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Well you can call it the tale of two markets this year shaping up to be one of the biggest ever for corporate credit issuance in other words companies are selling debt at record levels and there are buyers everywhere.
Then you've got the individual credit markets for many families and small companies still finding it very tough to get -- why the divergence joining us -- Jim Bianco president.
A Bianco research.
Jim why is -- such a divergence do you think that we're gonna see the overall credit market ease up next year.
Did to the first question divergences because of the nature of the markets.
When a company issues a corporate bond we all understand the nature and the mechanics of corporate bond.
But a lot of these other markets -- what we've referred to during the financial crisis is the securitization markets.
That's who we pull a bunch of loans together with the mortgage loans or corporate loans and sell them as a package.
Kind of fell apart during the financial crisis in fact it was partially responsible for the financial crisis.
-- it's never come back.
So those -- rely on loans.
There's no real secondary market for the -- that gives -- alone to sell it and that's why it's been so hard to get loans that's why it's been so sluggish to get loans.
Even all the way up to mortgages as well to trying to securitization was a four letter word last year and even earlier this year really criticize but you're telling us.
You know whatever people think of it it is absolutely vital for loan generation.
Absolutely yet that the peak of the market in 2007 and yes that was a little over done.
Securitization was larger than the corporate bond market it was larger than the bank loan market as we understand it it's just a conduit it's -- -- banks take loans they package them together and they sell them to investors willing take the risk.
That is gone right now and that is really a problem.
The only thing that's working right now working in a big way is corporate bond market.
But beyond that it's still difficult to get credit.
If anybody's tried to get a mortgage is found out yet -- mortgages available but you have to have much higher credit -- -- -- to put down bigger down payments.
So the game has definitely changed from where was a few years ago and the game continues to be tough for mom and pop -- Wal-Mart can sell five year debt yielding less than 1% there's fires that -- it -- up all mom and pop.
Can't get a loan to keep the business afloat.
That's right because most consumer loans are who tied to the securitization market whether to credit card loan personal loan.
-- mortgage or car loan.
Those all used to be packaged together and -- now they still do it.
But not nearly in the numbers that we did before so the way that the market adjusts is it makes the standards for those type of -- Credit cards or cars or homes.
Much more difficult to get it which is why.
People have been fighting it much more hard to get along.
On a different issue we had Chris Whelan on the program yesterday because there were 54 economists investors traders thinkers -- -- that wrote a letter open letter to Ben Bernanke Tim Geithner and others.
-- -- named Jim was on that list as well you said we need to change the way that we do business in the mortgage market.
What kind of response have you gotten in the days since the latter has been out is anybody listening to there were some good recommendations and there.
I hope that they were listening -- haven't gotten much of a response but what it has been as positive.
The market needs to be reformed it needs standard -- station and that was the idea that we -- with a letter is that you in the old days.
-- we could get away with everybody kind of setting up their own deal in their own different way.
But that's -- the markets now working down the best way to get it working is to have some kind of standardization.
Everybody operates and the same rule book everybody knows the rules of the road and hopefully we can get things moving.
I hope I get more positive response -- -- because I do think it's an important issue you know is a lot of people say we go back to the Jimmy Stewart.
Are right you know potter bill and all this stuff -- -- debate debate around the corner -- note you go down there and say you know mr.
Smith how much do I Obama bank and he looks right up.
Obviously that's not going to happen but we went out of control the other way.
In your mind Jim what is the happy.
Medium between you know keeping sophisticated market like the securitization market going but also making sure we have transparency.
And we have accountability.
I think you just answer the question that we need transparency and accountability.
The problem with the securitization market by 2006.
Was it was so complicated.
Nobody understood it including the rating agencies who have anointed AAA ratings and a lot of these securities that went bust we need to come back the other way and say okay.
Here's a standard way to do things here's a way that you can understand how it works you have a reasonable chance of doing some kind of valuation.
That's actually correct.
You don't need a bunch of Ph.D.s in quantum physics and mathematics to understand how it works and hopefully then people -- then.
Have the confidence to start by securitization.
Which we'll get lending moving again.
Jim Bianco Jim it was a pleasure have a Merry Christmas we'll see in the new year thanks very much for joining us.
Thanks for having me our -- are on.
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