Comments on: Is "The Credit Crunch is Over" Talk Premature?

By: Anonymous

Anonymous — Tue, 06 May 2008 14:46:00 +0000

A Japanese bank marking bonds at 10 cents and a Swiss bank selling them at 75 cents are talking about different bonds. No Japanese bank is marking the equivalent bonds at 10 cents on the dollar. You are confusing the issues by referring to all subprime bonds as if they were the same. To imply that they are is disingenuous.

By: bobo7874

bobo7874 — Tue, 06 May 2008 09:57:00 +0000

If the credit crunch was over, banks wouldn’t be hoping for money market funds to come in and buy the securities the banks are holding. http://www.ft.com/cms/s/0/1feb1b62-1871-11dd-8c92-0000779fd2ac.html?nclick_check=1

By: eh

eh — Tue, 06 May 2008 08:56:00 +0000

I mean, where's the evidence?

By: Hubert

Hubert — Tue, 06 May 2008 08:10:00 +0000

Steve,
that would be too bad a reporting job from the FT.
I guess these were the super-duper-senior tranches compared to the only super senior or pure senior tranches around.
We just do not know and take confidence that the Schweizerische Nationalbank stands firm behind UBS.

By: Yves Smith

Yves Smith — Tue, 06 May 2008 07:26:00 +0000

The FT did not make it sound like that (but good catch, that would be a way to finesse a much deeper real haircut), but there is the little mystery of the "minority position" as in UBS evidently had to kick in some hard cash, so it effectively got less than 75 cents on the dollar:

The UBS debt – which is being bought at a 25 per cent discount to its face value of $20bn – will be placed in a new BlackRock fund and marketed to investors, the people said.

The bank will hold a minority interest in the fund, which will enable it to participate in any potential upside.

By: Steve

Steve — Tue, 06 May 2008 07:21:00 +0000

On that 25% haircut: Is UBS’s minority interest in the transferred portfolio structured as a first-loss position?

By: eh

eh — Tue, 06 May 2008 07:16:00 +0000

As long as financials can park their crap paper at the Fed — which is not too discriminating about the quality of that collateral — and get treasuries to borrow against, then I guess this might have restored some “liquidity”. But eventually all that paper must be taken back onto balance sheets — one presumes — and then what? And how about surging mortgage defaults? This wave will not abate for some years, and that’s a lot of bad debt.

Over the years I’ve gotten used to sophomoric cheerleading from the mainstream (i.e. tabloid) financial press, but new lows have been reached over the last months.

But anyway, Americans will soon resume becoming wealthy by selling ever more expensive houses to each other with conjured money, and everything will be fine again.