Deja Vu... all over again... time to review two classic scenes from The Big Short

Here's the long version of the Jenga tower scene from the 2015 movie, The Big Short.  We're heading into another period where these basic ideas will come into play.  In this scene, he explains Mortgage Backed Securities (MBS) and Collateralized Debt Obligations (CDO's), and how subprime mortgages screwed them up, leading to the eventual collapse of the MBS's, and the U.S. housing market. 

Since the Great Recession, there has been much less of those techniques used in the home mortgage market.  But financiers know a good thing when they see it.  So the loan bundling techniques explained in this clip above have been used since 2009 on student loans (Student Loan Asset Backed Securties- SLABS), auto loans and credit card debt (Asset Backed Securities- ABS), commerical property mortgages (Commercial Mortgage Backed Securities- CMBS), and business loans (Collateralized Loan Obligations- CLO's).  The student loan SLABS, over $1.3 trillion in loans, have disappared, you can't find out who's holding them on the web.  Maybe the U.S. Treasury is going to eat it on these?  I can't figure that out.  

But the others are all hitting a point much like in 2008.  Except this time we have the ultra-low interest rate environment (2009-2021) followed by a high, and rising interest rate environment, which makes things even worse.  Even if a bank or investment fund holds solid, but low interest U.S. treasury bonds from 1-3 years ago, that can get banks in trouble now.  Silvergate and Silicon Valley Bank had to sell those low interest bonds to raise money, taking a loss they didn't want to take until the bonds matured.  Those two bank collapses are the start of this.  How big and how bad will the total shake-out be?  Only time will tell.  But there will definitely be more big bankruptcies, banks and major businesses, to come.  That much seems certain, right now.  

Here's the full clip of the Michael Burry scene, with Margot Robbie in a bathtub, explaining the mortgage bonds.  

What she explains is this clip about mortgages, has been done since 2009, with student loans, auto loans, credit card loans, commercial mortgage loans, and commercial operation loans.  Basically, the Wall Street financiers have used this same basic technique for every other kind of loan, except home mortgages, since 2009.  And now the "Jenga towers" are beginning to collapse.  This is about to get real interesting...

OK, I started this blog a few days ago to "collect" ideas for reusing commerical properties, aka "adaptive reuse," and happenings in the commercial real estate markets.  It's just a growing interest of mine in these weird times.  Then all this shit started happening with Silvergate and SVB, so the blog's a bit sidetracked already.  But "adaptive reuse" will be a big theme, as thousands more commercial landowners go bankrupt, default on loans, get foreclosed on, or simply hand buildings back to the lenders, in the next 2-4 years.  I'll get back to that idea... in time.