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Innocence Lost

Searching for some background info to get a better handle on Credit Card structures and the size of that portfolio, I came across this Fitch document from 1998.

It appears to be a hybrid between research and marketing, an "infomercial," if you will, for credit card structures.

It's good reading from at least two perspectives: a refresher or intro to the nomenclature of the field, and also as a sort of quant spin on the "innocence lost" theme. It reads like a fairy tale just before the aliens land, or the big bad wolf comes. In that sense, it's actually quaint but a bit melancholy.

For sheer drama, you can almost hear the ominous background music as you read lines like this:

In the history of credit card securitization, the only three deals that have triggered early amortization events were issued by RepublicBank, Delaware, Southeast Bank, and Chevy Chase FSB. None was rated by Fitch IBCA. In the Chevy Chase deal, investors voted to waive the trigger event, and the transaction continued to operate as normal. The securities were repaid as originally scheduled, and no investor suffered a loss.

I don't know that credit card structures have or will suffer the same fate as CMO's, but in light what we have experienced with the latter, we could be excused for viewing the attached with a bit of wry skepticism.

I also thought to myself, as I read this, "no wonder institutions went head-over-heels into these things. Nobody else would touch them." It takes a highly developed sophistication to appreciate certain things, like avant-garde art. For many of us, the appeal of the pitch in this document is like a dog whistle -- it just can't be heard. Down in the lower registers, all we hear is, "what if...?"


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