loans. In contrast, MBSs
constitute a secondary mortgage market.)
The SMMEA exempted MBSs from blue sky laws. It also removed restrictions on
pension funds and insurance companies from investing in MBSs issued by Wall
Street, even when they lacked GSE guarantees. The law further provided that
MBSs had to have a high rating by a credit agency. That provision enshrined the
role of rating agencies in MBSs. While some expressed concern that the rating
agencies were given too much responsibility, supporters of the legislation
reassured Congress that investors wouldn’t rely solely on ratings to buy an MBS.
In the end, the fear of “turning the mortgage market of America into a total
government franchise,” which was pounded into Congress by Ranieri, was too
much for Congress to ignore. The law was signed in October of 1984.
An interesting postscript to the notion that investors wouldn't rely solely on ratings,
comes in a statement by The Office of the Comptroller of the Currency 13 years
later: "Ratings are important because investors generally accept ratings ... in lieu of
conducting a due diligence investigation of the underlying assets ..." Moreover,
the rating agencies had charts and studies indicating that they were accurate a high
percentage of the time. On closer inspection, that doesn't appear to be the case.
Here are some well known failures the ratings agencies missed: the near default of
New York City; the bankruptcy of Orange County CA; the collapse of the Russian
and Asian economies; the implosions of: Penn Central Transportation Company,
Long-Term Capital Management, WorldCom and Tyco. Even back during the
depression in 1929, 78% of municipal bonds rated AAA and AA defaulted.
Enron's debt wasn't downgraded until four days before they filed for bankruptcy
despite the rampant fraudulent practices of Enron being exposed two months prior!
In the summer of 2007, Moody's released a statement saying that "there are no
negative rating implications ... as a result of [the banks'] involvement in the
subprime sector." Yet 93% of the AAA rated subprime residential mortgagebacked
securities issued in 2006 and 91% of them issued in 2007 were
subsequently downgraded to junk status.
The horrifying truth, at least when it came to mortgage backed securities was that
the agencies themselves never really conducted any due diligence regarding the
underlying mortgages. Basically, they assumed that if housing declined it would
be a relatively modest decline. Also, they believed that the housing market was
regional, so any decline in value in one part of the U.S. was irrelevant regarding
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another part (this is known as correlation). Another ugly factor that effected the
ratings of MBSs was something known as "ratings shopping." Investors preferred
to have two agencies rate a deal, but didn't require all three to rate a deal. This
allowed bond issuers to play agencies off of each other. If an agency was rating a
bond lower than the issuer wanted, the issuer could threaten to switch to the other
agency which would supposedly be more favorable. So if issuers could "game the
system" through ratings shopping, then how could the market, unaware of the true
state of the underlying mortgages contained within an MBS, correct itself??? The
answer is ... it couldn't.
Before MBSs, historically less than 2% of people lost their homes to foreclosures.
Quite simply, before the advent of the MBS, lending institutions and the borrower
had the same interest—getting the mortgage paid. But once the lender sold the
mortgage to a third party investor (as became prevalent with the advent of the
MBS), they had no real interest in whether there was a default.
When it came to creating securities from traditional mortgages
("securitizing"),Wall Street bankers realized, by the late 1980s, that they could not
circumvent the GSEs and thereby keep all the profits for themselves. They would
have to find some other mortgage product to securitize, something that Fannie and
Freddie wouldn’t touch. Enter the subprime mortgage. The first subprime
mortgage backed security was sold in 1988, by Guardian S&L. By 1991, Guardian
had sold $2.7 billion worth of securities backed by questionable loans.
A quick recap of how we legally ushered in these crappy subprime mortgages:
Before 1980, the ability to charge high interest rates and fees to borrowers was not
possible. States had instituted "usury laws," capping the interest rates people could
legally charge. However, these usury laws were preempted by Federal law in
1980 with the passage of The Depository Institutions Deregulation and Monetary
Control Act (DIDMCA). Logically, usury laws discourage lenders from
extending risky loans since those lenders may not be able to charge a high enough
interest rate to justify that risk. In addition, the use of variable interest rates and
balloon payments became permissible in 1982 with the passage of The Alternative
Mortgage Transaction Parity Act (AMTPA). And, finally, the big dog-- The Tax
Reform Act of 1986, which eliminated the deduction of interest on consumer loans
(credit cards), but kept the interest deduction on mortgages for primary residences
and a second home. This made mortgage debt (even with high costs and fees)
cheaper than consumer debt for many homeowners.
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Now back to the evolution of the subprime mortgage (SPM). If you recall, rising
interest rates had decimated the S&Ls in the early eighties. That factor, along with
Fannie Mae being granted the right to buy conventional mortgages, actually aided
non-bank mortgage originators like Ameriquest, Household Finance and
Countrywide to not only grow, but to dominate the home lending business. By
1989, non-bank mortgage companies funded 19% of home loans in America. By
1993, that figure reached 52%.
By 1992, Countrywide grew to become the largest mortgage lender in the U.S., and
its co-founder, Angelo Mozillo, was dubiously listed by Time Magazine in its
issue: 25 People to blame for the financial crisis. In the early 1990s, interest rates
began to fall, which helped more people afford homes. Countrywide began
advertising a new technique to allow people to use their homes as equity to borrow
more money than their current home loan, and take out the excess cash – it was
called "refinancing." In 1992, refinancing accounted for 58% of Countrywide’s
business. In 1994, it was 75%. Another significant practice instituted by Mozillo
was employing independent brokers to make loans so as to grow quickly. With the
S&Ls closing down by the hundreds, Mozillo had a large, cheap pool of loan
officers who, once they sold a loan and got their fee, had no “skin in the game.”
By 1997, delinquent payments and defaulted loans exceeded “projected levels.”
Compounding the cost of unanticipated losses was the use of “Gains on Sales
Accounting.” It has been called the financial equivalent of “crack cocaine.” A bit
complicated, but in a nutshell, this accounting method allows companies to book as
profit, in the present, the expected future value of loans. Moreover, it allows for
the assumption that a loan will always be repaid, and not prematurely. Obviously,
those projections were used to lure investors. In 1998, the rash of defaults and
delinquencies began to affect MBS prices since investors finally became concerned
about the underlying assets contained within the bonds. This, coupled with an
Asian financial crisis in 1998, made the cost of borrowing money higher. MBSs
backed with subprime loans dropped almost 18% from 1998 to 1999, but recovered
again from 2000-2003. Many subprime loan originators failed or were acquired
during this downturn, so that by 2003, 90% of all subprime lending was done by
just 25 firms. The collapse of the subprime companies didn't have much effect on
the banking system or the housing market, and within a few years the SPM
business would be stronger than ever. What should have been a warning to
regulators was left unheeded, or in Kabbalistic terms-- uncorrected.
Why was Wall Street so eager to market these SPMBS? Larry Fink, who is
credited with devising “tranching” for MBSs, was once asked by Congress whether
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Wall Street would ever try to securitize risky mortgages. He responded, “I can’t
even fathom what kind of quality of mortgage that is, but if there is such an animal,
the marketplace may just price that security out.” Basically, investors would
require such a high return that the security would be unmarketable. Once again,
the mantras of the market conservative: “the market is always right,” and “markets
are self-correcting,” simply turned out to be plain wrong.
One of the stunning revelations of the global economic meltdown was the
admission of market purist, financial guru, and former Federal Reserve Chairman,
Alan Greenspan. Also on Time’s list of 25 people to blame for the financial crisis,
Greenspan, in October of 2008, testified before Congress saying: “I made a
mistake in presuming that the self-interest of organizations, specifically the banks,
is such that they were best capable of protecting shareholders and equity in the
firms. I discovered a flaw in the model that I perceived is the critical functioning
structure that defines how the world works.”
Ironically, it was the U.S. government that gave Wall Street a jump start to
securitize SPMs. In another of a string of unintended consequences, after the S&L
crisis, the government, through the Resolution Trust Corp., wound up with
hundreds of billions of dollars worth of assets from failed S&Ls that they wanted
to unload. The best way to get rid of them was to securitize them, then sell them to
investors. Since much of these assets were too risky for Fannie or Freddie
backing, all they needed was an AA or AAA rating and pension funds would buy
them. So Wall Street devised various techniques known as “credit enhancements”
to lessen the risk to investors: get insurance companies to insure some risk; put
extra mortgages in the pool to minimize risk; or have some investment banks issue
letters of credit to investors in the event cash flows from the MBS dipped below a
certain level. These enhancements convinced the rating agencies to issue AA and
AAA ratings. Wall Street was finally able to create a huge securitization business
that they could market without sharing a dime with Fannie and Freddie.
In the early 1990s, the number of Americans owning homes had dropped slightly
due to the S&L crisis– 1.5% from 1980 to 1991. This prompted Bill Clinton, in
1995, to announce his National Home Strategy. It’s stated goal; increase the
number of U.S. homeowners by 8 million by the year 2000. Similarly, George
Bush Jr. pushed for increased home ownership. An unintended consequence of
pushing this “American Dream” is that politicians and regulators don’t want to
crack down too hard on subprime lenders because that could interfere with their
ability to make loans to the very people the government is trying to “help.” In fact,
one reason why Fannie Mae reluctantly ventured into the subprime world (the
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GSEs entered that market late in the game-- circa 2005) was to meet increased
affordable housing goals instituted by the Bush administration. Another reason,
more compelling, was higher profit margins-- the yield for guaranteeing subprime
loans was greater than 30 year fixed mortgages. By the end of 2007, the GSEs
owned 23% of all the outstanding subprime mortgage backed securities and 58%
of all Alt-A mortgages (Alt-A are riskier than prime, but not as risky as subprime).
The sheer size of the GSEs’ purchases definitely help inflate the housing bubble.
As the authors of "All the Devils are Here" put it: "Without the GSEs' buying
power, the private market would never have been as big as it got. And without
Wall Street, there never would have been all those bad mortgages for the GSEs to
binge on"
By the middle of the nineties, SPMs are booming. Moreover, they got another
steroid injection by the Federal Reserve who raised interest rates in 1994. This
caused refinancing to plummet – some “Prime” lenders, saw their loan volume
decline by 50%. How did they respond? They wrote subprime loans. Wall Street
also jumped into the act, not only by issuing bonds backed by SPMs now featuring
“credit enhancements,” but by extending lines of credit known as Warehouse Lines
of Credit to subprime lenders. These lines of credit allowed the Lenders to make
more subprime loans. Warehouse lines were the primary funding mechanism for
subprime mortgage originators. Then Wall Street got even more juice by taking
those subprime companies public such as: The Money Store (1-800-LOAN-YES);
First Alliance; Aames; Cityscape Financial; and New Century. Remember, Gains
on Sale Accounting made these companies look really profitable, and thus more
attractive to investors!
From 1994 to 1999, the number of SPMs went from 138,000 to 856,000, and from
$35 billion to $160 billion. Nearly 13% of all mortgage originations were SPMs.
In 1999, home ownership hit a record of 66.8%, but 82% of all SPMs didn’t go
towards buying a new home. They actually went to refinancing existing homes,
and 60% of those borrowers pulled out the excess cash.
By the way, I don’t want to paint the picture that all subprime lending was
intentionally predatory. Some lenders, Angelo Mozillo for instance, really
believed they were helping lower-income people and minorities. In the end
though, they were loaning to many people who couldn’t afford to borrow. Also,
we can't let borrowers off the hook either. Many borrowers used loans with teaser
rates that were fixed, usually for two years before the floating interest rates would
rise, to buy houses to flip at a higher price before the rate hike.
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In 1998, a prominent hedge fund, Long-Term Capital Management went bankrupt.
LTCM was started 5 years earlier by ex-Salomon Brothers’ bond trader, John
Meriwether. Meriwether had resigned from Salomon Brothers in 1991 after being
embroiled in a Treasury securities trading scandal perpetrated by a subordinate.
The U.S. Government had to bail out LTCM, but many subprime lenders were
subsequently denied capital, and went bankrupt. By 2002 there were no public
subprime lending companies in the U.S.
Left standing, was a lending behemoth named Household Finance Corporation.
They were still loaning second mortgages at a good pace. They offered 15-year
fixed mortgages at 7%, but it basically had a fraudulent component that tied the
interest rate to a 30 year loan, so that the effective rate of interest was 12.5%, not
7%. By the end of 2002, HFC settled a class action suit paying a $484 million
settlement distributed between 12 states. The following year, HFC sold its
company along with their toxic subprime portfolio to HSBC, a British
conglomerate for $15.5 billion.
By 2005, SPMs were back in vogue. Why the resurgence? After the internet
bubble burst at the end of 1999, Alan Greenspan reacted by lowering interest rates
to near historic lows. Mortgage rates dropped substantially, fueling a demand for
home buying. At the same time, investors were seeking higher yielding
investments. Wall Street wanted the subprime mortgages to package into their
bonds, which were in demand because of the higher yield they offered investors in
that low yield market.
In the mid-nineties, $30 billion of SPM constituted a huge year. In 2000, there had
been $130 billion in subprime lending, of which $55 billion was repackaged into
mortgage backed securities (42.3%). By 2005, there were $625 billion in SPMs, of
which $507 billion became collateral for mortgage backed bonds (81%). The
underlying terms of SPMs had also changed over time. For instance, in 1996, 65%
of SPMs had been fixed rate loans. By 2007, 80% of SPMs were adjustable loans-
- usually fixed for the first two years. By 1999, more than 50% of all mortgages
had down payments of less than 10%. Countrywide even marketed a product
called an 80/20 loan, which were actually two loans meant to enable a buyer to
borrow 100% of the home's purchase price. In addition, Countrywide raised its
loan limit to $1 million in 2006, up from $400,000 in 2001. And again, most of
these subprime loans were for refinancing (2/3 in 2006), rather than for buying
actual homes. Moreover, roughly 60% of their adjustable loans were made to
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people who could not afford the increased interest rate once the teaser period
would expire.
Instead of trying to make loans to people who could afford to pay them back, the
goal was to make as many loans as possible and sell those loans as soon as possible
to Wall Street firms who would repackage them into bonds. Long Beach Savings
was the pioneer of the “originate + sell” strategy. LBS was the predecessor to
Ameriquest, founded by Roland Arnall. They were also the Originator of the
"stated income loan," which allowed potential borrowers to state their income
without any process of verification. In 2004, LBS loaned $50 billion worth of
SPMs (out of $587 billion total SPMs that year).
The quality of mortgages became less and less desirable over time. To wit: the
interest only negative amortizing adjustable rate subprime mortgage. There was
even an option for the home buyer to roll the interest only portion onto the
principal of the loan so the buyer would pay nothing for a period of time. Who
would be interested in that? A buyer with no income. Other toxic loans
developed such as: NINA loans, No Income No Assets-- "No problem"; and
NINJA loans, No Income No Job No Assets. Again, "no problem." All you
needed to borrow money was a good credit score.
So the lender was selling their crappy loans to Wall Street who packaged pools of
these crappy loans into MBSs and sold them to willing buyers all over the world,
in large part, because they had the AAA seal of approval from the rating agencies
and investors believed that real estate values would never decline.
Along with the MBS, Wall Street developed another related “structured finance
product” known as the CDO—Collateral Debt Obligation. It was first unveiled in
1987 by junk bond kings—Drexel Burnham Lambert. Once again, these pools of
obligations could be loans, pools of asset backed securities, or MBSs. So now you
have pools of subprime mortgages packaged into MBSs, and pieces of these MBSs
can be further packaged into yet another pool—the CDO. An amazing fact about
CDOs, investors frequently had no idea what securities were contained in a CDO
because securities were often changed, nor did investors seem to care. Again, they
were buying the AAA rating.
But that’s not all. Wall Street creates another revenue center, in the early nineties,
The Credit Default Swap, which they marketed as an insurance policy on MBSs or
corporate bonds. A CDS is a type, the most common type, of credit derivative.
Derivatives have been around for hundreds of years, and are a way to bet on the
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future value of something. Farmers routinely use them to safeguard against
fluctuations in crop prices. These derivatives sold on commodity exchanges along
with futures of fuels, precious metals, currencies, etc. A Credit derivative basically
transfers ("or swaps") the credit risk from the underlying loan to another party. By
way of example, let’s say a corporation offers, through an investment bank,
hundreds of millions of dollars in corporate bonds to buyers. A CDS buyer can go
out to a Swap Seller, and, in essence, make a bet that the corporation is going to
default within a specified time. The buyer makes periodic payments, say quarterly
or semi-annually, to the seller. For instance, $100,000 a year to buy a ten year
CDS against $50 million of that corporation’s bonds. The most the buyer can lose
is $1 million ($100,000 per year for ten years). If the corporation defaults, $50
million goes to the CDS buyer. The CDS actually originated at JP Morgan after
the Exxon Valdez oil spill in 1994. Exxon, JP Morgan's client, was faced with a $5
Billion fine and, to prepare, drew $4.8 Billion from its credit line with JP Morgan.
The investment return on the credit line was relatively minor for JP Morgan, and it
would have to tie up hundreds of millions of dollars of capital in reserve due to
their exposure. So they convinced the European Bank of Reconstruction and
Development in London to take a stream of payments in exchange for that bank
assuming the risk of Exxon's default on JP Morgan's credit line. The Euro Bank
felt relatively safe that Exxon, with $100 billion in 1994 revenues, would not
default and was happy to take JP's payments. Although the actual loan remained
on JP Morgan's books, they were happy to reduce their risk. The Exxon deal went
off without a hitch and ushered in the CDS era. Next, Wall Street would lobby for
"capital relief," meaning that if they bought credit protection through CDSs then
they should be able to hold less capital in reserve. In 1996, the Federal Reserve
agreed.
As I mentioned earlier, Wall Street "marketed" CDSs as a form of insurance.
However, a CDS is not true insurance and there are many distinctions between the
two. A CDS is more of a bet against the market. The buyer of a CDS does not
have to own the underlying security or debt obligation, in other words there may be
NO “insurable” interest. A “naked” CDS is when the buyer has no insurable
interest in the underlying asset. If the buyer has an interest in the underlying asset,
then the CDS is in essence a hedge or type of credit insurance. Moreover, the
seller of a CDS does not have to be regulated. And, of paramount importance, the
seller is not required to maintain any reserves to pay off buyers in the event of a
loss. Conversely, by law, insurance companies must hold a certain amount of cash
reserves to pay an insured in the event of a loss. Swap transactions can be done
entirely with borrowed money, and without any transparency or disclosure. In the
U.S., CDS contracts are generally subject to "mark-to-market" accounting which
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became a generally accepted accounting principle (GAAP) in the early nineties.
Mark-to-market accounting basically tracks the value of an asset daily, so that in
boom times an asset may be overvalued and in crises times the asset may be
undervalued. In contrast, historical cost accounting, used in insurance contracts, is
a simpler, more stable, principle based on past transactions. Mark-to-market
accounting can introduce volatility that would not be present in insurance
contracts.
In the late 1990's, JP Morgan developed a variation on the CDS. Instead of
referencing a single corporation such as Exxon, they would bundle hundreds of
credit derivatives on hundreds of corporations. They created CDOs containing
nothing but credit default swaps. While investors of MBSs owned pieces of actual
mortgages, here investors owned pieces of CDS "premiums," which were income
streams paid by the party insuring the risk. Because these securities were not built
out of "real assets" and had no collateral they were referred to as synthetic CDOs.
These synthetic CDOs made it possible to bet on the same bad mortgages dozens
of times. The Wall Street Journal uncovered a case in which a $38 million SPM
bond created in June 2006, wound up in over 30 debt pools and caused roughly
$280 million in losses!