Yup, that is exactly why some of the Euro banks/hedge funds bought some of the sub-prime garbage. Trying to keep up with chase for higher yields.
The Subprime to the ridiculous. 10 replies
The truth about the markets & subprime... 2 replies
What is subprime? 12 replies
Is there anybody who can describe this crisis of subprime mortagage 2 replies
QuoteDislikedWhat makes such tales of stoicism and woe particularly affecting is that the greatest agglomeration of leverage ever witnessed in the long and tortuous history of this planet has only just begun to unwind. There are over $1 trillion of securitized low-grade mortgages outstanding and nearly three-quarters of a trillion dollars worth of mortgages whose adjustable rates are slated to rise over the next year, a heap of them sooner rather than later. That alone assures an appreciably larger magnitude of pain in the months ahead.
Moreover, as Merrill Lynch's David Rosenberg astutely reminds us, there's something like $300 billion in debt sitting on banks' balance sheets pledged to fund the last gasp of the M&A boom, commitments made when junk bonds were priced much more attractively. And we still can look forward, biting our lips as we do, to the doleful impact of hedge funds dumping assets to meet what could easily prove a mighty rush of redemptions.
QuoteDislikedThe next tier, Level 2, are described as those assets that may not trade much, but that can be theoretically valued by checking market prices of similar securities and making assumptions about variables such as interest rates (MBS, some corporate bonds and CDOs). According to Dick Bove of Punk Ziegel, the five largest U.S. brokers and banks -- Citigroup, J.P. Morgan Chase and Bank of America -- have $4.1 trillion of these Level 2 assets on their balance sheets. That's almost 10 times their shareholder equity. When the final coda of this era is written, wiping out 5 years or so of earnings is going to look like a bargain . . .
DislikedI think lending conditions are easing in some parts of the credit market, but it is still too early to tell if the Fed's efforts so far will succeed in getting funds flowing normally again in the banking system.
The strong figures on durable goods orders and new-home sales on Friday stoked buying in the 10- and 30-year sectors on the notion that the Fed may stand by its mantra that inflation risk outweigh other economic concerns. I think we'll be able to better gauge price pressures by this friday when the personal-spending data comes out, including core personal consumption expenditure.Ignored
DislikedI don't know about that. You will have to wait and see what happens in 2008.Ignored
QuoteDislikedPaulson Shifts on Mortgages
by Deborah Solomon
Word Count: 759 | Companies Featured in This Article: Fannie Mae, Freddie Mac
WASHINGTON -- U.S. Treasury Secretary Henry Paulson, concerned that millions of homeowners aren't being helped quickly enough, is pressing the mortgage-service industry to help broad swaths of borrowers qualify for better loans instead of dealing with mortgage problems on a case-by-case basis.
In an interview, Mr. Paulson said the number of potential home-loan defaults "will be significantly bigger" in 2008 than in 2007. He said he is "aggressively encouraging" the mortgage-service industry -- which collects loan payments from borrowers -- to develop criteria that would enable large groups of borrowers who might default on their payments to qualify for loans ...
QuoteDislikedThe rating agencies significantly contributed to the subprime crisis that caused the credit crunch this past summer and that may sink the economy into recession.
DislikedThis thread needs a bump and this post
"Markets fear banks have $1 trillion in toxic debt"
http://bigpicture.typepad.com/commen...0-ex-risk.html
is just the kind to do it ;p
Sounds to me like someone didn't use proper money management..literally ;p
One trade ruining DECADES of profit...oh my. They shoulda read our beginner Q&A threads!Ignored
Disliked....
USA and its banks and corporations are not coming to their doom....dont worry America created this gameIgnored
QuoteDislikedThe major banks have already reported billions in unexpected losses from complex investment vehicles known as CDOs. Now they face big risks from other corners of the debt markets -- but don't expect them to warn investors anytime soon.