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

I have 4 billion in residential CDOs, collateralized debt obligations.

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

So, each of these is an investor.

The mortgage...

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

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

We all have heard of it.

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

What we are going to do is go buy things like highly rated mortgage backed securities, or things like commercial paper, AAA corporate debt, so that those things, the interest on those things goes down.

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

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

why.

And that caused housing prices to go up.

But for the simplicity of this argument,

Well I have the original mortgage on my house.

I suffered from my mortgage loan.

And what is a bond?

What happens if let's go to that scenario where we talked before 20 of the borrowers just say, you know what?

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

This is really the tip of the iceberg.

It's only worth 100,000 now.

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

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.

Savings bonds.

We would create incentives for securitization.

You're assuming interest only loans.

What does it mean, derivative?

Now what are my liabilities?

Right?

Remaining mortgage on the home, 1 07,000.

They're savings bonds.

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

I am right now thirty four years old and

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

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

So a security in the equity world is a stock.

And why does that matter?

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

Can I go out there and I buy a whole bunch of mortgages.

I paid off the mortgage when I got my promotion.

So I stick them all inside of that.

They sell it to Bear Stearns.

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

I'm thinking about people's jobs, about their mortgages and pensions and their college funds for their kids.