Liar loans were designed for business owners who for one reason or another are unable to show documented income like an employee. In a normal non manipulated market they work. In an inflated value market where the loan officer is pushed to make a number, they don’t. In a euphoric bubble market they obviously are going to be abused.

Unfortunately, the abuse of the liar loan will make this product disappear entirely for some time, excluding those for whom it was designed.

Even if a bank was prudent, and verified every detail, and lent only to Prime borrowers at reasonable debt/income ratios, they would still be hit hard. People would just walk away due to all the other homes on the block dropping in value.

Every bank needs to be prudent, and you need to government to be there to make sure they all play fair. Its just amazing how a change in leverage limit law, and a few years of turning a blind eye can create the largest housing crash (ever?)

Keep up the good fight…….

While transparency would seem logical, let’s look at who Markit is. Meanwhile you can submit your ideas here.

http://www.markit.com/information/contact/eureka.html

Let’s review

“About Markit
Markit is a financial information services company with over 1000 employees in Europe, North America and Asia-Pacific.

Markit was founded in 2001 as the first independent source of credit derivative pricing. Today, our data, valuations and trade processing services are regarded as the market standard in the global financial markets, helping our clients to reduce risk and improve operational efficiency.

Markit has unparalleled access to a valuable dataset spanning credit, equities and the broader OTC derivative universe and we work closely with leading market makers to develop innovative solutions for the marketplace.

Our clients include investment banks, hedge funds, asset managers, central banks, regulators, rating agencies and insurance companies – we provide round-the-clock support from our offices in London, New York, Dallas, Toronto, Amsterdam, Frankfurt, Luxembourg, Tokyo and Singapore.”

The problem as I see it, is that the products that you are trying to bring transparency to are the very same assets that are on the primary client’s balance sheet. The developers of the derivative market are the ones that provide Markit the data that they require to exist. It appears what we have here is the old Mexican Standoff.

When you look at the primary dealers in the derivative market, you have a “Who’s Who” of who has assets on the Federal Reserve balance sheet, the dirty laundry. Nobody wants you to know how dirty that laundry actually is, how fast it is getting dirty, or how many tons of Tide it is going to take to get that clean. Understandably, Markit would be coming under extreme pressure. Markit says that they were the first, so that may mean that there are others you could try if they bow out.

On another subject, for the historical types that might want a feel for what is going on behind the closed doors of the Fed, may want to travel back to the last big Mexican Peso crisis in 1995 where juggling was done and issues between the Fed and Treasury. I read this about 5 years ago. I find these things fascinating, the majority likely think it is BOARING as hell, lol. Start PDF page 119, document page 117

http://www.federalreserve.gov/monetarypolicy/files/FOMC19950201meeting.pdf

I know many of the folks at Markit and they consult me regularly on their product roadmaps. I plan to call them on Monday to let them know how disappointed I will be if they listen to anything you have to say.