The ongoing crises - The Sub Prime disaster

[a_unique_person]

Every day I listen to my 'reputable' news sources, the Australian ABC which is our equivalent of the BBC, there is a good chance there will be a story on the sub prime crises.

The recent action to let some borrowers off the hook is only a small part of the story. The real story is the endless billions of easy credit that governments are handing out to the big banks at the moment.

http://www.abc.net.au/worldtoday/con...7/s2117886.htm

Quote:

ELEANOR HALL: But first, the worsening crisis on global financial markets has prompted emergency action overnight from five of the world's key central banks.

The unusual joint action, led by the US Federal Reserve, will start with a $20 billion cash injection, which is designed to build trust in financial markets and particularly between banks.

The move comes after yesterday's plunge on Wall Street and is an attempt to stave off the growing likelihood of a recession in the world's biggest economy.

Business editor Peter Ryan has the story.

PETER RYAN: In terms of global cooperation in a crisis, today's move is the most significant since the September 11 attacks on New York and Washington six years ago.

One trader described the intervention as "shock and awe" with an initial cash injection of US$24 billion designed as the opening shot in a war on the credit crunch.

PETER DUNAY: I think they're going to try and pump as much as they need to to make sure that the financial institutions have the liquidity they need.

PETER RYAN: Peter Dunay of Leeb Capital Management in New York says the emergency strategy from US Federal Reserve, the European Central Bank, the Bank of England, the Bank of Canada and the Swiss National Bank is designed to restore confidence in financial markets and ease a climate of fear and suspicion.

PETER DUNAY: You really want to create a situation where the banks are willing to lend to each other, where they have enough confidence as well as enough capital and that's what this is designed to do. Right now there is going to be a currency swap of about $24 billion and there'll probably be a lot more behind that.

PETER RYAN: The plan is to effectively auction off cheap money in four tranches over the next six weeks.

The winning bids will give banks access to discounted interest rates to help ease the squeeze and put cash into draining financial systems where anything associated with risk has been avoided in recent months.

And that means one key question is critical to the solution.

DAVID BUICK: Do the banks trust each other to lend money?

PETER RYAN: David Buick of Cantor Index in London is cautiously optimistic but realistic about the fear factor.

DAVID BUICK: It's all very well making these facilities available but what this has to do is create a climate of trust whereby banks are prepared to lend each other money at something remotely looking like the normal rate of interest rather than the inflated one. And we've got a long way to go before that actually filters through.

It's a start in the right direction, but now we have to see that translated into wholesale trust right across the spectrum for it to really work quickly.

PETER RYAN: Some economists believe it's too little, too late, and that the US Federal Reserve should have acted earlier to ease the impact of the widening crisis in subprime mortgage defaults, which is now threatening a recession in the world's biggest economy.

Which makes today's intervention from the world's big five central banks even more significant.

DAVID HALE: Because there has been concern for several weeks about the fact that we have relatively high inter-bank lending rates in the money markets.

Lots of easy money out there from the government, but not the free market.

[Francesca R]

It's not "easy credit". It's credit on the terms that central banks ordinary open-market operations would have provided in the first place, were it not for money markets being dominated by excessive fear. These reports often read as though money is being given away or lent for zero interest. In fact it is nothing of that sort.

I am reasonably convinced that this is what central banks should do in current circumstances. They could go too far, by cutting policy interest rates or by lending (as last resort) to dodgy borrowers. It is impossible to remove any danger of this happening of course. I don't believe that are going too far.

I am sceptical of the reaction that one sees in equity markets, especially emerging markets, that this somehow means that stocks can trade to new highs.

[a_unique_person]

It's easy credit, in the sense that it's easier than free market credit.

[Francesca R]

But there is not intended to be a free market in overnight and short term borrowing. It is in all central banks' mandate to infulence the price of it.

[a_unique_person]

Which they are struggling to do at the moment, since banks are reluctant to lend on the short term market at the moment, apparently.

[Francesca R]

Yes, hence the merit of "lender of last resort", if all banks are reluctant to lend

[a_unique_person]

And more today.

http://www.abc.net.au/worldtoday/con...7/s2119040.htm

Quote:

Today Australia's second largest shopping mall owner suspended trading in its shares ahead of an expected profit downgrade because of the steeper borrowing costs.

The Centro Properties Group is attempting to negotiate terms for $5-billion worth of loans which fall due in three years.

And financial markets have reacted cautiously to yesterday's move by the world's big five central banks to stem the credit crisis, amid criticism that the action is too little, too late.

Business editor Peter Ryan reports.

PETER RYAN: Australia's big four banks have already made it clear that the higher cost of money means a lower bottom line for them, and that sooner or later they'll resist political and community pressure and pass on the cost to borrowers.

But others in the corporate sector, who can't necessarily absorb the new costs, are starting to struggle.

The Centro Properties Group is one company facing tougher times amid speculation that it will be forced to issue a profit downgrade.

The nation's No. 2 owner of shopping malls also has $14-billion worth of assets in the United States and $5-billion of debt on its books.

But the US property slump, uncertain economic times and a shaky US consumer, means shopping mall tenants are a greater risk to lenders, and so Centro is now facing higher borrowing costs for the higher risk it didn't expect.

An Australian company might be small on the world stage, but companies like Centro are hoping yesterday's Central bank intervention to ease the credit crunch will work.

EXCEPRT OF CNN BULLETIN: The major central banks around the world, not just the United States, are launching a coordinated assault on the credit crisis. This is the Federal Reserve…

PETER RYAN: But financial markets are sceptical about the fighting words.

The London Stock Exchange fell three per cent overnight, and on Wall Street the Dow Jones Industrial Average closed just a third of one per cent higher as investors tried to see the positive side.

MICHAEL LEHMAN: I think it's a good idea and anything the Federal Reserve can do to help is of course welcome.

PETER RYAN: But economist Michael Lehman worries the intervention by central banks in the US, Canada, the UK and Europe might be too little, too late.

MICHAEL LEHMAN: The measures the Fed have taken, while they're welcome and appropriate, they're not going to be enough to offset the damage done.

PETER RYAN: And the subprime related casualties continue to mount.

Today, a Wall Street listed bond insurer, Security Capital Assurance, went to the brink of losing its triple-A rating because of the aversion to risk, when the Fitch ratings agency revealed it was $2-billion short of the required cash in the bank.

EXCERPT OF NEWS BULLETIN: The company has lost 52 per cent of its market value in just the last three trading sessions. SCA has forwarded six weeks to come up with what Fitch terms as firm capital commitments to meet the guidelines.

[Francesca R]

Overall, stock markets would most probably be a lot lower without the central bank actions. I find it surprising that they have been so well supported. For all the 2%+ down-days, there have been almost as many recoveries of similar magnitude. Yet no central bank is doing this to prop up stocks.

[hipparchia]

I write for a business publication and yesterday the latest intervention of central banks made page one. Otherwise, I write almost every day about the effects of the sub-prime crisis.

What the central banks are doing is correct- trying to control the overnight rates to be at the desired levels. Otherwise, what you get is expensive credit.

The biggest doubt is whether the credit markets will be lively again in the near future like they were in the first and second quarters of this year.

I recently went to an explanatory seminar at the European Central Bank. Basically, the bank has not given away money after August 9th. What they did was to allocate more of their monthly lending at the beginning of the month and then give less and less and take back the short term loans. It was supposed to tell the banks that money is available and there is no need to hide away their resources from other banks.

[a_unique_person]

The crises goes on.

http://www.abc.net.au/worldtoday/con...7/s2121666.htm

http://www.abc.net.au/worldtoday/con...7/s2121674.htm

Quote:

ELEANOR HALL: Yet, Centro's management says they should never have expected that their funding would dry up in this way. I mean, should they have been more wary?

STEPHEN LONG: Definitely. And that excuse isn't cutting the mustard with a lot of people in the markets, for various reasons. One is that for years central banks around the world have been warning that risk was underpriced in markets. And also we had key analysts last year, and I was doing reports last year, saying that there was a risk of a credit crash coming because of the exposure in the credit markets through these fancy financial products, your collateralised debt obligations and derivatives, and people have been talking about the woes in the housing market.

Now, it's true that this is perhaps an unprecedented credit crisis, but to say that they couldn't see it coming, it's a big call, and then when it did hit in August, there are steps they could've taken to mitigate their exposure, which they didn't take because they made a bet that things would get better, that the credit crisis would ease, and instead it's got worse.

ELEANOR HALL: Now, there's … talking of the central banks, shouldn't there be a whole lot more money available, given what the central banks of the world have pumped into the market just recently?

STEPHEN LONG: Well, per … well, they have pumped a lot of money in to maintain liquidity. The problem is that really that's a medicine for the wrong illness, the wrong disease. It's not just the expense of money that's the problem, it's the fear in the market, the fear about who's exposed, and you have a situation where banks are unwilling to lend to other banks because of that fear.

Now, the big test will come, Eleanor, overnight, when there's the first auction of this new cheap money that the Federal Reserve in the US announced last week in conjunction with other banks, that it would be auctioning off to the world's big investment banks.

If that goes smoothly, at least in the short-term, things could get a bit better. If it goes badly and the auction tanks, then things could get really, really bad.

But beyond that, I think that we are looking at a serious situation because everyone is expecting big write-downs by the world's big investment banks in the second half of January, when they have to report their earnings, and more problems with the money that they've spun off their own accounts, into these special funds that they've got out in the debt markets.

[hipparchia]

The funny thing is that most experts in Bulgaria believe the real estate sector will remain unaffected by the crisis and continue with the double-digit growth of recent years.

Now the European central bank is providing limitless 2-week funds of about 500 bln. euro. Will wait and see what is the effect of this intervention and whether it will resolve the crisis of confidence that really ails the banking sector.

[hodgy]

A_unique_person,

Did you have a point to make here or just bringing these quotes to our attention for the sake of interest (no pun intended)? Fine, if the latter - just wondering.

[a_unique_person]

Originally Posted by hodgy

A_unique_person,

Did you have a point to make here or just bringing these quotes to our attention for the sake of interest (no pun intended)? Fine, if the latter - just wondering.

They just keep coming up with these stories every day on our equivalent of the BBC. Is there something to it, or are they just glad to have a topic that sounds important to pad out their current affairs shows during the silly season?

[Francesca R]

Well if you watched Bloomberg TV or something like that you could get this 24/7. It's news depending on your interest level. It's not business-as-usual in the money markets, for certain.

Mainstream BBC news has not focussed on the fixed income market situation much, but coverage rises if the woes of a UK firm (like Northern Rock) feature. Centro is high profile for Australian news, but I only read about it on financial market newswires here.

[a_unique_person]

The gist of the story appears to be.

If you are tied into short term finance to run a long term investment, you could be in real trouble.

Using short term debt for long term investments was becoming quite fashionable for a while.

Is that right?

If so, how many more businesses are going to be in trouble.

[Francesca R]

Originally Posted by a_unique_person

The gist of the story appears to be.

If you are tied into short term finance to run a long term investment, you could be in real trouble.

Of course you could be. It depends on your leverage and the terms of your short term finance. If your short term borrowing is all in the overnight money market, you have to pitch up to that market every day and take the rates that happen to be on offer. You're as exposed as you can be. If you are financed through private equity locked in for 15 years, you don't need to read about any "credit crisis".

Quote:

Using short term debt for long term investments was becoming quite fashionable for a while.

It's more than fashionable—it's a business model used throughout the banking and investment industry. Borrowing short and lending long is a reasonable approximation of what all banks do.

[a_unique_person]

Fair enough, but banks are a special case. They are highly regulated, and, as is the case now, have special, government backed, access to funds if they run short.

[hodgy]

Originally Posted by a_unique_person

They just keep coming up with these stories every day on our equivalent of the BBC. Is there something to it, or are they just glad to have a topic that sounds important to pad out their current affairs shows during the silly season?

Understood - thanks.
I think Acuity sums it up well.

[Nogbad]

A key difficulty is that without perfect knowledge available to all the players in the market sentiment becomes a key factor in determining movements. If there is an underlying fear that banks have exposed themselves to potentially excessive bad debts people start to worry. Now it may be that most of Northern Rock's debtors will pay up, the provision for bad debt overstated and the bank will turn a tidy profit. Those who fled the business will then lose out. The difficulty is that sentiment can turn into a stampede and become a self fulfilling prophecy.

The US real estate market is depressed and some home owners do have negative equity. However, the majority of home owners buy a house to live in and if they can will attempt to see the rough patch through as long as they retain their jobs and can pay their mortgages/loans. If they have to move and they obtain less than they paid for the house they will still presumably want a house to live in and should be able to obtain another one for a similarly depressed price - taking their negative equity with them at no further loss. The real difficulty comes with a more general recession and attendant job losses. There is a real fear that too much has been lent to too many who have no margin for error. These pigeons have not come home to roost in a significant way (yet). If they do there will be feathers flying in some banks.

The sky might fall is always newsworthy.

The sub prime issue is a potentially serious problem rather than a current one.

[Grimoire]

Originally Posted by a_unique_person

Fair enough, but banks are a special case. They are highly regulated, and, as is the case now, have special, government backed, access to funds if they run short.

Whereas before, they had access to non-special, non-government backed funds. That dried up due to market fear (yes, that is a simplification). Should the central banks allow all banks involved in ABCP collapse due to a lack of short term funding?

[a_unique_person]

More gloom and doom

http://business.theage.com.au/americ...1223-1iqr.html

Quote:

THE Dow soared 200 points in a Christmas rush on Friday that belied emerging details that US banking, mortgage companies and credit rating faced collapse while the nation's mortgage insurance industry plunged into chaos.
Nearly 180,000 US local councils were placed on credit watch, with the credit agency Fitch releasing another $US5.3 billion in credit downgrades involving 27 mortgage companies. The news emerged on Friday night, when the nation's newspapers, even if they were following the story, would miss it.
That one company could downgrade 27 major financial institutions in one stroke is stunning, but it follows a swathe of credit downgrades that swept the US on Thursday and Friday.
There has been a major falling out between mortgage insurers, credit rating companies, banks and mortgage institutions, which believed their loans were insured, only to be stunned to find themselves booted into the mire that is American banking.
Chinese, Singaporean and Arab sovereign investment funds seem to offer the only salvation for the US banking system.
The depth of the housing crisis was underscored by the head of one of America's largest banks, Bank of America, the straight-speaking Kenneth Lewis, who warned of a completely new attitude by Americans to their homes amid fears that as many as 20 million householders may "walk" from them, further deepening the crisis.
Lewis' comments came as a new expression - "jingle mail" - referring to the growing trend where Americans mail the keys to their homes to the lenders before vacating, entered the US lexicon. Figures for November revealed more than 200,000 US homes were foreclosed, a 68% increase on November 2006.

[a_unique_person]

Quote:

But the drama now unfolding surrounds the mortgage bond insurers and the credit agencies.
Insurance is taken out in the hope it will never be claimed. However, the insurer has to assume it will be claimed and therefore ensures the premiums are safely invested. The banks, some earlier than others, realised the threat to their mortgages and took some, not nearly enough, insurance from companies such as MBIA and ACA.
As the loans had been sliced and diced, it must have been difficult for actuaries to calculate what insurance was necessary. Even to this day, no one knows who owns and owes exactly what. The CDOs are, after all, collectivised.
It turned out the risk was great and the insurance was needed. Then came the surprise.
The insurer had invested in the very thing the insured was fearful of, the collapse of the value of the CDOs.
Morgan Stanley then commented: "We are shocked that management withheld this information for as long as it did. MBIA simply did not disclose arguably the riskiest part of its CDO exposure."
But they did. Not to JPMorgan or Merrill, but to the insurers, which evidently didn't hear, didn't realise or didn't think it worth passing on to the major mortgage institutions that their insurance money was tied up in the same risky ventures these companies were trying to protect themselves from.

from the same article. If that's true, it's a worry for many institutions.

[Tokenconservative]

Not sure what the "subprime" crisis might be in other countries.

Here (US) it refers to the subprime residential real estate lending "crisis."

Of course, it's only a crisis because a Republican is in the White House and it's an election year.

Any other year, it'd simply be a fairly mundane and low-level market correction.

Tokie

[dann]

Well, it’s certainly more than “a fairly mundane and low-level market correction” to the millions of people who risk losing their homes: http://www.democracynow.org/2007/4/4...ns_of_families

Quote:

http://www.dailybulletin.com/business/ci_5939817
““… the number of default notices sent to California homeowners during the first quarter of this year rose to the highest level in almost 10 years. The reasons are varied: flat appreciation, a sales slowdown and the resetting of interest rates on loans that started with low "teaser" rates.”

… and now people are being ‘teased’ out of their homes.

Quote:

“For now, the industry is still predicting that the subprime problem and foreclosures will continue to rise before they retreat.
"We're starting to see the tip of the iceberg," said Tingting Zhang, president of The TerraCotta Group, a Redondo Beach real-estate-investment company funded by private investors. "It will be bitter; it doesn't matter what the government does. People are still going to be going through pain."”

Something very similar to this is happening in Denmark, too.

[Gord_in_Toronto]

Originally Posted by Tokenconservative

Not sure what the "subprime" crisis might be in other countries.

Here (US) it refers to the subprime residential real estate lending "crisis."

Of course, it's only a crisis because a Republican is in the White House and it's an election year.

Any other year, it'd simply be a fairly mundane and low-level market correction.

Tokie

Different Universe from ours?

[CriticalThanking]

Originally Posted by Tokenconservative

[snip]Here (US) it refers to the subprime residential real estate lending "crisis."

Of course, it's only a crisis because a Republican is in the White House and it's an election year.

Any other year, it'd simply be a fairly mundane and low-level market correction.

That is an interesting idea - that most borrowers' ability to make the next house payment is tied to which party is currently in office. For subprime adjustable rate mortgages (ARMs), the primary self-reported cause (>90%) of initial delinquency is interruption of income, not the rise in the interest rate. Are you saying that people's incomes are being interrupted because of the Republican party? ;-)

I need to study the data a bit more to be able to quantify the reasons on other loan types, but income interruption is still overall number one.

Ok, I really do understand which point you were trying to make. But please be specific. Is it your contention that the numbers/rates of people delinquent on their loans, or being foreclosed upon, or unable to get a loan due to credit tightening are mundane occurrences? I am intentionally separating the issue of decline in home value across a large number of metropolitan areas. Do you have data that shows any of these items are mundane, common occurrences?

CT

[balrog666]

Originally Posted by Tokenconservative

Not sure what the "subprime" crisis might be in other countries.

Here (US) it refers to the subprime residential real estate lending "crisis."

Of course, it's only a crisis because a Republican is in the White House and it's an election year.

Any other year, it'd simply be a fairly mundane and low-level market correction.

Tokie

Uh, no. The big problem is that all those bundled subprime ODC's have no market value. They're not worthless, it's just that no one can place a meaningful value on them, no one wants to buy them, and no one can sell them at anything approaching what they paid for them. So they've just become illiquid (non-readily marketable).

Thus, the balance sheets of far too many financial companies are in breach of their minimum capital asset requirements and are technically insolvent.

Furthermore, new banking rules are going into effect that require that they report these securities at market value, regardless of how they are performing cash flow wise. And that will squeeze their balance sheets even further.

And now where do the major financial companies get the cash (or readily marketable securities) to prop up their balance sheets other than by selling off significant ownership shares to the cash rich? So look for the Saudis, Abu Dhabi, Kuwait, the Sultan of Brunei, the Chinese and other Sovereign funds, et al. to pick up a big share in, or to buy outright, a great many US and European finanical firms over the next year.

[Tokenconservative]

Originally Posted by balrog666

Uh, no. The big problem is that all those bundled subprime ODC's have no market value. They're not worthless, it's just that no one can place a meaningful value on them, no one wants to buy them, and no one can sell them at anything approaching what they paid for them. So they've just become illiquid (non-readily marketable).

Thus, the balance sheets of far too many financial companies are in breach of their minimum capital asset requirements and are technically insolvent.

Furthermore, new banking rules are going into effect that require that they report these securities at market value, regardless of how they are performing cash flow wise. And that will squeeze their balance sheets even further.

And now where do the major financial companies get the cash (or readily marketable securities) to prop up their balance sheets other than by selling off significant ownership shares to the cash rich? So look for the Saudis, Abu Dhabi, Kuwait, the Sultan of Brunei, the Chinese and other Sovereign funds, et al. to pick up a big share in, or to buy outright, a great many US and European finanical firms over the next year.

Hmm...yeah, I wondered what was going to happen with these things when the bundles could not be resold.

It's a problem, but nothing as big as the media and the libs are making it out to be in the runup to getting Queen Hilary crowned.

It's nowhere near as bad as things were in the 80s, though I will say that the selling and reselling of these mortgages seems to be something that is a much bigger part of the whole these days.

Tokie

[Tokenconservative]

Originally Posted by CriticalThanking

That is an interesting idea - that most borrowers' ability to make the next house payment is tied to which party is currently in office. For subprime adjustable rate mortgages (ARMs), the primary self-reported cause (>90%) of initial delinquency is interruption of income, not the rise in the interest rate. Are you saying that people's incomes are being interrupted because of the Republican party? ;-)

I need to study the data a bit more to be able to quantify the reasons on other loan types, but income interruption is still overall number one.

Ok, I really do understand which point you were trying to make. But please be specific. Is it your contention that the numbers/rates of people delinquent on their loans, or being foreclosed upon, or unable to get a loan due to credit tightening are mundane occurrences? I am intentionally separating the issue of decline in home value across a large number of metropolitan areas. Do you have data that shows any of these items are mundane, common occurrences?

CT

I guess I wasn't being clear, or were assuming from your other posts you were a bit more sophisticated in your understanding of these things.

Let me draw a picture: the media in America is, by and large, left-advocacy (they stopped being simply left-biased some time ago, and are now actively working against the correct side of things while trying, very actively, to influence elections by the way in which they report things). They are extracting a pound of lies from an ounce of truth in the "foreclosure crisis."

In actual fact, currently, nationwide 90% of all mortgages are being made on time and only 10% fall into the "at risk" category, anyway. Of that 10% something like less than 1% are identifiably mortgages to people who will have a hard time making their payment when it caps. Now, if there were say, 26 houses in America, these numbers might be a bit scary. But there are more houses than that here.

The 90% you reference is 90% of that less than 1%...which for some reason you left out of your figures. Moreover, only something on the level of 4-5% of ALL houses in America are included in the "crisis." This is expected to rise to a MAXIMUM of 8% (more likely somewhere around 6%) in mid 2008. Again, hardly what anyone reasonable would call a "crisis." It takes more cars than that, having the same problem, in a manufacturing run to trigger a recall. And the foreclosure RATE in 1999 was something around 4%, anyway.

Also, since unemployment is running at a frightening 4% (nearly time to open the soup and brealines!) any reasonable thinker can figure out that "employment disruption," as a cause for foreclosure continues to be simply part of a market correction as anyone who, in this economy, cannot replace a lost job in a matter of weeks, at most, and who does not have at least a month of mortgage payment $$ available in the bank or on credit cards...whatever, is clearly not someone who should be a homeowner in the first place. Just as those "day traders" who all lost their shirts when the .com bubble burst, shouldn't have been playing that game.

Repeat after me: market correction.

Regardles of all the sob stories, it is diminishingly rare and most of the time when foreclosure occurs it's because someone got in over his/her head.

No, I'm not saying that. Incomes WILL be severely disrupted if Hilary is elected and we are not smart enough to keep enough Rs in Congress to cripple her presidency. That's what happens when taxes are raised, which she will do and which a socialist congress will rubber-stamp.

Do you have any data that show that credit tightening has never occured before or that no one has ever lost his or her home to foreclosure in the past?

Tokie

[Tokenconservative]

Originally Posted by Gord_in_Toronto

Different Universe from ours?

No, just a different planet.

Earth.

We have bigger brains than people from planet Canada.

Not to brag, of course. Moose have small brains.

Tokie.

[Tokenconservative]

Originally Posted by dann

Well, it’s certainly more than “a fairly mundane and low-level market correction” to the millions of people who risk losing their homes: http://www.democracynow.org/2007/4/4...ns_of_families
… and now people are being ‘teased’ out of their homes.
Something very similar to this is happening in Denmark, too.

No, it's just what I said it was, and how Ma and Pa Kettle feel about it simply does not matter.

Next time, they should more carefully weigh their options such as: can we really afford the upkeep on a home (I imagine the government pays for that in Denmark) and will we be able to meet the mortgage when it caps out at more than twice what we are paying now?

ARMS, Option-ARMS and HELOCs are wonderful instruments for people sophisticated enough in these things to know how to use them.

Ma and Pa Kettle are not that sophisticated, and will pay the price. That's not a good thing. It's not a bad thing. It's just a thing.

Foreclosure happens all the time. Currently, in the US our foreclosure RATE is about what it was in 1999....nobody was screaming about it then...but then, 1999 was not (even protracted as this one is) an election year.

I am not sure what "teased out of their homes" means.

In case you don't know, I rarely access the links of people I believe I can trust and that means I NEVER access links provided by shrieking libs.

Besides, I'm sorta old school. I believe that if YOU are going to make an argument, you should not post a buncha links and shriek at me, "There! No go read all that and arrive at my conclusion!" No, I'd much rather YOU read it, analyzed it (if you are able) then synopsized it in one way or another for my edification, with cites etc. as you feel the need.

Hope you'll forgive me, that's just the kinda hairpin I am.

Tokie

[Gord_in_Toronto]

Originally Posted by Tokenconservative

No, just a different planet.

Earth.

We have bigger brains than people from planet Canada.

Not to brag, of course. Moose have small brains.

Tokie.

Gee. I just searched on Google for <bloomberg banks mortgage +december +2007> and got close to 200,000 hits. The majority seem to show that the rest of this planet (including the USA) sees a major problem with the perceived value of US mortages and that this is causing major financial probelms for all of us.

You don't have to apologize for moose brains -- they are delicious!

[a_unique_person]

Now they are mentioning a trillion dollars being at risk. Add that on to the cost of the war in Iraq, and it could all add up. As someone once said "A trillion here, a trillion there, pretty soon you are talking about serious money".

http://blogs.theaustralian.news.com....it_us1trillion

Quote:

THE US economy could be heading into its blackest year since the Great Depression as estimates of losses from the housing slump and sub-prime mortgage implosion reach unprecedented levels.

The latest bank estimate of $US700 billion in losses made this week by Rob McAdie, the UK-based head of credit at Barclays Capital, is $US300 billion more than a headline-grabbing Goldman Sachs estimate that jolted US markets just last month.
And it is light years from the $US50-100 billion in losses predicted by US Federal Reserve chairman Ben Bernanke to Congress in July. Expressed another way, the International Monetary Fund and World Bank say only 15 countries have a GDP higher than $US700 billion. Australia was 15th on both lists.
But even estimates of a $US700 billion sub-prime bloodbath may be conservative, with respected finance and economic blog sites like Calculated Risk predicting losses as high as $US1 trillion. The implications for global credit markets of losses of this magnitude would be horrendous, forcing banks and other institutions to slash lending by several trillion dollars.
Combined with the rising cost of oil, the US would be plunged into a recession, the severity of which would depend largely on the policy responses taken by the Fed and the White House to restore confidence and liquidity.
Writing in American Banker last week, Alfred DelliBovi, president and chief executive of the Federal Home Loan Bank of New York and a former deputy secretary of the US Department of Housing and Urban Development, said the lessons of the Great Depression could help avert disaster.

[Gord_in_Toronto]

Originally Posted by a_unique_person

Now they are mentioning a trillion dollars being at risk. Add that on to the cost of the war in Iraq, and it could all add up. As someone once said "A trillion here, a trillion there, pretty soon you are talking about serious money".

http://blogs.theaustralian.news.com....it_us1trillion

No need to worry. Tokie will be along in a minute to tell you that it's "just a minor market correction".

[Corsair 115]

Originally Posted by Gord_in_Toronto

No need to worry. Tokie will be along in a minute to tell you that it's "just a minor market correction".

Or he'll lay the blame for all the problems on liberals/the left/anti-Americanism.

[JonnyFive]

Originally Posted by Tokenconservative

Hmm...yeah, I wondered what was going to happen with these things when the bundles could not be resold.

It's a problem, but nothing as big as the media and the libs are making it out to be in the runup to getting Queen Hilary crowned.

It's nowhere near as bad as things were in the 80s, though I will say that the selling and reselling of these mortgages seems to be something that is a much bigger part of the whole these days.

The other central issue here is the effect that all this will have on credit issuance in general. The issues of credit over-extension in the subprime market are going to impact the outlook of the financial institutions when it comes to underwriting credit in general, and the likely result is that they will move to a hard underwriting stance and it will be generally more difficult to obtain credit.

That is the second part of how this situation could cause an economic slowdown. I wouldn't say "crisis," but I certainly wouldn't say "minor market correction, nothing to see here" either, and to do so is simply to bury one's head in the sand. Ultimately, that is no better than the hysterics you accuse the "left advocacy" media of displaying.

[Tokenconservative]

Originally Posted by JonnyFive

The other central issue here is the effect that all this will have on credit issuance in general. The issues of credit over-extension in the subprime market are going to impact the outlook of the financial institutions when it comes to underwriting credit in general, and the likely result is that they will move to a hard underwriting stance and it will be generally more difficult to obtain credit.

That is the second part of how this situation could cause an economic slowdown. I wouldn't say "crisis," but I certainly wouldn't say "minor market correction, nothing to see here" either, and to do so is simply to bury one's head in the sand. Ultimately, that is no better than the hysterics you accuse the "left advocacy" media of displaying.

Nothing wrong with tightening up credit extension. Besides, that happens periodically and seems never to cause the economy to collapse.

But the left and their 5th column, the "news" media are shrieking "CRISIS!!!" regardless of whether it actually is (it isn't). And yes, depending upon how Congress or even some key states react and how their own leftist politicians' force them to react to the "crisis," we could indeed see this snowball in to something much, much worse than the minor market corretion (sorry, but this currently impacts MAYBE 4% of all mortgages in the country and will reach a MAXIMUM of 8%--very unlikely--at its peak in the middle of next year, so that make it minor) that it currently is.

And of course, that's he hope of the left, that it will snowball into something that severely impacts the entire econmy, slows it down at minimum or causes a crash--best scenario in the view of the left--to help them regain and keep power at the national level.

Tokie

[Tokenconservative]

Originally Posted by Gord_in_Toronto

Gee. I just searched on Google for <bloomberg banks mortgage +december +2007> and got close to 200,000 hits. The majority seem to show that the rest of this planet (including the USA) sees a major problem with the perceived value of US mortages and that this is causing major financial probelms for all of us.

You don't have to apologize for moose brains -- they are delicious!

Not surprising. Perception is 99% of reality and the perception, pounded into everybody's head by the left-advocacy media is that our econmy is collapsing and that the mortgage "crisis" is just evidence for that.

Of course, lefties like you, willing to slice off your own nose to spite MY face, are happy to help the US economy slide in order to get Hitlery or Osama into office.

That's all that's important to you.

Tokie

[JonnyFive]

Originally Posted by Tokenconservative

Nothing wrong with tightening up credit extension. Besides, that happens periodically and seems never to cause the economy to collapse.

I agree with you on this, but it is possible to a reduction in credit to cause economic harm. Again, I don't think it's a crisis, but I don't think we should just be shrugging our shoulders and dimissing it as a minor correction either.

Quote:

But the left and their 5th column, the "news" media are shrieking "CRISIS!!!" regardless of whether it actually is (it isn't). And yes, depending upon how Congress or even some key states react and how their own leftist politicians' force them to react to the "crisis," we could indeed see this snowball in to something much, much worse than the minor market corretion (sorry, but this currently impacts MAYBE 4% of all mortgages in the country and will reach a MAXIMUM of 8%--very unlikely--at its peak in the middle of next year, so that make it minor) that it currently is.

The core issue as far as the market is concerned isn't the mortgages directly effected, it's the resulting impact on the overall credit market and the securities markets that are backed up by those mortgages that are effected.

For the love of Ed, please take the rants about the leftists and the news media to politics. "What is the impact of the subprime situation" and "are the Democrats using the subprime situation as a stepping stone for political gain" are two separate topics.

Quote:

And of course, that's he hope of the left, that it will snowball into something that severely impacts the entire econmy, slows it down at minimum or causes a crash--best scenario in the view of the left--to help them regain and keep power at the national level.

Really? Is that really the intention of "the left?" Like how the goal of "the right" is to set up a perpetual "war on terror" based on fear and lies so they can stay in power forever and rape Iraq for its sweet, sweet oil?

Wait, those are both ridiculously over-broad statements about ridiculously over-broad political meta groups. Take it over to politics.

[Gord_in_Toronto]

Originally Posted by Tokenconservative

Not surprising. Perception is 99% of reality and the perception, pounded into everybody's head by the left-advocacy media is that our econmy is collapsing and that the mortgage "crisis" is just evidence for that.

Of course, lefties like you, willing to slice off your own nose to spite MY face, are happy to help the US economy slide in order to get Hitlery or Osama into office.

That's all that's important to you.

Tokie

Ok. So it's a completely different Space-Time Continuum you live in?