The mortgage...

Or they might even start to buy things that aren't Treasuries.

What does it mean, derivative?

You're talking about 0.5 per month.

Most of the loans we're familiar with in our personal

why.

Let's say it's um let's say its 10 billion of commercial mortgages.

Imran's no dummy, so he does the same thing. He raises his price to 2.

So let's think about how we manage our money.

So right here are a whole bunch of people's mortgages.

Well I have the original mortgage on my house.

But maybe that's not enough. Maybe the economy is still tanking.

And that caused housing prices to go up.

You know, we take out these loans to buy houses.

Yeah, this model actually goes as far as Excel would let me.

Let's say I'm some type of the Investment Bank.

I suffered from my mortgage loan.

Now what are my liabilities?

Right?

This is really the tip of the iceberg.

It's only worth 100,000 now.

We all have heard of it.

Well everyone knows that it's not going to be exactly 10 .

And when it auctions off the house actually I think there are laws that it can't get more than the mortgage, or anything more than the mortgage it gets, it actually has to pay taxes, or we won't go into all of that.

And Bear Stearns is doing this for millions of mortgages at a time.

I am right now thirty four years old and

And when they default, what is kind of the recovery?

You're assuming interest only loans.

So, each of these is an investor.

Remember, it was 6 not too long ago.

And why does that matter?

So let's say I have another group of assets.

I paid off the mortgage when I got my promotion.

If you look at the major categories they have food and beverages, housing

And in return for that, that Countrywide mortgage broker will just get a fixed fee for doing that transaction.

But for the simplicity of this argument,

Remaining mortgage on the home, 1 07,000.

They sell it to Bear Stearns.

Your address in Brooklyn, the payments on your mortgage, how long you've been a member of the NYPD.

Now one thing I want you to keep in mind is, they get 10 only if every one of these borrowers pays their loans, never defaults, never pre pays.

You take a bunch of mortgages, so you know, these are house mortgages.

We create financial markets that are super complex.

We would pump more and more money into Fannie and Freddie Mac.

We would lower standards on what it took to get a mortgage.

So I'll just draw it down here.