[lbo-talk] frontiers of financial innovation

[Jordan Hayes]

> >Also: if there was a signifcant default rate on these
> >things, the banks wouldn't underwrite them.
>
> Gee, you mean that because IPOs have a shitty record going back
> decades, that means people won't buy them, and investment banks won't
> underwrite them? You have a touching faith in the rationality of
> financial markets.

You're confusing products to sell and products to buy :-)

If I underwrite an IPO, I make money no matter how the issue performs in
the secondary market.  And "underwriting" in this case is a joke: if the
issue doesn't sell, the "underwriter" doesn't underwrite it.  Period.
The underwriting contract is (almost?) always signed AFTER the shares
are allocated.  Don't get me started on IPOs :-)

If I underwrite a mortgage and it defaults, I'm now a) out money and b)
in the real estate market.  BIG DIFFERENCE.

Are you just in a bad mood today, Doug?

/jordan