In 2005, EUROCATALYST was held in Rome with the support of the Italian Banking Association. The opening session, “Retail Markets at Wholesale Prices: Gauging the Impact of Globalization on Mortgage Markets” directly questioned the rationality of commoditizing high-risk mortgage assets on a global scale. In the mortgage funding session, “Securitization and Lending Anarchy”, the discussion got heated between European regulators and rating agencies. Regulators argued that they should enforce capital markets standards and criteria, while rating agencies countered that they were better positioned with investors to “harmonize” criteria with bond ratings. Once again, rating agencies were questioned about the fact that

MBS structurers and arrangers were blatantly engaging in ratings arbitrage, which the agencies continued to deny.

One of the more notable sessions featured four top economists discussing house prices around the world, which were now at spectacular, all time highs. Hosting the session, Tim Skeet and I walked onstage wearing T-shirts emblazoned with the caption, “Mr. Housing Bubble. When I pop, you’re screwed!” There had never been a time in history when homeowners all over the world were so over-levered on their homes. Even the respected Economist magazine previewed the inevitable decline in house prices and resulting economic devastation with their June 2005 cover story, “After the Fall”. Despite this, lenders throughout the U.S. continued to originate sub-prime loans with no documentation (and no equity) and in Europe, sub-prime lending continued to proliferate, particularly in the UK, Netherlands, Spain and Ireland.

In his comments about the state of the U.S. market, Alan Boyce commented on the U.S. market, “in the 4th quarter of 2006, the sh*t is really going to hit the fan” Indeed, it would. By now, the

“American invasion” of Europe was in full throttle, including the entry of Countrywide in a servicing joint venture with The Woolwich in the UK. Plot spoiler: the venture failed spectacularly.

The most fun session of the event, “The Dating Game” featured the top Italian bankers posing as mortgage borrowers with a variety of credit profiles who were in competition for a fictional “date” with the Head of Genworth Mortgage Insurance in Italy. At the end of the session, the audience decided which borrower profile they would fund, thereby naming the winning “bachelor”. Who won? The charismatic soccer player with inconsistent income.

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