I’m a bit late to this item, from Friday’s Financial Times: “Credit crisis to worsen as banks cut and run,” which is an unusually vivid headline. The FT story describes how margin requirements for mortgage-related CDOs have been made considerably more stringent. AAA rated CDOs, which used to be haircut at 2-4% in January are […]
Read more...This story from MarketWatch describes another ugly aspect of subprime lending that is likely to get more press as foreclosures rise: minority groups with credit records that would have qualified them for prime loans were steered to subprime products at a far greater rate than their white counterparts. And the industry’s defense? Rogue brokers, of […]
Read more...It’s probably a character defect, but I get wound up when I read something that is directionally correct but then discredits itself by getting important facts wrong. The latest case in point is a Huffington Post post by Eugene Linden on “The Ecology of Toxic Mortgages.” It’s a more than usually frustrating example because 1) […]
Read more...UBS’s CEO Peter Wuffli resigned, in large measure due to losses related to the closure of an internal hedge fund last May. The Wall Street Journal, in “UBS Ousts CEO Wuffli After a Spate of Setbacks,” reports: Swiss financial giant UBS AG — buffeted by a series of setbacks, including the costly blowup of an […]
Read more...Today’s Wall Street Journal, in “Mortgage Mess Shines Light on Brokers’ Role,” tells the sorry tale of one Altaf A. Shaikh, who frequently used the name Zak Khan and left a path of financial devastation in his wake as a subprime mortgage broker. This isn’t a great job of reporting. By focusing on one, and […]
Read more...Bloomberg reports that a Key Biscayne based brokerage firm, United Capital Markets, barred redemptions on its hedge funds that invested in subprime mortgages. This isn’t Bear Stearns redux. The firm presented the problem as simply investor jitters. Bloomberg reports that the fund suffered modest losses (5%, if you believe the valuations, which given press about […]
Read more...While we’re have a cliche fest, an ill wind blows nobody good, and it looks like that Bear Stearns hedge fund debacle had some unexpected upside, namely, producing a flight to quality, meaning Treasuries, sparking a rally. I’m sure you could have said the same of past crises (just for starters, the 1997 emerging markets […]
Read more...John Gapper, in a Financial Times comment, “How Bear Stearns Put Itself First,” argues that even though Bear Stearns’ decision to step in to manage the unraveling of its two troubled hedge funds was self-interested, it was also bad for the hedge fund industry and for the CDO market. I don’t agree with Gapper, and […]
Read more...Louis Uchitelle, in “A False Sense of Security? You Must Own a Home,” revisits the subject of Americans’ propensity to break into the piggybank of the accumulated equity in their home. In a concerned, rather than alarmist article, he points out that the amount of net homeowners’ equity has fallen, even in a time (until […]
Read more...In “Bear Stearns Investors Await Tally on Losses,” the Wall Street Journal reports that investors in the two troubled Bear Stearns hedge funds won’t get end of May results until July 16. While this delay is probably crazy-making for fund holders, Bear is no doubt erring on the side of conservatism. Recall that the High-Grade […]
Read more...Admittedly, this story from the Washington Post is largely anecdotal. But I am passing it along because it is an indicator of how widespread housing stress is. Remember, unemployment is still low, and normally defaults move up and down with overall employment. The sources in this article attribute the increase in mortgage defaults and foreclosures […]
Read more...As readers may know, I sometimes find marked differences in how the Financial Times and the Wall Street Journal report the same story, with the FT typically doing a much better job. In this case, I was underwhelmed by both papers’ coverage, but together they conveyed some useful information. Federal banking regulators (including credit union […]
Read more...There’s been plenty of discussion on this blog and elsewhere of the questionable role of rating agencies, particularly regarding collateralized debt obligations. Rating agencies are slow to downgrade weakening credits (if you are in the debt business, this is very old news), suffer from acute conflicts of interest in rating CDOs (they are a de […]
Read more...OK, schizophrenia is a bit too strong a word, but it got your attention, right? “Dissonance” is closer to the mark, and differing points of view in a plugged-in, market-savvy paper like the Financial Times is an interesting sight to behold. Both stories address the same general topic, namely, whether the current mess in subprimes […]
Read more...A Wall Street Journal article, “Subprime: Point to Where It Hurts,” endeavors to clarify the issues in modifying loans to try to save defaulting mortgage borrowers. Previous stories have mentioned that the fact that most residential mortgages go into mortgage backed securities makes it harder to change terms than in the old days, when the […]
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