This quotation is taken from a 1991 issue of BondWeek: First Interstate Bank of Texas will look into buying several different types of collateralized mortgage obligation tranches when it starts up its buy program sometime after the second quarter of 1991, according to Jules Pollard, v.p. Pollard said he will consider replacing maturing ad- justable-rate mortgage pass-throughs with short companion tranches and planned amortization classes because the ARMS have become rich..... Pollard did not provide a dollar figure on the planned investments, which will be made to match fund the bank's liabilities. When he does invest he said he prefers government-guaranteed securities or those with implied guarantees.

a. Explain the types of securities that Pollard is buying and selling.

b. Given the preference stated in the last sentence of the quotation, what issuers is he likely to prefer? What issuers would he reject?

AppendixLO1