Yes indeed. And it's not just CUSIP's there all kinds of private data that floats around the in the finance universe. I've built my share of professional finance terminals and managing priivately owned content as it meanders through the data warehousing and analytcal systems has been part of the game since as long as I can remember including the stories I got from the old timers when I first took this business up. (Many moons ago too now. Sigh.)
The bottom line is the analysis systems packager is honor bound to be help ensure the copyright owner(s) rights are respected. When I build things I often become the nexus who has to insist that all parties involved are in reasonable compliance with both public rules and private ones. It's a bit of a black art at times. I re-read "Getting to Yes" every once in awhile. LOL.
- Dennis
I agree about the privacy concerns. Loan servicing tapes contain names, addresses, identifiers, the status of the loan, balances, distributions of payments to loan line item elements including fees and penalties. You can know a person's financial status as dangerously as looking at their DNA's vulnerability to diseases. Loan servicers are also very careful to guard the data in bulk form. It can be used for red lining. This is an information case where, unlike financial reporting of public companies, full public transparency down to the loans list is not the goal.
CUSIPS's are private property. You need a license from S&P to display them. Says so in every data contract I've ever signed. I've been signing them since around 1994.
We agree on the larger point about academia in general. There is much to be done to adjust the training regime UCLA's program was the result of another industry group specialzing in risk management. Also a goodly portion of MoU's didn't b-school at all. Many were engineering/math majors with little experience in finance, accounting, law or exposure to what I still consider to be the most important missing lesson in academia, business ethics. It's good to see some schools responding but it's still more innovation than core curriculum. And then there's the ivory tower effect that makes it really hard to connect the dots to the real world. I do guest spot speaking when I can so people get exposed to at least one pragmatic influence somewhere along the way. That's when I tell them under what accounting line item research is really booked. LOL.
David - I'd be happy to talk to you about it more. There is much work to be done and opportunity to collaborate. Ring me on Tuesday next week. Office # is 310-676-3300. I'm out of town all weekend and might not get back until Monday pm West Coast time. Looking forward to connecting. - Dennis
Some good news. B-schools are responding to the need. I gave a talk to the Masters in Financial Engineering class at UCLA's Anderson School about a month ago and the students were all well versed in "geek". I felt very at home among them. LOL.
continued ...
Don't get me wrong. I've been a longtime proponent of tracking collateral performance in detail and of routinely marking illiquid portfolio holdings to the underlying collateral on a regular basis as part of keeping the secondary market from reaching stasis. The technology is getting there and it will do good but it won't solve all the MBS uncertainties by itself. All I'm saying is that the assertion that solving collateral record keeping "cleans up the ecosystem" of structured finance was a bit too much of a reach to be putting into a bullet point. Technology would progress a lot faster if each contributor to the solution set approached things with a bit more humility. The way I look at it the American taxpayer has paid for a lot of technology in a lot of places and the people should reap the benefits of the entire body of the public good investments they've made. I don't think it would be a bad idea for the administration to instruct the apparatus to investigate how to leverage it.
Yes I did mean "deal modeling". The ecosystem of securitizaion consists of a train of events. Recording collateral data performance and assignment to a specific securities deal is just one of them. It comes after the loan servicing step and before the imposition of the securitized asset deal payout rules. Deal models are representations of the legal contract for the security itself. Structured finance transforms collateral into bonds allowing the source of the collateral to "sell" it to the special purpose entity and thereby create the capacity to issue new lending. That's the whole purpose of the process whether it's pass-thru or exotic. These rule allow for a host of arbitrary optionalities. At this point in time I view Universal Modeling Language (UML) as the tool of choice for this part of the bond ecosystem. UML is a branch of information and rules of engagement representation that has been worked on for at least a decade both in defense and academia. Anyone who's worked intimately with uncertainty theory knows just how similar war games and structured finance are in their core mathematics.
end of part 1
It's a start but the XBRL solution alone in isolation from other methods is insufficient. It's time to let the UML modelers into the solution process. MBS/CMO deals are part data records and part deal modeling language. The structured finance industry still uses modeling methods that trace their roots back to the days of Michael Milken and Drexel. That people was back in the days when we lived with the miracles coming out of a Sun SPARC 2. I like the data recording structure that XBRL offers to rationalize transparent capture of data. I'd love to see the secondary market marked to actual servicing cash flows monthly. But the core deal reverse engineering modeling goes far beyond what a records keeping system is designed to do. The DoD people have been investing in the kind of UML that can solve this part of the problem. Now is the time to look at the whole gamut of solutions and harvest one more of those life changing peace dividends.
Dennis Santiago
Long haul campaigns whether military or economic are won based on the rate of adaptation by the protagonist outpacing the chaos creation rate of the antagonist. The enemy we face is an economy we've put into a spiral of our own making. Transparency is everything to winning. If you cannot see you can't be efficient. And then entropy wins. We are capable of making things transparent. The question now is do we have the resolve to bear looking at the truth and accepting the changes needed to become a better people.
At social gatherings these days are all about people talking about their worries. The stresses are becoming personal. When someone complains to me I ask them a simple question. "So what are you doing to help?" It's time to start paying forward.
![[Avatar]](/images/avatar26.png){kind=avatar}
Creation