Barclays estimates that half the 2006 and 2007 subprime loans are in or close to negative equity status, which means this roughly $800 billion of mortgages is at greater risk of default. Note that their analysis used OFHEO data; Case-Shiller estimates of the fall in housing prices exceed those of OFHEO, which means this forecast […]
Read more...The New York Times, in “Loan Industry Fighting Rules on Mortgages,” tells us that the real estate creditors are fighting tooth and nail to gut new rules that the Fed intends to impose. The Times, apparently reflecting the sentiment of sources in the Fed, Capitol Hill, and consumer advocates, seems surprised at the vehemence of […]
Read more...I believe in synchronicity, so I found it noteworthy that I came across two articles that gave great prominence to the issue of values, one Jeremy Grantham’s April newsletter, “Immoral Hazard,” the other a post by Willem Buiter on, of all things, the Olympics. Grantham’s excellent piece is unfortunately too long to present in full; […]
Read more...Various indicators suggest that the tone of the credit market (save the interbank market) is improving: jck at Alea deems the latest TSLF auction to be a success. Bloomberg tells us that government bond prices are falling, not just in the US but other major economies, signaling a return of confidence: Government bonds worldwide are […]
Read more...It’s predictable that embattled Ambac CEO Michael Callen would claim that all is well at the bond insurer in the face of considerable evidence to the contrary in the form of first quarter net loss of $1.66 billion, which wiped out last month’s highly dilutive capital raise of $1.5 billion. Ambac had to triple its […]
Read more...Credit Suisse, which heretofore looked somewhat immune to credit market problems, has joined its peers in having a loss-making quarter. A Sf5.3 billion writedown on leveraged loans and mortgage instruments was the proximate cause. Note the quarterly deficit was more than three times the consensus estimate. The CEO was also loath to declare the debt […]
Read more...In a post at the Telegraph, Ambrose Evans-Pritchard reviews the case for why the credit markets might be on the mend and finds it wanting. While some of his arguments are familiar, the part I found interesting was his belief (contrary to Wolfgang Munchau at the Financial Times’ piece “Pessimism about the eurozone is misplaced”) […]
Read more...Despite the cheery tone in the press of late and the claims by quite a few senior banking executives that the credit crisis is on the mend, the money markets remain unconvinced. As we pointed out in a post yesterday, the results of the Fed’s latest Term Auction Facility auction were disappointing, leading the writer, […]
Read more...Bloomberg reports that the rating agency Fitch predicts that recoveries on corporate bonds that default will be far lower than in previous downturns, due to the deterioration in lending standards. The estimate is grim; Rather than receiving the historical average recovery of 42 cents on the dollar in a default, owners of a third of […]
Read more...In a bit of synchronicity, two items, focusing on different aspects of our continuing credit woes, illustrate how the Fed is acting like the drunk looking under a streetlamp for his keys, because the light is good there, rather than where he lost them. The central bank’s version of this behavior is to continue to […]
Read more...What a difference five weeks makes. Around the ides of March, we had the mind-focusing spectacle of the possible implosion of Bear Stearns, which was feared to take down a lot of the financial system. But Fed and JP Morgan to the rescue, Lehman presents earnings that depend entirely on accounting rather than business activity, […]
Read more...Bloomberg gives us a pretty downbeat assessment from the Government of Singapore Investment Corp. (note that Singapore has two sovereign wealth funds, the other being Temasek): Government of Singapore Investment Corp., a sovereign wealth fund that manages more than $100 billion, said the world economy may be facing its worst recession in three decades as […]
Read more...Now that the credit markets for the moment have been moved out of intensive care, some commentators have shifted their attention away from “what should the powers that be do to prevent a meltdown” to the broader question of “what can we do to prevent this sort of mess from happening again?” Dani Rodrik, in […]
Read more...It’s remarkable how attending an industry love-fest can distort one’s perception. The Economist seems to have fallen hook, line, and sinker for International Swaps and Derivatives Association view that counterparty risk in the credit default swaps market isn’t all that big an issue. Its article, “Clearing the fog.” while mentioning the little problem that led […]
Read more...With all the cheery talk about how our credit crisis is a thing of the past, mortgage rates, as reader Scott reminds us, are moving up again. From his message: You’ll recall that some time over the last month or so, bullish commentators noted that with mortgage rates falling, resets of ARMs were no longer […]
Read more...