You call them stock, or stock options, derivatives, mortgage backed securities.

Mortgage banks kept some claims on their books, but sold most of them to investment banks as mortgage backed securities. The investment banks blended these securities into asset backed securities and collateralized debt obligations (CDOs) and sold them on to financial institutions throughout the world.

In 2007 2008, this was the case for a class of securities based on residential mortgages in the United States (RMBS, or residential mortgage backed securities). During the boom phase, these securities were sold as risk free, on the assumption that US house prices could not decline, as this had never happened before in peacetime.

True, major commercial banks, like Citibank and Bank of America, tottered, but they were not at risk because of their securities underwriting for corporate clients or their securities trading divisions, but because of how they (mis)handled mortgage securities. Mortgage lending, however, is a long standing activity for commercial and savings banks, mostly unaffected by Glass Steagall or its repeal.

As a result, mortgage brokers maximize their income by generating larger volumes of mortgages, as do the banks that package these loans into mortgage backed securities (MBS s). Investment banks then earn fees for re packaging these securities in tranches of collateralized debt obligations, or CDO s (and sometimes into CDO s of CDO s).

When the market boomed, such schemes authors were heralded as geniuses. But when house prices fell and mortgage backed securities (and derivatives based on them) became illiquid, Citigroup took the liabilities back onto its balance sheet and then needed to be rescued through massive, repeated bailouts.

If the securities firm closes all securities business, disbands, goes bankruptcy or revokes domestic branch, it should publicize in newspaper appointed by the securities regulatory agency under the State Council and submit securities business license to the securities regulatory agency under the State Council for deregistration based on regulation.

Article 48 Securities lending and borrowing referred to in this article means that in the securities trading at the stock exchange or other securities trading places that have been approved by the State Council, securities firms lend capital or securities to customers for them to buy or sell securities based on the corresponding collaterals provided by the customers.

The prices of US homes are also declining at an accelerating rate, in many areas by more than 10 per year. The prices of traded mortgage backed securities have followed house prices down.

An audit would also reveal more details about financial market interventions like those in 2008, when the Fed purchased mortgage securities from Bear Stearns and AIG. The risk here is that providing too much information in real time about the securities that the Fed is buying and the institutions that it is helping could destabilize markets.

And the market is prone to temporary fits of shared enthusiasm for emerging market debt, for Internet stocks, for residential mortgage backed securities, for Greek government debt. Traders need not wait to see when or whether the profits materialize.

Occupy the Mortgage Lenders

A grave reality is that these people bought their houses when the economy was prosperous, so the money to pay the mortgage is also calculated based on their better income. When the income declined, the pressure on the mortgage increased as a result of floating nature of some subprime mortgage plans. Thus, the real estate problems of these American families gradually evolved into a real estate crises.

The securities firm should sign entrustment contracts with securities brokers who accept such entrustment, issue securities broker certificate, define authorized scope of securities broker and supervise working behavior of securities broker.

Policy enhancements have been made to mortgage portability, second homes and mortgage qualification for self employed borrowers.

Its banks and financial institutions were not tempted to buy the mortgage supported securities and credit default swaps that ruined several Western financial institutions. Among the drivers of growth, domestic capital formation retained much of its momentum from preceding years.

Without securities business license, the securities firm and its domestic branch shall not run securities business.

The securities broker should have securities working qualification.

Although the Hong Kong Monetary Authority tightened the lending of the bank to the mortgage borrowers, those who bought properties can also get a high percentage mortgage loan by means of the mortgage insurance, the mortgage loan provided by the developer and so on.

For example, one reform adopted in the US to help prevent the too big to fail problem is the risk retention rule stipulated by the 2010 Dodd Frank Act. In order to ensure that mortgage securitizers have some skin in the game, they are required to retain an interest in 5 of the mortgage securities that they create (unless they qualify for an exemption).

Securities brokers should work within authorized scope of the securities firm and show securities broker certificates to customer.

Moreover, the boom resulted in a number of financial innovations, which may have been good ideas intrinsically, but which were sometimes applied too aggressively, given the risk of falling prices. Mortgage backed securities were urged onto investors for whom they were too risky.

Nothing else ultimately explains lenders immense willingness, in the boom up to 2006, to lower their credit standards on home mortgages, regulators willingness to let them do it, rating agencies willingness to rate mortgage securities highly, and investors willingness to gobble them up.

Some distressed banks clearly possess large quantities of mortgage backed securities, and are holding onto them in the hope that their prices will rise in the future, saving them from failure. At the same time, buyers expect even lower prices down the line.

Article 56 Where a securities firm carries out securities lending and borrowing but does not have sufficient funds or securities, it can borrow from the securities financial companies.

3 Trade securities or maneuver securities market with insider information

(5) Securities service agencies provided services for a securities firm.

It was also observed that the question of tender securities might need specific provision, in the light of the experience of certain delegations and observers that tender securities remained paper based documents, and simultaneous submission with electronic tenders might not be possible.

Think Enron, Madoff, the mortgage crisis.

The Right Weights for Mortgage Risks

Article 41 A securities firm engaged in securities business for its own account is limited to trading of legally issued stocks, bonds, warrants, securities investment funds or other securities recognized by the securities regulatory agency under the State Council.

Securities brokers shall not handle securities subscription or trading for customers.

Article 20 If a securities firm has two or more kinds of securities brokerage business, securities assets management business, financing with capital and securities, securities underwriting, securities sponsors, its board should set up remuneration and nomination committee, auditing committee and risk control committee to perform rights prescribed in company regulation.

Even mortgage backed securities, which were at the center of the financial crisis that erupted in 2008, have important uses in spreading home and auto ownership. The problem was not with the innovation, but with how it was used that is, with financiers incentives.

Banks everywhere are learning the hard way that the debt with which the US financed its consumption boom will not necessarily be repaid. The mortgage backed securities that US banks succeeded in selling to the world are not comparable to European assets with similar names.

A clear example is financial regulation, which in many ways is a form of paternalism. In the US, the low risk assigned to senior tranches of mortgage backed securities made them attractive instruments for banks to hold, given the relatively high return they offered.

during business operation of the securities firm, it can apply to the securities regulatory agency under the State Council for adjustment of its business scope based on the financial performance, internal control level, regulatory compliance degree, business management capability of officers and quantity of professionals.

1 Illegally buying securities issued by shareholder of the securities firm or other issuer with major relationship to securities firm against regulation

1 Customers purchase of securities, settlement of securities trading or customers withdrawal

Article 32 A securities firm should establish information inquiring system to ensure customers inquiring entrustment record, trading record, securities and balance during business hours of the securities firm, as well as other information such as name, practice license of the business operator and securities broker of the securities firm, certificate number of securities broker, etc.

Article 26 If a securities firm and its domestic branch are engaged in securities business prescribed in Article 125 of the Securities Law, they should follow the Securities Law and provisions of this Regulation.

Article 38 If a securities firm is engaged in securities brokerage business, it can entrust staff outside of the securities firm as securities broker, engaging in attracting and providing service for customers as agent.

Securities account opened by the securities firm for securities assets management customer should be submitted to stock exchange for filing within 3 trading days.

Article 44 If a securities firm is engaged in self run securities business, its risk controlling indicators such as ratio of total securities value and company net capital, ratio of value of one type of securities and net corporate capital, and ratio of quantity of one type of securities and total issuing quantity of this type of securities should comply with prescription of the securities regulatory agency under the State Council.

Article 50 A securities firm that carries out securities lending and borrowing business shall sign a securities lending and borrowing contract with the customer, and shall open a customer securities guarantee account with the securities registration and settlement organs, and a customer funds guarantee account with the designated commercial bank in the name of the securities firm in accordance with the provisions of the securities regulatory agency under the State Council.