Higher Valuation Allowed for Brooklyn Bridge-Backed Derivates

Bankers, investors, and bond holders are breathing easier now that mark-to-market accounting rules have been eased and some hard-to-value assets that were collateralized by the Brooklyn bridge can be pegged to their long-term potential. It was only recently discovered that some bond bundles held by Citigroup and other big banks included loans backed by the famous New York bridge, although it is uncertain whether ownership of the bridge was clearly established. What was evident was that Brooklyn-bridge backed assets were sold and resold to many thousands of buyers, although the buyers did not know at the time that they were buying it. At first the mortgage bonds were highly valued and placed in the highest tranch, but later when the loans were questioned, the tranch level was lowered, so that the bridge in fact dragged down the overall value of the derivatives rather than bolstering them.

But now, according to investment bankers, the bridge can be assessed at its value at some future time, not precisely estimated, but agreed to be "not soon." What it means for the present, however, is that banks, their investors and bondholders, and ultimately the taxpayers can feel a new sense of solvency. The assets themselves can be offered for resale at a much higher price, and in any case the books will show a more solid anchor value. Oh, and while we're on the subject, would you like to buy the bridge?

Comments

[Sundialsvc4]

It wasn't a joke, Larry. It was true.

Just as the court jester, with his "jokes," was the trusted advisor to the King (because he was the only one who could and would speak the plain truth without fear of having his head chopped off), we need more "jokes" like this one. Yes, these swindlers (let's call 'em what they really are...) COULD sell "the Brooklyn Bridge," and they probably did just that.

You see, we "know" that "selling the Brooklyn Bridge" is a joke, and so we laugh. But selling a hundred derivative­-securitie­s against a package of loans that people could never, ever repay is "a joke" too... and this time we're not laughing.

In the old days, the jester would have danced his jig in front of the King and pointed out that both of these ideas are merely composed of the same sort of nonsense. And the King probably would have cut-off the banker's heads and thereby saved his Kingdom a great deal of grief. We didn't do that.

There IS NO difference between "selling the Brooklyn Bridge" and the "selling" that these people actually did ... did for fifteen years and more.

[Heidi Hoerman]

The truly sad thing is when I read this I thought, "What? A late April Fool's prank?" How can the bridge possibly be collateral!?! Did the city put it up?

[Larry Arnstein - Huffpost Blogger]

Yeah, actually just a joke - I still can't get over that nobody knows what's behind these damn things. I only wish I'd caught the typo in the title, but nobody's perfect I guess. I keep reading these explanations of what these derivatives are, but it kind of seems like a shell game.

[twofish]

"I would gladly pay you Thursday for a hamburger today." -- Wimpy

But what is a hamburger on Thursday worth today?