Fixed Income and Collateralized Mortgage Obligations

Do you know what fixed income investments you have and what they are invested in?

The Collateralized Mortgage Obligations which include sub-prime mortgages have not just disappeared. If you don’t know what happened here is a brief explanation courtesy of LawyersandSettlements.com from their article entitled “Retirement Fund Rip-Off“. The article was written in November 2007 and updated in Jan 2008.

With an estimated $400 billion likely to be in default I cannot believe all is well.

If your Bank, Stock Broker or Investment firm sold you bonds, CDs or notes as a way to supplement fixed income, social security or pension, then you need to get in touch with them and make sure your investments are notimage involved in these mortgage obligations.

Almost all the financial institutions were up to their armpits in this stuff. Has your institution called you to tell you your account did not and does not include these financial instruments?

As part of protecting your nest egg you need to have your financial institution or financial planner give you a signed written statement that your investments are not tied bonds, CDs or notes that are connected in any way with the Collateralized Mortgage Obligations. Or they need to advise you of the situation so you can decide what action to take to protect your nest egg.

Lawyers and Settlement point out the following Banks and Firms have these products.

Bear Stearns, Merrill Lynch, Bank of America, Goldman Sachs, JP Morgan, Washington Mutual, Deutsche Bank Morgan Stanley, UBS Financial, Wachovia, Wells Fargo, CS First Boston, AIG and Citigroup and many other financial institutions.

They go on to name the funds and the percentage of the funds invested in these mortgage obligations. Take a look for yourself.

Now a lot has happened since January 2008 when this article was updated and it seems things have gone quiet. Time heals all – but maybe the problem just cannot go away that quickly. So even if all is well with your investments you need it in writing as far as I am concerned. It won’t go away and it will only get better once the pain being shared around.

I believe there was a saying in Japan when they were “king of the heap” that if the market went up the Banks made money and if it went down the Government socialized the losses. Look what happened there. Well it is happening in the USA in the name of keeping the Banking System functioning.

That’s not a criticism so much as an observation. The Government has an obligation to keep the financial system running and the only ones who are in a position to run it are the ones that caused the problem in the first place. So the Government really is between a rock and a hard place.

But whilst things are still being kept under wraps by the financial institutions all us Baby Boomers can quietly go about making sure we are not in the direct firing line if it does actually blow up. Quietly does it. That means making sure our investments are not invested in these structured products or tied to sub-prime mortgages. So please check your financial situation for all your accounts wherever they may be and take action to get out of them.

It won’t mean that if the whole thing blows up that we won’t lose something. But that is better than losing everything through failure to take control.

Please read Retirement Fund Rip-Off and take action if appropriate. If need be talk with the guys at Lawyers and Settlement. They seem to have a handle on things.

I remember reading an article in early January about the financial bonuses paid to Wall Street. I believe it was something like $36 billion which almost matched the amount of losses declared at that time by the financial institutions affected by the sub-prime mess.

So make sure you are still not in any CDs, notes or bonds assocaited with the Collateralized Mortgage Obligations.

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