bigfoot12
Member of DD Central
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Post by bigfoot12 on Jul 7, 2019 13:31:21 GMT
If two people request a withdrawal from the QAA and one gets out unscathed having sold his bad loans to the second and that second hits the end of normal market conditions and is stuck with the bad loans then I think it would be difficult to argue that the the loans were exchanged at a “fair price”. The moment the "fair price" falls below 100% the current rules for transferring loans no longer apply. Yes, there has to be a moment at which this occurs (e.g. due to a newly defaulted loan being unable to have its expected losses covered).
It is a matter of speculation exactly what process will be used once the fair value falls below 100% (e.g. initially to 99.9%), as this hasn't happened yet, but this doesn't mean that transfers BEFORE the triggering event were at anything less than full value based on the information available before that triggering event.
If I buy shares in company X today, and they're suspended from trading tomorrow due to some event that occurs AFTER I bought them, that surely doesn't affect the fair value today? If you invest in the QAA and there is a failure in one or more loans totalling 5% of the QAA, I'm certain sl75, that you will be one of the first to complain if you only have access to ~90% of your funds not the 95%+ you might expect.
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sl75
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Post by sl75 on Jul 7, 2019 16:17:03 GMT
If you invest in the QAA and there is a failure in one or more loans totalling 5% of the QAA, I'm certain sl75 , that you will be one of the first to complain if you only have access to ~90% of your funds not the 95%+ you might expect. I don't follow how you think a failure in one more more loans totalling 5% of the account value would by itself result in an immediate loss of ~10%. That would indeed certainly be cause for complaint.
If you're referring to liquidity, however, withdrawals can only be processed normally while uninvested cash remains in the accounts. I'd expect a "run on the account" to restrict access far more than merely to as much as ~90% of funds. At an extreme, it may even be necessary to restrict withdrawals to 10% or less of the account, leaving 90%+ of funds "temporarily stuck" and waiting for the underlying loans to repay or be recovered.
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bigfoot12
Member of DD Central
Posts: 1,817
Likes: 816
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Post by bigfoot12 on Jul 7, 2019 16:54:11 GMT
If you invest in the QAA and there is a failure in one or more loans totalling 5% of the QAA, I'm certain sl75 , that you will be one of the first to complain if you only have access to ~90% of your funds not the 95%+ you might expect. I don't follow how you think a failure in one more more loans totalling 5% of the account value would by itself result in an immediate loss of ~10%. That would indeed certainly be cause for complaint.
If you're referring to liquidity, however, withdrawals can only be processed normally while uninvested cash remains in the accounts. I'd expect a "run on the account" to restrict access far more than merely to as much as ~90% of funds. At an extreme, it may even be necessary to restrict withdrawals to 10% or less of the account, leaving 90%+ of funds "temporarily stuck" and waiting for the underlying loans to repay or be recovered. Not saying a loss of 10%, but the withholding of 10% until some of the failures are better known. (Existing Suspended loans are about 5% of QAA as of 6/6.)
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