And you end up with a mortgage backed security.

I have a whole video on mortgage backed securities.

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

I think it's a distraction.

Mortgage backed security.

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.

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

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

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

But we have to start with the basics.

Some of them are going to pay ahead of time.

We would create incentives for securitization.

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

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.

And the cash flow will come back to it.

You group them all together.

And these shares would be called Mortgage Backed Securities. or sometimes MBSes.

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

So that's what we're going to show you in the presentation on collateralized debt obligations.

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.

And because it's a junkier rating, no one is going to want to buy it.

But essentially what happened is the investors in the mortgage backed securities provided the money to the special purpose entity to essentially loan to the borrowers.

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

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

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

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

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 .

And then when we go and get the property because the

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

Word is that davis' fund has taken some big hits on mortgagebacked securities.

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Of course, if enough people start defaulting, even these people start to get hurt.

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.

Or, it could even buy completely different assets, it could maybe buy mortgage backed securities, and the point here isn't just to increase the money supply the point in quantitative easing is maybe to kind of smooth over what's happening in certain parts of the market and so they thing that there's log jam in the mortgage backed security market that's why they're participating there.

The policy number of my insurance is PC two three five seven.

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.

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.

It could split the Special Purpose Entity into a million or ten million shares and then sell those shares to investors.

The 400 million senior tranche we raised from 1000 senior securities, collateralized debt obligations.

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

I've gone over all of it with your money managers.