We first alerted Parliament 8 Aug (Hansard Ec. Committee Inquiry into Banking Post GFC) 2012 that "Government cannot, ought not to profit from a  fraud."  Two months later Government decided to sell off the AOFM's purchase of $24 billion (tax payer dollars) of potentially toxic RMBS Packages. Treasurer said: "One of our best polcies but decided to sell."  Duh!  

Now read this:


Aussie credit is booming

Australian credit investments are booming. On the back of the lowest borrowing rates in history and generally benign conditions across most asset classes, the cost of issuing Australian corporate bonds and selling home loans via portfolios of residential mortgage-backed securities (RMBS) is plumbing new lows.  In the words of one major bank analyst on Tuesday, “volatility is absolutely crushed for now with the VIX Index looking like a pancake”. Volatility is a measure of the probability of loss in financial markets, with the Chicago-traded VIX index tracking the volatility of US equities.

This favourable sentiment is allowing banks and companies to raise money to fund loans at some of the cheapest levels since the global financial crisis. It is also delivering substantial capital gains to those who have invested in corporate debt and RMBS when credit spreads, which measure the cost of these securities, were much wider.  Winners include retail punters who have purchased the many new debt securities listed on the Australian Stock Exchange by major and regional banks in recent years. Indeed, there have been interesting developments in the pricing of ASX bonds vis-a-vis their wholesale over-the-counter contemporaries. Another beneficiary will be the Commonwealth government, which still owns over $7 billion of RMBS that it bought during the GFC at significantly lower prices..................

Through the Commonwealth Treasury’s subsidiary, the Australian Office of Financial Management, the government has been gradually selling down its RMBS portfolio at prices above its original entry level.  Since March 2012 the AOFM has divested around $1 billion of the more than $15 billion of RMBS it purchased to support system liquidity between 2008 and 2011. But with over $7 billion remaining on the government’s books, more RMBS profits may come. It’s a mixed blessing for some inside the AOFM who opposed the RMBS investment policy and have been eager to talk down the government’s profits..............


 Comment:  Yes but the Government still cannot profit from a fraud!!!!!  In 2008 Banks decided to no longer VERIFY incomes on mortgage loan apps whether FULL DOCS or LOW Docs - these mortgage differences are simply higher costs and fees for Low Docs.  The RMBS here in Oz are the packaging of INCOME STREAMS (not titles!).  The buyers have been sold a dud!  30 year loans designed to implode in 4 years and BOOM no more income as the loans slide into default.  Is anyone watching what these banker bandits are up to?   This email address is being protected from spambots. You need JavaScript enabled to view it.