Will be interesting to see what they propose because it will difficult to do a freeze on ARM's while keeping bond investors who bought all these mortgages happy.
More subprime lending trouble
- Thread starter Murt10
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Will be interesting to see what they propose because it will difficult to do a freeze on ARM's while keeping bond investors who bought all these mortgages happy.
threeticks
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Subprime and Conduits.
Conduits are a twist on the age-old banking practice of taking a client's assets such as receivables or securities and turning them into cash.
Banks create conduits that are then filled with an array of assets that could include credit-card receivables, auto loans or mortgages. Using these assets as collateral, the conduit sells commercial paper to big investors, who are seeking generally safe, short-term investments while getting a slightly higher yield than that offered by ultra-safe instruments such as certificates of deposit or Treasury bills.
The cash from the sale of the commercial paper goes back to the companies that put their assets into the conduit.
In the past, the assets in a conduit generally came from one bank or company. But in recent years asset-backed commercial-paper conduits that combine debts from different companies, banks and financial firms have become more popular, accounting for about half the commercial-paper market. These notes can include some subprime mortgage securities, which are terrifying investors around the world.
Notes issued by these conduits account for just less than half of the nearly $3 trillion global commercial-paper market.
Banks earn fees to set up and run the conduits. They also often agree to provide funding if a conduit can't resell its commercial paper when it matures, which is generally every 90 days. That is where today's problems lie. Conduits are essentially using the sale of short-term debt, commercial paper, to fund the purchase of long-term assets. That creates a mismatch if demand for the short-term paper disappears.
The problem is these conduits are created as independent entities, so they don't sit on the banks' balance sheet, at least not until things go bad or the bank is left holding them at the end of their financial year.
And they are left holding them because nobody will touch them in the current financial climate.
The circle has stopped.
Its like playing snap and nobody knows who is holding what cards.
It would appear that these conduits are now showing their heads as the Subprime/Financial crisis drags out.
I can see more heads rolling in the financial sector as these conduits start to bite.
Conduits are a twist on the age-old banking practice of taking a client's assets such as receivables or securities and turning them into cash.
Banks create conduits that are then filled with an array of assets that could include credit-card receivables, auto loans or mortgages. Using these assets as collateral, the conduit sells commercial paper to big investors, who are seeking generally safe, short-term investments while getting a slightly higher yield than that offered by ultra-safe instruments such as certificates of deposit or Treasury bills.
The cash from the sale of the commercial paper goes back to the companies that put their assets into the conduit.
In the past, the assets in a conduit generally came from one bank or company. But in recent years asset-backed commercial-paper conduits that combine debts from different companies, banks and financial firms have become more popular, accounting for about half the commercial-paper market. These notes can include some subprime mortgage securities, which are terrifying investors around the world.
Notes issued by these conduits account for just less than half of the nearly $3 trillion global commercial-paper market.
Banks earn fees to set up and run the conduits. They also often agree to provide funding if a conduit can't resell its commercial paper when it matures, which is generally every 90 days. That is where today's problems lie. Conduits are essentially using the sale of short-term debt, commercial paper, to fund the purchase of long-term assets. That creates a mismatch if demand for the short-term paper disappears.
The problem is these conduits are created as independent entities, so they don't sit on the banks' balance sheet, at least not until things go bad or the bank is left holding them at the end of their financial year.
And they are left holding them because nobody will touch them in the current financial climate.
The circle has stopped.
Its like playing snap and nobody knows who is holding what cards.
It would appear that these conduits are now showing their heads as the Subprime/Financial crisis drags out.
I can see more heads rolling in the financial sector as these conduits start to bite.
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threeticks
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Do you rember something called the gold standard ?
When money was issued based on gold reserves.
If you go to a bank for a mortgage today the "gold reserve" is the property.
In other words the bank creates new money based on the asset.
In this case its your house.
Take a look at this video on money as dept.
Its around 50 mins long but its worth watching.
It will explain how it works.
[broken link removed]
When money was issued based on gold reserves.
If you go to a bank for a mortgage today the "gold reserve" is the property.
In other words the bank creates new money based on the asset.
In this case its your house.
Take a look at this video on money as dept.
Its around 50 mins long but its worth watching.
It will explain how it works.
[broken link removed]
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MichaelDes
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Another indicator of inflation as people flee the dollar into anything tangible. By Scott Lanman
Dec. 12 (Bloomberg) -- The Federal Reserve plans to ease ``elevated'' short-term funding pressures by injecting cash to banks through auctions and providing $24 billion in currency swap lines to the European and Swiss central banks. The Fed is coordinating the measures with the European Central Bank, Bank of England, Bank of Canada and Swiss National Bank, the Fed said in a statement in Washington. The Fed will auction term funds to banks against a ``wide variety of collateral.'' All generally sound institutions can participate, the statement said.
As the American printing presses push out more dollar, they only thing happening in IMO is more money dropping into the abyss and giving more fuel for the gold rocket.
Dec. 12 (Bloomberg) -- http://www.bloomberg.com/apps/news?pid=new...id=a8dhKVSfrNfQ
Gold Gains on Speculation Fed's Credit Plan to Spur Inflation
Dec. 12 (Bloomberg) -- Treasuries fell the most in 11 years after central banks led by the Federal Reserve agreed to a coordinated effort to break a logjam in credit markets. Yields on two-year notes rose more than a quarter of a percentage point on speculation that central banks will do what is necessary to ensure that banks have adequate access to capital through the end of the year, when demand is typically the greatest.
I’m afraid we are in the mist of an financial contagion within the markets as primarily Euro and US credit derivitatives continue to crash and burn. If you are sitting on gold, get your popcorn and enjoy the show. It was always going to end in tears, even the most stupid could deduce this from the chart evidence. [broken link removed]
Dec. 12 (Bloomberg) -- The Federal Reserve plans to ease ``elevated'' short-term funding pressures by injecting cash to banks through auctions and providing $24 billion in currency swap lines to the European and Swiss central banks. The Fed is coordinating the measures with the European Central Bank, Bank of England, Bank of Canada and Swiss National Bank, the Fed said in a statement in Washington. The Fed will auction term funds to banks against a ``wide variety of collateral.'' All generally sound institutions can participate, the statement said.
As the American printing presses push out more dollar, they only thing happening in IMO is more money dropping into the abyss and giving more fuel for the gold rocket.
Dec. 12 (Bloomberg) -- http://www.bloomberg.com/apps/news?pid=new...id=a8dhKVSfrNfQ
Gold Gains on Speculation Fed's Credit Plan to Spur Inflation
Dec. 12 (Bloomberg) -- Treasuries fell the most in 11 years after central banks led by the Federal Reserve agreed to a coordinated effort to break a logjam in credit markets. Yields on two-year notes rose more than a quarter of a percentage point on speculation that central banks will do what is necessary to ensure that banks have adequate access to capital through the end of the year, when demand is typically the greatest.
I’m afraid we are in the mist of an financial contagion within the markets as primarily Euro and US credit derivitatives continue to crash and burn. If you are sitting on gold, get your popcorn and enjoy the show. It was always going to end in tears, even the most stupid could deduce this from the chart evidence. [broken link removed]
threeticks
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Current financial conditions are unprecedented in modern times.
It simply looks like the fed is clutching at straws.
The Fed said that the new auction process should 'help promote the efficient dissemination of liquidity' when other lines of credit were 'under stress.'
The experience gained from the four scheduled auctions would be 'helpful in assessing the potential usefulness' of this new process to provide funds to U.S. banks, the central bank said. Fed officials indicated more auctions would be scheduled if the first four were successful.
Its a shot in the dark.
Long term is it going to work ?
threeticks
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Irish property chart might show the same evidence.
Z
z109
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Indeed, you could put up a similar chart for equities (whether old or emerging markets), commodities (oil in a recession anyone?), or even gold. Does that mean it's all going to end in tears? I don't know, but if it does, I suspect it won't all be at the same time (different asset classes will be out of favour at different times). On the other hand, 1929-31 and all that, was in part about the fact that there was nowhere safe to put your money.
MichaelDes
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Game over IMO, 1929 again- gold could go towards $2000 an ounce. The markets will decide what happens next, not the governments. BoE and the Fed are no longer in control, it is in the hands of reckless money market dealers. Freed and Greed control the market. Fear is in absolute control. With cost push inflation causing problems and Federal cuts doing nothing so far to stimulate against this contagion , economies will begin to experience stagflation and eventually hyperinflation, especially if governments keep pumping money into the system. The Fed and BoE should have just raised interest rates and crashed and burned straight to recession. What is happening is fighting against the inevitable. The delay will only make any recession more brutal and difficult. Their futile actions remind me of Lamonts attempts to protect the ERM, billions of dollars are being wasted whilst Abx markets get tighter and crash.
Look at my earlier post to see what's coming down the tracks. CDO's, SIV's, MBO's are all in parlysis and will be completely screwed if this decision sticks, which I think it will in the America Supreme court. It's decision day very soon - stay away from bonds and financial stocks. But you don't need to be a genius to work that out. Enjoy the show it's only starting...
Look at my earlier post to see what's coming down the tracks. CDO's, SIV's, MBO's are all in parlysis and will be completely screwed if this decision sticks, which I think it will in the America Supreme court. It's decision day very soon - stay away from bonds and financial stocks. But you don't need to be a genius to work that out. Enjoy the show it's only starting...
speaking of sub-prime, LBBW's takeover of SachsenLB has run into some stickiness.
[broken link removed]
LBBW wanted the State of Saxony to take responsibility for "risks" but Saxony, probably the richest of the former East German states, was declining.
The regulator said he wanted a deal this week and was threatening to shut SachsenLB down if it was not done and dusted by Sunday.
Now Saxony are saying they will underwrite the deal but its all a bit up in the air.
It will be interesting what Brussels will say about this as the Landesbanks are not supposed to have state guarantees any longer.
And it's ironic that before subprime went kablooey, the German Chancellor and Bundesministers were calling for more transparency of hedge funds, when it seems the state owned banks were digging big pits off-balance sheet into which to throw money.
And if they are bailed out by the state, then it's ultimately taxpayers' money.
[broken link removed]
LBBW wanted the State of Saxony to take responsibility for "risks" but Saxony, probably the richest of the former East German states, was declining.
The regulator said he wanted a deal this week and was threatening to shut SachsenLB down if it was not done and dusted by Sunday.
Now Saxony are saying they will underwrite the deal but its all a bit up in the air.
It will be interesting what Brussels will say about this as the Landesbanks are not supposed to have state guarantees any longer.
And it's ironic that before subprime went kablooey, the German Chancellor and Bundesministers were calling for more transparency of hedge funds, when it seems the state owned banks were digging big pits off-balance sheet into which to throw money.
And if they are bailed out by the state, then it's ultimately taxpayers' money.
threeticks
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The fact that the central banks, who usually have different objectives, are combining forces means that the problem is worse than we thought
Pumping money into the markets now is only masking the symptoms.
The fundamentals are not going to go away.
It will have to run its course.
Taking paracetamol for the flu may deal with the runny nose, aches and pains but it’s not a cure.
Only one thing for the flu and that is bed and rest.
Financial markets will definitely be taking to the bed for a while and will have to run its natural course sooner or later.
Until then its better to sit back and stay clear unless you want to catch it.
Great time for trading currency markets though.
Interesting times ahead.
Plenty of volatility.
Here is a question?
Will this mean weaker usd and eur against the yen?
'The Bank of Japan welcomes these measures and hopes that they will contribute to maintaining the functioning of international financial markets,'
I can see the BOJ sitting back and playing a waiting game.
Pumping money into the markets now is only masking the symptoms.
The fundamentals are not going to go away.
It will have to run its course.
Taking paracetamol for the flu may deal with the runny nose, aches and pains but it’s not a cure.
Only one thing for the flu and that is bed and rest.
Financial markets will definitely be taking to the bed for a while and will have to run its natural course sooner or later.
Until then its better to sit back and stay clear unless you want to catch it.
Great time for trading currency markets though.
Interesting times ahead.
Plenty of volatility.
Here is a question?
Will this mean weaker usd and eur against the yen?
'The Bank of Japan welcomes these measures and hopes that they will contribute to maintaining the functioning of international financial markets,'
I can see the BOJ sitting back and playing a waiting game.
threeticks
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Actually its more like a cancer than a flu that has spread through the financial sectors.
Would it be reasonable to say that if interest rates had been raised bringing on the recession quickly a lot of big players would stand to loose a lot in a short period of time....but instead by prolonging the inevitable so those players would have the time so put their capital and assets elsewhere before the recession hits...?
threeticks
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FBI looking into Subprime mess!!!!!!
This is not a good sign. But we should have expected it. Big booms tend to end with loud bangs that draw the attention, rightly or not, of criminal prosecutors. The merger boom of the 1980s. The dot.com boom of the 1990s. And now, the subprime boom-bust? The FBI has announced it is probing 14 firms in a wide-ranging look at the subprime daisy chain, joining the SEC and many state regulators. Mortgage fraud has been on the radar of the FBI for a while now. But if they decide to go after the top firms, the Merrill Lynchs and Morgan Stanleys, that would big news indeed.
For more:
- here's a New York Times article
- regulators seek mortgage info from Goldman Sachs, Morgan Stanley. Article
This is not a good sign. But we should have expected it. Big booms tend to end with loud bangs that draw the attention, rightly or not, of criminal prosecutors. The merger boom of the 1980s. The dot.com boom of the 1990s. And now, the subprime boom-bust? The FBI has announced it is probing 14 firms in a wide-ranging look at the subprime daisy chain, joining the SEC and many state regulators. Mortgage fraud has been on the radar of the FBI for a while now. But if they decide to go after the top firms, the Merrill Lynchs and Morgan Stanleys, that would big news indeed.
For more:
- here's a New York Times article
- regulators seek mortgage info from Goldman Sachs, Morgan Stanley. Article
threeticks
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Check out this powerpoint cartoon on subprime
http://docs.google.com/TeamPresent?revision=_latest&fs=true&docID=ddv7hj34_03774hsc7&skipauth=true
Give it a min to load
http://docs.google.com/TeamPresent?revision=_latest&fs=true&docID=ddv7hj34_03774hsc7&skipauth=true
Give it a min to load
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threeticks
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Breaking News Alert
The New York Times
Sunday, March 16, 2008 -- 7:18 PM ET
-----
JPMorgan Chase Says It Will Acquire Bear Stearns for $2 a Share
Bear Stearns, facing collapse because of the mortgage crisis,
agreed Sunday evening to be bought by JPMorgan Chase for a
bargain-basement price of less than $250 million, the two
companies announced.
The all-stock deal values Bear Stearns at about $2 a share,
based on JPMorgan's closing stock price on Friday, the
companies said. In contrast, shares of Bear Stearns, which
fell $27 on Friday, closed at $30.
Read More:
http://www.nytimes.com/?emc=na
Subprime and Conduits.
As I posted back in dec 07 and its only now these conduits are being made public.
The key here for financial institutions left holding these loans was to try to off load them but nobody wanted to buy them so there comes a point when they had to come clean and declare.......this is the result now and more to come...
The New York Times
Sunday, March 16, 2008 -- 7:18 PM ET
-----
JPMorgan Chase Says It Will Acquire Bear Stearns for $2 a Share
Bear Stearns, facing collapse because of the mortgage crisis,
agreed Sunday evening to be bought by JPMorgan Chase for a
bargain-basement price of less than $250 million, the two
companies announced.
The all-stock deal values Bear Stearns at about $2 a share,
based on JPMorgan's closing stock price on Friday, the
companies said. In contrast, shares of Bear Stearns, which
fell $27 on Friday, closed at $30.
Read More:
http://www.nytimes.com/?emc=na
Subprime and Conduits.
As I posted back in dec 07 and its only now these conduits are being made public.
The key here for financial institutions left holding these loans was to try to off load them but nobody wanted to buy them so there comes a point when they had to come clean and declare.......this is the result now and more to come...
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Duke of Marmalade
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Anglo down 14%, AIB & BOI down 7%.
Daily Telegraph predicting that Ireland will be required to nationalise one or more big banks and that the property market will implode.
Let's face it, with hindsight it was a total nonsense that every Joe/Jane Soap was sitting on undreamed of equity in their house which was financed at very very cheap interest rates.
The Anglo Saxon model is all wrong. Ordinary people should be renting their accommodation from either the State or institutions. The idea that we could all borrow at 5% p.a. and see the assets grow at 20% p.a. couldn't possibly make sense.
The continentals have it right. You never here of property bubbles in Germany or France. Home ownership fuelled by profligate cheap lending from banks just isn't part of their prudent psyche. No wonder the dollar and sterling are plummeting - it was just too cheaply lent to everybody and not just to sub primers.
Daily Telegraph predicting that Ireland will be required to nationalise one or more big banks and that the property market will implode.
Let's face it, with hindsight it was a total nonsense that every Joe/Jane Soap was sitting on undreamed of equity in their house which was financed at very very cheap interest rates.
The Anglo Saxon model is all wrong. Ordinary people should be renting their accommodation from either the State or institutions. The idea that we could all borrow at 5% p.a. and see the assets grow at 20% p.a. couldn't possibly make sense.
The continentals have it right. You never here of property bubbles in Germany or France. Home ownership fuelled by profligate cheap lending from banks just isn't part of their prudent psyche. No wonder the dollar and sterling are plummeting - it was just too cheaply lent to everybody and not just to sub primers.
Duke of Marmalade
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22% and 11% Freefall