They serviced the loans.

Now let's say it gets even worse.

So, each of these is an investor.

But this I just want to show you some data here.

What is your strategy in your household?

That man borrows money from many lenders.

That man is a heavy debtor.

That man has many debts.

The bank was profitable.

It allows let's say this group of borrowers let's say this pool of borrowers right here actually didn't

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

It's exciting, but we went over our finances and...

You're still solvent.

We would just know that there is a 20 chance.

They would actually owe this extra 1 million.

Helps bring it down.

Because the government now owns 90 something percent of the company.

You can sell shares.

So that's bankruptcy.

You go get bankruptcy protection.

These are the people who first lose money.

That's where the 1 billion comes from.

I know I've overdrawn this picture a little bit too much.

We would create incentives for securitization.

It can do it through debt or equity.

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

Over the next few years big decisions will be made in Washington on jobs, the economy, taxes and deficits, energy, education, war and peace.

Payable to the City of San Francisco.

And of those 20 that default, we have a 50 recovery.

So it buys, it buys debt.

My next presentation, I'm going to take it to a further

And this is what this mortgage backed security market allows.

Don't sell. You've got obligations. A huge payroll, overhead, retirement plans.

You have 189,000 as the value of this equity.

Have a surplus? Take two tax cuts, roll back some regulations and call us in the morning.

I know that interest rates are fixed in accordance to the borrower's business risk.

And so when the Federal Reserve or any Central Bank prints money, and it buys debt, it goes out into debt markets and it buys it, it usually buys the safest kind of debt, but that affects all of the debt markets, it goes out and buys in the debt market, they're essentially shifting the supply curve of money to the right, they shift the supply curve to the right.

That's not always the case.

External debt something that I can tell you a long story about because I personally worked on one of the biggest debts on the continent has come down dramatically.

America's foreign debt shot past 500 billion.

This guy, he does have interest.

I can no longer fulfill my obligations.

So I really do have a positive equity of 11,000.

So we still have the same amount of debt.

Some percentage of these borrowers are going to default on their mortgage.