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UNECE – Group of Experts on National Accounts 6 – 9 May 2014 - Geneva

UNECE – Group of Experts on National Accounts 6 – 9 May 2014 - Geneva. Challanges and approaches to the implementation of 2008 SNA From the Subprime Crisis to Government Debt Wolfgang Eichmann Federal Statistical Office Germany. From the Subprime Crisis to Government Debt:.

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UNECE – Group of Experts on National Accounts 6 – 9 May 2014 - Geneva

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  1. UNECE – Group of Experts on National Accounts6 – 9 May 2014 - Geneva Challangesandapproachestotheimplementationof 2008 SNA FromtheSubprimeCrisistoGovernmentDebt Wolfgang Eichmann Federal Statistical Office Germany

  2. From the Subprime Crisis to Government Debt: Wolfgang Eichmann 1. Subprime Crisis and National Accounts 2. The elementary monetary circuit 3. Generating profit I 4. Generating profit II

  3. Subprime Crisis and National Accounts - Mechanics - Presentation in National Accounts zurück zur Übersicht

  4. 1. Step: Normal mortgage business Collateral Liability/Claim Mortgage borrower Mortgage bank Money

  5. 2. Step: Securisation Rating agency prices Bank incorporates Bank incorporates Mortgage RMBS 1) Mortgage bank SPV 4) SPV 4) Securisation 1) Residential Mortgage Backed Securities 4) Special Purpose Vehicle

  6. 3. Step: Structuring (Risk transformation) New development: Re-Remics „Resecurization of Real Estate Mortgage Investment Conduits“ Rating- agency prices Bank incorporates Bank incorporates CDO 2) SPV 4) SPV 4) Senior Mezzanine Hedge- Funds Equity Risk transformation Capital contribution Loan Institutionel Investors Investor Banks 2) Collaterized Debt Obligations 4) Special Purpose Vehicle

  7. Quelle: „Blei zu Gold“, Institutional Money, Ausgabe 3/2007 zurück zur Übersicht

  8. The CDO Machine AAA AAA AAA AAA AA / A AA / A AA / A AA / A BBB BBB BBB BBB BBB BBB BBB BBB BBB BBB zurück zur Übersicht

  9. The CDO Machine AAA AAA AAA AAA AA / A AA / A AA / A AA / A AAA AAA AA / A AA / A BBB BBB BBB BBB BBB zurück zur Übersicht

  10. The CDO Machine AAA AAA AAA AAA AA / A AA / A AA / A AA / A AAA AAA AA / A AA / A AAA AA / A BBB zurück zur Übersicht

  11. 3a: Synthetic Securisation by Credit Default SWAPS Rating- agency prices Bank incorporates Bank incorporates CDO 2) SPV 4) SPV 4) Senior Mezzanine Equity Risk transformation CDS 5) 2) Collaterized Debt Obligations Insurance AIG 4) Special Purpose Vehicle 5) Credit Default SWAP

  12. 4. Step: Maturity transformation Bank incorporates Liquidity convenant ABCP 3) SPV 4) Investor Maturity transformation 3) Asset Backed Commercial Papers 4) Special Purpose Vehicle

  13. Mechanics subprime - market - Stylised presentation- Variant: True Sale Rating- agency prices Bank incorporates Bank incorporates Bank incorporates Liquidity covenant Collateral Mortgage CDO 2) ABCP 3) RMBS 1) Mortgage Senior Client Mortgage bank SPV 4) SPV 4) SPV 4) Investor Mezzanine Equity Maturity- transformation Risk- transformation Securisation Hedge- Funds 1) Residential Mortgage Backed Securities 2) Collaterized Debt Obligations Capital contribution Loan 3) Asset Backed Commercial Papers Investor Banks 4) Special Purpose Vehicle Institutionel Investors

  14. Business Accounting Balance sheet Gain- and loss account Balance sheet Liabilities new Own funds new Assets new Liabilities Proceeds Of which: holding gains Expenditures Of which: holding losses Gain/ loss Assets Own funds National Accounting Sequence of accounts Output (turnover etc. Intermediate consumption . . Net lending/ borrowing Balance sheet Financial accounts Revaluation Balance sheet Assets new Liabilities new Change in net worth total Net lending/ borrowing Change in liabilities and net worth holding gains/ losses Assets holding gains/ losses Liabilities Change in net worth due to nominal holding gains/losses Change in assets Assets Liabilities Own funds (no gross fixed capital formation) zurück zur Übersicht

  15. The elementary money circuit zurück zur Übersicht

  16. The elementary money circuit in detail Labour Money Banking Systems Producing enterprise Trading enterprise Households Goods Goods Commercial bill Commercial bill Money Money Commercial bill Money

  17. The elementary money circuit in detail 1 Labour Money Banking Systems Producing enterprise Trading enterprise Households Goods Goods Commercial bill Commercial bill Money Money Commercial bill Money

  18. The elementary money circuit in detail Labour Money Banking Systems Producing enterprise Trading enterprise Households Goods Goods Commercial bill Commercial bill Money Money Commercial bill Money zurück zur Übersicht

  19. Generating profit I zurück zur Übersicht

  20. How can profit be generated ? Labour 100 MU Employees 80 Goods Banking System Collateral Enterprise 100 MU 100 Monetary units (MU) 100 Goods 100 (MU) : 1,25 (Price) = 80 Goods Profit = 20 (Goods) x 1,25 (Price) = 25 MU Collateral 100 MU Gross Domestic Product at current prices: 125 MU Employer Compensation of employees: 100 MU 20 Goods Operating Surplus (Profit): 25 MU zurück zur Übersicht

  21. Generating profit II zurück zur Übersicht

  22. A real estate bubble Landlord Balance sheet 100 RE 100 OF RE = Real Estate OF = Own Funds

  23. A real estate bubble Banking System Investor A Landlord Balance sheet Balance sheet Balance sheet 100 RE 50 G 50 OF 100 OF RE = Real Estate OF = Own Funds G = Gold

  24. A real estate bubble 20 Gold Banking System Investor A Landlord 200 MU Balance sheet Balance sheet Balance sheet 100 RE 50 G 50 OF 100 OF 20 G 20 OF RE = Real Estate OF = Own Funds L = Loan MU = Money Units G = Gold

  25. A real estate bubble 20 Gold Banking System Investor A Landlord 200 MU Balance sheet Balance sheet Balance sheet 100 RE 200 MU 50 G 50 OF 100 OF 20 OF 20 G 200 MU 180 L 180 L RE = Real Estate OF = Own Funds L = Loan MU = Money Units G = Gold

  26. A real estate bubble 20 Gold 200 MU Banking System Investor A Landlord 200 RE 200 MU Balance sheet Balance sheet Balance sheet 100 RE 200 MU 50 G 50 OF 100 OF 20 OF 20 G 200 MU 180 L 180 L RE = Real Estate OF = Own Funds L = Loan MU = Money Units G = Gold

  27. A real estate bubble 20 Gold 200 MU Banking System Investor A Landlord 200 RE 200 MU Balance sheet Balance sheet Balance sheet 200 MU 50 G 200 RE 50 OF 100 OF 20 OF 20 G +100 Profit 200 MU 180 L 180 L = 200 OF RE = Real Estate OF = Own Funds L = Loan MU = Money Units G = Gold

  28. A real estate bubble 40 Gold 20 Gold 200 MU Banking System Investor A Investor B Landlord 200 RE 200 MU 400 MU Balance sheet Balance sheet Balance sheet Balance sheet 200 MU 200 RE 50 G 50 OF 100 OF 20 OF 40 OF 40 G 200 MU 20 G +100 Profit 180 L 180 L = 200 OF RE = Real Estate OF = Own Funds L = Loan MU = Money Units G = Gold

  29. A real estate bubble 40 Gold 20 Gold 200 MU Banking System Investor A Investor B Landlord 200 RE 200 MU 400 MU Balance sheet Balance sheet Balance sheet Balance sheet 200 MU 200 RE 50 G 50 OF 100 OF 20 OF 40 OF 40 G 20 G 200 MU +100 Profit 180 L 180 L = 200 OF RE = Real Estate OF = Own Funds L = Loan MU = Money Units G = Gold

  30. A real estate bubble 40 Gold 20 Gold 400 MU 200 MU Banking System Investor A Investor B Landlord 400 RE 200 RE 200 MU 400 MU Balance sheet Balance sheet Balance sheet Balance sheet 200 MU 200 RE 50 G 50 OF 100 OF 20 OF 400 MU 40 OF 60 G 600 MU +100 Profit 180 L 360 L 540 L = 200 OF RE = Real Estate OF = Own Funds L = Loan MU = Money Units G = Gold

  31. A real estate bubble 40 Gold 20 Gold 400 MU 200 MU Banking System Investor A Investor B Landlord 400 RE 200 RE 200 MU 400 MU Balance sheet Balance sheet Balance sheet Balance sheet 200 MU 400 MU 50 G 50 OF 100 OF 20 OF 400 RE 40 OF +200 Profit 60 G 600 MU +100 Profit 360 L = 220 OF 540 L = 200 OF 180 L RE = Real Estate OF = Own Funds L = Loan MU = Money Units G = Gold

  32. A real estate bubble 40 Gold 20 Gold 400 MU 200 MU Banking System Investor A Investor B Landlord 400 RE 200 RE 200 MU 400 MU Balance sheet Balance sheet Balance sheet Balance sheet 200 MU 400 MU 50 G 50 OF 100 OF 20 OF 400 RE 40 OF +200 Profit 60 G 600 MU +100 Profit 360 L = 220 OF 540 L = 200 OF 180 L RE = Real Estate OF = Own Funds L = Loan MU = Money Units G = Gold

  33. A real estate bubble 40 Gold 20 Gold 400 MU 200 MU Banking System Investor A Investor B Landlord 400 RE 200 RE 200 MU 400 MU Balance sheet Balance sheet Balance sheet Balance sheet 50 G 200 MU 50 OF 100 OF 20 OF 400 RE 40 OF 20 G +200 Profit 40 G 400 MU +100 Profit 200 MU 360 L = 220 OF 360 L = 200 OF RE = Real Estate OF = Own Funds L = Loan MU = Money Units G = Gold

  34. A real estate bubble 80 Gold 40 Gold 20 Gold 400 MU 200 MU Banking System Investor A Investor B Investor C Landlord 400 RE 200 RE 200 MU 400 MU 800 MU Balance sheet Balance sheet Balance sheet Balance sheet Balance sheet 200 MU 50 G 50 OF 100 OF 20 OF 400 RE 40 OF 80 G 80 OF 20 G +200 Profit 40 G 400 MU +100 Profit 200 MU 360 L = 220 OF 360 L = 200 OF RE = Real Estate OF = Own Funds L = Loan MU = Money Units G = Gold

  35. A real estate bubble 80 Gold 40 Gold 20 Gold 400 MU 200 MU 800 MU Banking System Investor A Investor B Investor C Landlord 400 RE 200 RE 800 RE 200 MU 400 MU 800 MU Balance sheet Balance sheet Balance sheet Balance sheet Balance sheet 200 MU 50 G 50 OF 100 OF 20 OF 400 RE 40 OF 800 MU 80 OF 20 G +200 Profit 120 G 1200 MU +100 Profit 200 MU 360 L 720 L = 220 OF 1080 L = 200 OF RE = Real Estate OF = Own Funds L = Loan MU = Money Units G = Gold

  36. A real estate bubble 80 Gold 40 Gold 20 Gold 400 MU 200 MU 800 MU Banking System Investor A Investor B Investor C Landlord 400 RE 200 RE 800 RE 200 MU 400 MU 800 MU Balance sheet Balance sheet Balance sheet Balance sheet Balance sheet 200 MU 50 G 50 OF 100 OF 20 OF 800 MU 40 OF 800 RE 80 OF 20 G +200 Profit +400 Profit 120 G 1200 MU +100 Profit 200 MU 720 L = 440 OF = 220 OF 1080 L = 200 OF 360 L RE = Real Estate OF = Own Funds L = Loan MU = Money Units G = Gold

  37. A real estate bubble 80 Gold 40 Gold 20 Gold 400 MU 200 MU 800 MU Banking System Investor A Investor B Investor C Landlord 400 RE 200 RE 800 RE 200 MU 400 MU 800 MU Balance sheet Balance sheet Balance sheet Balance sheet Balance sheet 200 MU 50 G 50 OF 100 OF 20 OF 800 MU 40 OF 800 RE 80 OF 20 G +200 Profit +400 Profit 120 G 1200 MU +100 Profit 200 MU 720 L = 440 OF = 220 OF 1080 L = 200 OF 360 L RE = Real Estate OF = Own Funds L = Loan MU = Money Units G = Gold

  38. A real estate bubble 80 Gold 40 Gold 20 Gold 400 MU 200 MU 800 MU … Banking System Investor A Investor B Investor C Landlord 400 RE 200 RE 800 RE 200 MU 400 MU 800 MU Balance sheet Balance sheet Balance sheet Balance sheet Balance sheet 40 G 200 MU 50 G 50 OF 100 OF 20 OF 40 OF 800 RE 80 OF 20 G +200 Profit +400 Profit 400 MU 800 MU +100 Profit 80 G 200 MU 720 L = 440 OF = 220 OF 720 L = 200 OF RE = Real Estate OF = Own Funds L = Loan MU = Money Units G = Gold

  39. Opening Balance Sheet Revaluation Closing Balance Sheet Employees Gross Domestic Product at current prices: 125 MU Compensation of employees: 100 MU Employer Operating Surplus (Profit): 25 MU Landlord 100 OF 200 OF 200 MU 100 RE +100 Investor A 220 OF 20 G +200 20 G 20 OF 200 MU Banking Sytem Closing Balance Sheet Investor B 40 G 440 OF +400 40 OF 40 G 50 G 50 OF 400 MU 80 G 800 MU - 200 Landlord 720 L Investor C - 200 Investor A 80 OF 800 RE 80 G 80 OF - 400 Investor B 720 L

  40. Opening Balance Sheet Revaluation Closing Balance Sheet Employees Gross Domestic Product at current prices: 125 MU Compensation of employees: 100 MU Employer Operating Surplus (Profit): 25 MU Landlord 100 OF 200 OF 200 MU 100 RE +100 Investor A 220 OF 20 G +200 20 G 20 OF 200 MU Banking Sytem Closing Balance Sheet Investor B 40 G 440 OF +400 40 OF 40 G 50 G 50 OF 400 MU 80 G 800 MU - 200 Landlord 720 L Investor C - 200 Investor A -620 OF 100 RE 80 G 80 OF -700 RE - 400 Investor B 720 L Government

  41. Opening Balance Sheet Revaluation Closing Balance Sheet Employees Gross Domestic Product at current prices: 125 MU Compensation of employees: 100 MU Employer Operating Surplus (Profit): 25 MU Landlord 100 OF 200 OF 200 MU 100 RE +100 Investor A 220 OF 20 G +200 20 G 20 OF 200 MU Banking Sytem Closing Balance Sheet Investor B 40 G 440 OF +400 40 OF 40 G 50 G -570 OF 400 MU 80 G 800 MU - 200 Landlord 100 RE Investor C - 200 Investor A +/- 0 OF 80 G 80 OF -700 RE -620 L - 400 Investor B Government

  42. Opening Balance Sheet Revaluation Closing Balance Sheet Employees Gross Domestic Product at current prices: 125 MU Compensation of employees: 100 MU Employer Operating Surplus (Profit): 25 MU Landlord 100 OF 200 OF 200 MU 100 RE +100 Investor A 220 OF 20 G +200 20 G 20 OF 200 MU Banking Sytem Closing Balance Sheet Investor B 40 G 440 OF +400 40 OF 40 G 50 G -570 OF 400 MU 80 G 800 MU - 200 Landlord 100 RE Investor C - 200 Investor A +/- 0 OF 80 G 80 OF -700 RE -620 L - 400 Investor B Government +620 GB GB = Government Bonds

  43. Opening Balance Sheet Revaluation Closing Balance Sheet Employees Gross Domestic Product at current prices: 125 MU Compensation of employees: 100 MU Employer Operating Surplus (Profit): 25 MU Landlord 100 OF 200 OF 180 MU 100 RE +100 20 GB Investor A 220 OF 20 G +200 20 G 20 OF 200 GB Banking Sytem Closing Balance Sheet Investor B 40 G 440 OF +400 40 OF 40 G 50 G -570 OF 400 GB 80 G 800 MU - 180 Landlord 100 RE Investor C - 620 Government +/- 0 OF 80 G 80 OF -700 RE -620 L Government +620 MU +620 GB GB = Government Bonds

  44. Opening Balance Sheet Revaluation Closing Balance Sheet Employees Gross Domestic Product at current prices: 125 MU Compensation of employees: 100 MU Employer Operating Surplus (Profit): 25 MU Landlord 100 OF 200 OF 180 MU 100 RE +100 20 GB Investor A 220 OF 20 G +200 20 G 20 OF 200 GB Banking Sytem Closing Balance Sheet Investor B 40 G 440 OF +400 40 OF 40 G 50 G + 50 OF 400 GB 80 G 180 MU Landlord 100 RE Investor C +/- 0 OF 80 G 80 OF -700 RE -620 L Government -620 GOVERNMENT DEBT +620 GB GB = Government Bonds

  45. „Ferner war es problematisch, dass komplexe Produkte (CDOs mit Exposures auf zweitrangige Kredite) hemmungslos als Sicherheiten in Repogeschäfte eingebracht wurden.“ CDOs were used as collaterals Michael Hüther/ Manfred Jäger-Ambrozewicz: „Von der Finanzkrise zur Regulierungsfalle? Die Rolle der Banken als Intermediär“ Zeitschrift für das gesamte Kreditwesen , 2010. Re-Remics enthalten Tranchen, die stärker als CDOs gegen Verluste bei den zugrunde liegenden Krediten schützen. So sollen qualitativ bessere Anleihen von risikoreicheren Papieren getrennt werden. Damit erhöht sich die Chance, dass die besser benoteten Anleihen ihr Spitzenrating behalten, wodurch ihr Wert genügend steigt, um den Gesamtwert des Hypothekenportfolios zu steigern, erläutert Doug Dachille, Vorstandsvorsitzender bei First Principles Capital Management. Each structuring increases the value of the portfolio Wirtschaftsblatt (Österreich), on-line Ausgabe vom 8.7.2008

  46. The Wall Street Money Machine Source: Pro Publica 2011

  47. Related story: Banks’ Self-Dealing Super-Charged Financial Crisis Source: Pro Publica 2011 Thetica Systems zurück zur Übersicht

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