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How credit cards become asset-backed bonds

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by Paddy Hirsch
Tuesday, November 25, 2008 - 22:23

Mortgages aren't the only financial instruments that get turned into securities. Marketplace Senior Editor Paddy Hirsch explains how companies make money by buying credit card debt and bundling it.

About the author

Paddy Hirsch is the Senior Producer, Personal Finance at Marketplace and the creator and host of the Marketplace Whiteboard. Follow Paddy on Twitter @paddyhirsch and on facebook at www.facebook.com/paddyhirsch101
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Sourabh Verma's picture
Sourabh Verma - Apr 21, 2009

I can see the analogy between credit card receivables and the securities with the example of bond ratings but couldn't get the 'asset-backed' part...???

Ajibola Abudu's picture
Ajibola Abudu - Feb 9, 2009

Illuminating.

bruce k's picture
bruce k - Jan 30, 2009

I wonder if you can shed some light on why companies who are going to the US government for money to save their companies would be taking that money and handing some of it out in bonuses or buying new corporate jets?

Are they incompetent?
Are they stupid?
Are they greedy?
Are they legally bound?
Are they really in a position of strength and they know it?
Are they immune to any repercussions, and if so, why?

Ramona Hinkle's picture
Ramona Hinkle - Jan 24, 2009

Where were you ten years ago. When I was calling everyone an idiot and kept loosing jobs. The experts were so "wacked out". I nor anyone else in their right minds can justify what they were doing. The big dummies.

James Noble's picture
James Noble - Jan 24, 2009

I am extremely pleased with your presentations. That said I would ask that you explain the action and purpose of wage fixing. Which I believe to be stalling our economy out of restarting.

Dan Martin's picture
Dan Martin - Dec 24, 2008

I think it's humorous (and appropriate) that Paddy ends the segments with "...leaving us badly in need of a drink."

Great whiteboards! A good use of time to check them out.

kaili ong's picture
kaili ong - Dec 7, 2008

i can't view the videos; they all say 'sorry, this video is no longer available'... does anyone have any alternative way to view the videos?

please send your ideas to premiumcarrot@gmail.com

Bob Hawkins's picture
Bob Hawkins - Dec 7, 2008

Great Videos! Can you explain Structured Investment Vehicles (SIVs).

Joann Hennessey's picture
Joann Hennessey - Dec 6, 2008

For what its worth... The Asset Back Securities behind this Fallout can be used to help homeowners arguments during a foreclosure. The Mortgage and Note were sold improperly and the holder can not prove possession. This can result in the case being dismissed. The Homeowner wins.

Marko Robinson's picture
Marko Robinson - Dec 4, 2008

Keep doing the vids Paddy Hirsch. We Americans need to better understand our economy and how it works.

Hopefully, you explain one day on how hedge funds and private equity work on separate vids, but also how they both interlinked with one another.

My theory is that hedge funds and private equity firms are some how involved in the current crisis. If they are involved in the current financial crisis, I hope you could do a vid on this. If not, then I am wrong.

Thanks.

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