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Advanced Funding Options[edit | edit source]

Socially Responsible Funding[edit | edit source]

Socially Responsible Funding, is a concept based on an understanding of the nature of the latest market crash, which was based in the Sub-Prime Mortgage Bubble in the U.S. Essentially what has recently been found, is that the U.S. government in its zeal to create a low-cost housing supply in the states, created a very powerful system of finance, that spread the risk over a wide range of International Bond market subscribers.

The primary risks that they did not take into account in their rush to market, was that the market they were distorting, was in fact the basis of many securities on who's stability the BANKS were dependent. Further, the bankers that developed the securities, did not take into account the risk of the linkage of multiple backed securities defaulting simultaneously when the sub-prime rates were lost.

This problem, exasperated the popping of the real-estate bubble, and essentially meant that there was an echo of the bubble approximately 5 years after the sub-prime scandal ended, when the mortgage holders became aware that they would have to refinance their mortgages at significantly higher rates, and thus amounted to a bait and switch that put their renewal beyond their means.

The willingness to walk away from the property rather than continue financing it at higher rates, constituted a new market trend that could not be predicted from pure calculation, but should have been obvious to anyone who has bought a cell phone in the last few years and been burnt on "Introductory Pricing".

This new market trend, meant that far from being several, as had been expected mortgages moved as a block, to a higher risk which destroyed the credibility of all the securities based on the bubble market. This exposed the Underbelly of the Banking system which is over-invested in Mortgage backed securities, and threatened the financing of the banks causing a banking crisis.

It is easy to blame the "Quants" mathematically derived securities, for the problem, when what was causing the issues were the tendency of Banks and mortgage brokers to bait and switch the clients, and then expect that because the securities created were backed by assets that they would not move as a block when the sub-prime promotional period ended.

Add to this the malfeasance of the Mortgage brokers that did not protect the fundamentals in their zeal to sell mortgages to everyone.

What you get is a powerful positive feedback loop creating a bubble in the market, and a later trough, as the bait ran out and the switch started. Smart investors divested themselves of the stocks of the companies that didn't recognize that the switch was coming, and rode out the financial crash in good shape, while the banks which mistakenly bought the securitized bonds, were devastated.

The Opportunity in the Crash[edit | edit source]

The main thing to understand, is that there is an opportunity to be found in the market crash, and that lies in the fact that social responsibility CAN be funded if care is taken to deal well with the responsibility aspect. The Quant concept of Securitization if kept on a small scale and managed in vertical markets should be separated enough between multiple bond issues not to bring down the market, but can still be used to mobilize money that is trapped in paper documents, and never reaches the market.

Socially Responsible Funding[edit | edit source]

Socially Responsible Funding is a corporate concept that can be used to fund responsible projects like basic research where a product is expected to be produced at some future date. It works on the idea that the international bond market really doesn't want to destroy all the countries it works in, so much as is blind to the net effects of big money moving within in them, and that government is being forced to do more and more with fewer and fewer tax and royalty funds.

This means that Society is responsible for holding the country together without adequate funding, and business being blind to its own effects on the countries involved, is destroying its own markets. SRF reverses this trend by assuming that some projects are just too important to leave to a strict profit motive, and must be promoted by society through some market distorting mechanisms, that are not dependent solely on governments for funding. These Responsible funders, will attract financial support for specific issues, and thus fund Socially oriented enterprise at the local area level, using international financial vehicles. "Lend Locally, Finance Globally" is the theme promoted by GreySmith Institute