And you end up with a mortgage backed security.

So these shares each of these one million shares this is a mortgage backed security.

I think it's a distraction.

I have a whole video on mortgage backed securities.

That's how loans worked before the mortgage backed security industry really got developed.

So this is a form of a collateralized debt obligation.

But we have to start with the basics.

Some of them are going to pay ahead of time.

But anyway, this isn't the crux of it either.

I make are to the bank.

And that's why they are called derivative instruments.

But you should watch the videos on mortgage backed securities and collateralized debt obligations, if you want to get a better understanding of exactly how the money flows go.

And the cash flow will come back to it.

You group them all together.

Mortgage backed security.

You'd have to sell that loan to someone else.

So there's no way for him to invest in this security and to get better returns.

So let's make some very simple assumptions for ourselves.

And this guy's an investment bank instead of a commercial bank.

And the loans are just the right on these 10 payments.

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

But what you read about the most right now in the newspapers is mortgage backed collateralized debt obligations.

But on average this Special Purpose Entity will then be able to pay a dividend.

Real estate.

Now to finish the job you began! It was a pleasure meeting you, but we don't want you here.

This real estate guy.

And so money came from when the owners of each of these mortgage backed securities each, let's say, paid 1,000 for the mortgage backed securities.

Do pay?

Hey, it's a pleasure. Good to meet you.

I only have two minutes left in this presentation, so in the next presentation I'm going to focus on what this guy can now do with the loan to turn it into a mortgage backed security.

Coldwell Banker, I'm a real estate agent! Please, don't hurt me.

And that's why we say that it's a mortgage backed security.

And this is what you probably read some articles about, these hedge funds with these computer models to value their mortgage backed securities.

Leverage.

And then when we go and get the property because the

Charlie the barber.

Somebody solvent?

I develop real estate.

So takes a Goldman Sachs, which is considered the top dog in the economy and the political system.

But based on the model that we just constructed, I think the real return we're going to get on this mortgage backed security is 9 .

No. Oil and real estate.

So that's why the book value of the equity is now 2 billion.

And then we said, OK, well where does that money for this special purpose entity, or for this corporation, come from?

For the right interest rate and for the right assumptions in my model, I'm willing to give anybody a loan, as long as I'm compensated for it enough.

She is an estate agent.