The Financial Times today reports that sales of asset backed securities and related debt could easily reach $100 billion in 2008 between the winding up of SIVs and forced selling by the occasional ABS hedge fund player hitting the wall. Note that some, perhaps many, of these players do not have much latitude in the […]
Read more...Harvard Professor of Political Economy has penned a prototypic New York Review of Books essay on Alan Greenspan’s The Age of Turbulence. That means no snarkiness. What would likely disappoint readers of this blog is that Friedman thinks that Greenspan acquitted himself well in managing monetary policy; he argues that growth was weak after 2001 […]
Read more...First, let’s start with a general premise: if a borrower has a reasonable ability to service his mortgage (and “reasonable” is in the eye of the beholder, but one has to assume it better be north of 50% of a “fair” rate) it’s better to renegotiate and keep him in place. Now that we have […]
Read more...From time to time, there are marked disparities in how events are reported in the Wall Street Journal and the Financial Times. In the overwhelming majority of times, it’s the Journal’s reporting that’s deficient. Today’s sighting fits the classic pattern. The difference in headlines says it all. The Journal’s is: “German Bank Blames UBS for […]
Read more...The markets seem to think so…..From Doug Noland at Prudent Bear: Now Fannie is in theory a good credit, but its implicit Federal guarantee has never been tested. Market observers may be worried that many of the “rescue the homeowner” proposals, starting with what Tanta calls “Loans Formerly Known as Jumbos” now eligible for the […]
Read more...Steve Waldman at Interfluidity reminds us that bailouts can be useful or misguided, depending on the circumstances. Trying to shore up overvalued assets is simply a bad idea and often compounds the damage. Unfortunately, as we will discuss in this post, the use of Waldman’s criteria demonstrates that many of the proposed housing market rescue […]
Read more...Readers may have heard of cases, starting in Ohio, where judges have dismissed foreclosures because the bank (usually the mortgage servicer on behalf of a securitized entity) was unable to provide the right paperwork showing that it in fact owned the mortgage. That often results from mortgages passing though several hands before being securitized and […]
Read more...Man, not only does the Administration tell whoppers, but it is completely shameless about them. The latest sighting comes from Reuters: Treasury Undersecretary Robert Steel told the Reuters Housing Summit it is proper for homeownership to hold a special status…. “If I default on my credit card debt, no one here knows and it has […]
Read more...Any doubts that we are going down the Japan path of trying to shore up inflated asset value rather than letting the market find the right level, should now be over. Bloomberg tells us that the Office of Thrift Supervision is looking into a plan that will enable homeowners to refinance houses that have negative […]
Read more...One of the not-sufficiently-acknowledged-in-the-MSM reasons for the current credit crisis is the sharp contraction of securitization, particularly of mortgages. Banks are balking at honoring LBO commitments because they can’t on-sell them as collateralized loan obligations, at least in the current environment. CDO new issues have pretty much halted, with only three deals this year (some […]
Read more...We’ve often observed that the reason to keep the banking industry (and Wall Street, now that some firms are too big to fail) on a short leash is that it plays with the public’s money: gains go to employees and shareholders but losses are socialized. We now see a bald-faced example of that problem in […]
Read more...The Hope Now Alliance, a plan brokered by Treasury Secretary Hank Paulson to get mortgage servicers to freeze introductory ARM rates for a narrowly-defined set of subprime borrowers, was roundly attacked by many borrower advocate groups. Their estimates of how many people it would help ranged from 15,000 to 145,00, and were attacked by the […]
Read more...We didn’t think much of the New Hope Alliance, the program brokered by the Treasury Department to rescue subprime borrowers facing resets. The program’s criteria targeted those who were already paying fairly high initial interest rates with very little to no equity in their house at the time of closing. In other words, this group […]
Read more...The G7 forecast that subprime damage could total $400 billion is hardly surprising to anyone who has been following that sorryhttp://www2.blogger.com/img/gl.link.gif saga. Predictions that were once regarded as wildly pessimistic have been borne out as correct. What is noteworthy about the G7 remarks is that things have gotten so bad that there is nothing to […]
Read more...Bloomberg reports that Bear Stearns increased its short subprime position from $600 million in November to $1 billion. The story suggests that this hedge is to offset trading positions; there is no indication that the firm is “net short” as Goldman is. For those who might think there is something wrong with this strategy, consider: […]
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