In "Subprime Mess, Part I" (See Below) we found out that the entire world credit system had been placed on the foundation of the US housing market. Mortgages were bundled in bonds that were rated highly by the credit agencies and sold hedge funds and other speculators. Besides paying a good dividend, these packages were also used as collateral for getting loans from the banks for additional speculation in everything from currency markets to shares.
So why XML? XML (EXtensible Mark-up Language) has been embraced by the mortgage industry to standardize real estate finance transactions on the Internet. The use of XML has the potential of disaggregating the packaged loans and removing those in trouble and reorganizing them in other packages that can be appropriately rated by Moody's and Standard and Poors.
This hasn't solved the problem of the margin calls as these mortgage bond packages get rated down but it suggests a more flexible system for maintaining the quality of commercial paper.
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