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TraderJoe
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Credit Derivatives & Subprime Crisis

June 20th, 2008, 11:59 am

British banks and all that ...
 
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TraderJoe
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Credit Derivatives & Subprime Crisis

June 24th, 2008, 12:06 pm

QuoteAmongst the underlying causes for the subprime crisis were:-Take away the modern terminology and you have something very old fashioned - Banks lost money on fuelling a speculative asset boom -In a period of remarkable stability and low credit spreads a “search for yield” – this is why mortgages originated in Paris Texas ended up on the balance sheet of banks in Paris France-Weakened Credit Standards as a result of dislocation between originators and investors-Increasing Sophistication of products whose “ model to market” became very misaligned from “mark to market” under stress-The herd mentality and extreme difficulty to stand against the crowd.From a recent PRMIA event on subprime.
 
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TraderJoe
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Credit Derivatives & Subprime Crisis

June 30th, 2008, 4:36 pm

QuoteBIS says global downturn could be 'deeper and more protracted' than expected06.30.08, 7:15 AM ET BASEL (Thomson Financial) - The downturn in the world economy could be deeper and more protracted than expected as a result of the ongoing turmoil in financial markets, the Bank for International Settlements said.The BIS said in its annual report that the interaction of the market turmoil, slowing real growth and rising inflation points to a 'deeper and more protracted global downturn than the consensus view seems to expect'.'The current market turmoil in the worlds main financial centres is without precedent in the postwar period. With a significant risk of recession in the United States, compounded by sharply rising inflation in many countries, fears are building that the global economy might be at some kind of tipping point. These fears are not groundless,' it said.It will certainly be a long time before conditions return to normal after the credit crisis, the BIS said.Continued here.
 
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ppauper
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Credit Derivatives & Subprime Crisis

July 4th, 2008, 2:28 pm

super super jumbo loans
 
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TraderJoe
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Credit Derivatives & Subprime Crisis

July 10th, 2008, 2:38 pm

Fannie Mae and Freddie Mac are now insolvent.QuoteFannie Mae slumped $2.70 to $12.61 at 10:19 a.m., extending declines for the year to 69 percent. Freddie Mac tumbled $2.96 to $7.30, taking its 2008 slide to 78 percent.The government is counting on Fannie Mae and Freddie Mac, which own or guarantee about half the $12 trillion in home loans outstanding, to help revive the housing market. Congress created Freddie Mac and expanded Fannie Mae in 1970 to promote home buying in the U.S. The companies' charters give the Treasury the authority to buy as much as $2.25 billion in each of their securities in the event of possible default. The government will likely be forced to take over the companies because of the mortgage meltdown, Poole said. "We know in a crisis the Federal Reserve tap would be open,'' said Poole, now a senior fellow at the Cato Institute. The bailout of Bear Stearns Cos. by JPMorgan Chase & Co., arranged by the Fed, demonstrates the government's unwillingness to allow ``large, systemically important'' financial institutions to fail, he said. Bear Stearns collapsed after customers fled amid speculation the company faced a cash shortage. "I worry about those institutions,'' retired Richmond Fed President Alfred Broaddus said. "They are huge. They dwarf the Bear Stearns issue. In the very worst case scenario, I don't know how you do it other than extend money and the public takes the loss.''Thanks to trad4alpha for supplying the link.
Last edited by TraderJoe on July 9th, 2008, 10:00 pm, edited 1 time in total.
 
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TraderJoe
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Credit Derivatives & Subprime Crisis

July 13th, 2008, 11:35 pm

Oops not anymore they aint.Paulson lets US taxpayer pay.Is this what they mean by a tailspin economy ?QuoteUS spells out Fannie-Freddie backstop planBy JEANNINE AVERSA, AP Economics Writer 12 minutes ago WASHINGTON - The Federal Reserve and the Treasury announced steps Sunday to shore up mortgage giants Fannie Mae and Freddie Mac, whose shares have plunged as losses from their mortgage holdings threatened their financial survival. The steps are also intended to send a signal to nervous investors worldwide that the government is prepared to take all necessary steps to prevent the credit market troubles that started last year with losses from subprime mortgages from engulfing financial markets and further weakening the economy and housing markets.The Fed said it granted the Federal Reserve Bank of New York authority to lend to the two companies "should such lending prove necessary." They would pay 2.25 percent for any borrowed funds — the same rate given to commercial banks and Big Wall Street firms.The Fed said this should help the companies' ability to "promote the availability of home mortgage credit during a period of stress in financial markets."Secretary Henry Paulson said the Treasury is seeking expedited authority from Congress to expand its current line of credit to the two companies should they need to tap it and to make an equity investment in the companies — if needed."Fannie Mae and Freddie Mac play a central role in our housing finance system and must continue to do so in their current form as shareholder-owner companies," Paulson said Sunday. "Their support for the housing market is particularly important as we work through the current housing correction."The Treasury's plan also seeks a "consultative role" for the Fed in any new regulatory framework eventually decided by Congress for Fannie and Freddie. The Fed's role would be to weigh in on setting capital requirements for the companies.The White House, in a statement, said President Bush directed Paulson to "immediately work with Congress" to get the plan enacted. It also said it believed the plan outlined by Paulson "will help add stability during this period."Investors may not be as sanguine, however, according to Chris Johnson, an investment manager and president of Johnson Research Group in Cleveland. Stocks of financial institutions "are going to get clobbered," he predicted. "It is a situation where regulators and the government are trying to play catch up, and that means everything is not discounted in the stock prices yet."The Dow Jones industrials on Friday briefly fell below 11,000 for the first time in two years and Johnson expects shares of investment banks and regional banks could notch even lower as investors react to this weekend's developments.Fannie Mae and Freddie Mac either hold or back $5.3 trillion of mortgage debt. That's about half the outstanding mortgages in the United States.I mean, how bad is going to get?
 
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TraderJoe
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Credit Derivatives & Subprime Crisis

July 14th, 2008, 4:03 pm

Finally (better late than never).QuoteFed adopts plan to curb shady mortgage practices.Monday July 14, 11:19 am ET By Jeannine Aversa, AP Economics Writer WASHINGTON (AP) -- The Federal Reserve has adopted rules to give home buyers more protection from the types of shady lending practices that have contributed to the housing crisis and propelled foreclosures to record highs. Chairman Ben Bernanke and his central bank colleagues approved a plan Monday that would crack down on dubious lending practices that have hurt many of the riskiest "subprime" borrowers -- people with tarnished credit histories or low incomes.In that regard, the plan would:-- bar lenders from making loans without proof of a borrower's income.-- require lenders to make sure risky borrowers set aside money to pay for taxes and insurance.-- restrict lenders from penalizing risky borrowers who pay loans off early. Such "prepayment" penalties are banned if the payment can change during the initial four years of the mortgage. In other cases, a penalty can't be imposed in the first two years of the mortgage.-- prohibit lenders from making a loan without considering a borrower's ability to repay a home loan from sources other than the home's value. The borrower need not have to prove that the lender engaged in a "pattern or practice" for this to be deemed a violation. That marks a change -- sought by consumer advocates -- from the Fed's initial proposal and should make it easier for borrowers to lodge a complaint."Rates of mortgage delinquencies and foreclosures have been increasing rapidly lately, imposing large costs on borrowers, their communities and the national economy," Bernanke said."Although the high rate of delinquency has a number of causes, it seems clear that unfair or deceptive acts and practices by lenders resulted in the extension of many loans, particularly high-cost loans, that were inappropriate for or misled the borrower," he added.For all mortgages, the plan would require advertising to contain additional information about rates, monthly payments and other loan features, and it would curtail certain deceptive or misleading advertising practices.Other practices also would be clamped down on. Lenders, for instance, have to credit a mortgage payment to the homeowner's account on the day it is received. And, brokers and others are forbidden from "coercing or encouraging" an appraiser to misrepresent the value of a home.Federal Reserve gives home buyers more protection against shady lending practices.
 
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IAmEric
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Credit Derivatives & Subprime Crisis

July 14th, 2008, 8:40 pm

*cough*
 
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TraderJoe
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Credit Derivatives & Subprime Crisis

July 14th, 2008, 8:50 pm

QuoteOriginally posted by: IAmEric*cough*Hello there ....
 
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IAmEric
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Credit Derivatives & Subprime Crisis

July 14th, 2008, 9:21 pm

Howdy TraderJoe,Just testing the waters here. How have things been? Navigating the rapids?Now this is not the end. It is not even the beginning of the end. One might even think this is, perhaps, the end of the beginning. But no, this is the beginning of the beginning.Fasten your seatbelt.Best regards,Eric
 
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IAmEric
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Credit Derivatives & Subprime Crisis

July 15th, 2008, 8:58 pm

If you were feeling a bit down, this should cheer you upRoubini telling it like it is
 
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TraderJoe
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Credit Derivatives & Subprime Crisis

July 20th, 2008, 9:44 pm

Keeping track.
 
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TraderJoe
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Credit Derivatives & Subprime Crisis

July 20th, 2008, 10:44 pm

Paulson braces public for months of tough times.
 
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TraderJoe
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Credit Derivatives & Subprime Crisis

July 28th, 2008, 10:31 pm

QuoteMerrill to sell troubled assets, raise capital NEW YORK - Merrill Lynch & Co., in a broad move to clean up its troubled balance sheet, said Monday it will sell a big slice of its asset-backed securities and issue new stock to raise $8.5 billion of fresh capital. The world's largest brokerage, struggling to right itself as the credit crisis continues, said it will issue more than 200 million new common shares as part of the deal. Singapore sovereign wealth fund Temasek Holdings agreed to boost its stake by acquiring another $3.4 billion stake, while Merrill's management plans to buy 750,000 shares.Though capital-raising efforts are generally applauded, this move may well cause frustration among shareholders because it dilutes the company's stock. Chief Executive John Thain, who joined Merrill Lynch last year, had vowed in the past he wanted to avoid using a public offering to raise money.Merrill made the announcement after the close of trading on Wall Street. Its shares closed down 11.6 percent to $24.33, and is down 54 percent this year. The stock drifted down 2 percent in after-hours trading.The brokerage said it will sell a large portion of asset-backed securities and terminate hedges linked to bond insurers; those are two of its most troubled areas since the credit turmoil began last year. Merrill reported earlier this month its fourth straight quarterly loss and write-downs from failed investments approaching $40 billion.The sale of asset-backed securities will cut its exposure by $11.1 billion from its level on June 27, leaving $8.8 billion of these securities on its books. Merrill will take a $5.7 billion pre-tax write-down during the third quarter.The sale of the substantial majority of our CDO positions represents a significant milestone in our risk reduction efforts," said John A. Thain, Chairman and CEO of Merrill Lynch."Our consistent focus has been to opportunistically reduce risk, and in order to take advantage of this sizable sale on an accelerated basis, we have decided to further enhance our capital position by issuing common stock," Thain said in a statement. "The actions we announced both today and on July 17 will materially enhance the company's capital position and financial flexibility going forward."Earlier this month, Merrill sold its stake in Bloomberg LP for $4.43 billion as a way to raise capital while avoiding diluting current investors' holdings by selling new securities.The brokerage said it is also paying Temasek $2.5 billion to reset some provisions on a previous stake sale. Holders of Merrill's mandatory preferred stock agreed to move $5.4 billion into the share offering, and will be paid an additional $2.4 billion from dividends as a result of the exchange.Merrill said it sold $30.6 billion of CDOs to an affiliate of Dallas-based investment firm Lone Star Funds, which will result in a $4.4 billion pre-tax write-down. The brokerage will provide financing for a majority of the purchase price.Lone Star is owned by John Grayken, whose firm is known for investing in distressed debt. He could not immediately be reached for comment.
 
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TraderJoe
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Credit Derivatives & Subprime Crisis

August 1st, 2008, 11:36 am

Merrill's meltdown.QuoteAfter the binge comes the purge. Merrill Lynch (MER) announced after the close of trading on July 28 that it had sold $11.1 billion in collateralized debt obligations (CDOs), or nearly 60% of its exposure to mortgage-related securities, to private equity firm Lone Star Capital Management for $6.7 billion as part of its latest effort to repair its tattered balance sheet. At the same time, Merrill reduced its exposure to troubled XL Capital Assurance (XL), a subsidiary of Security Capital Assurance (SCA), and other bond insurers, who provided insurance on Merrill's CDOs. This "purging of assets," as Oppenheimer (OPY) analyst Meredith Whitney described the sale in a July 29 research note, places the Wall Street stalwart closer to the end of its mortgage related troubles. The cost, however, was high. The securities Merrill unloaded, known as super-senior asset-backed CDOs, had a face value of $30.6 billion, meaning the company received only 22¢ on the dollar for the toxic assets. Even including prior markdowns totaling roughly $41 billion, Merrill will have to write off another $4.4 billion to get the assets off its books. To get out of its contracts with XL, the brokerage firm had to agree to give up $500 million in gains from hedge positions it took against the CDOs it sold and will likely pay another $800 million to close out contracts with other insurers. In all, Merrill expects third-quarter writedowns to total $5.7 billion just shy of two weeks after it posted a record loss of $4.65 billion on CDO writedowns of $3.5 billion. BusinesWeek.The US economy is in a whole pile of shit. Meanwhile, China's continues to grow apace ... This aint a competition, just fact.
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