Global Subprime Fallout From Lehman, Fannie/Freddie [Housing Tracker]

Seeking Alpha's Housing Tracker is a collection of housing-related excerpts from various sources, grouped by topic. Feel free to post any interesting links on the subject in the comments section below.

Quotes of the Day

"Unlike Japan during the 1990s, the U.S. is willing to take its financial pain upfront.” – Mark Zandi, chief economist at Moody’s Economy.com. (Inman News, Sept. 15)

"At this stage, we're quite confident.” – A spokesman for the French Finance Ministry, who said that French banks and French government debt agency, Agence France-Tresor, are not in danger from the market turmoil in the U.S. (Trading Markets, Sept. 15)

“We have been more or less insulated from the subprime crisis. Prima facie, the crisis in the US may not have any impact on India.” – Indian Finance Ministry spokesman. (India Economic Times, Sept. 16)

“We are in the middle of a crisis, it is not over, it is to be taken seriously, but it is centrally an American crisis.” – German Finance Ministry spokesman Torsten Albig. (Monster & Critics.com, Sept. 15) 

“Europeans like to have a bit of schadenfreude about the U.S., but not too much, because when it gets serious, we’re all in the same boat.” - Nicolas Véron, a research fellow at Bruegel, a research center in Brussels that focuses on Europe’s place in the global economy. (NY Times, Sept. 15)

Global Subprime

Bankruptcy Won't Affect Us: Finmin. “Bankruptcy experts pointed out that many Western investment companies hit by the global credit crunch may be forced to sell off their assets in India at throwaway prices as it is next to impossible under Indian laws to co-ordinate between bankruptcy and liquidation authorities in India and the US, in order to find a single buyer for the insolvent company’s world-wide assets.” (India Economic Times, Sept. 16) 

More than Rs 2,000 crore wiped out from Lehman's India investments. “Lehman’s (LEH) bankruptcy today wiped off more than Rs2,000 crore from the market valuation of those Indian companies in which the US financial major has made equity investments… Major stocks held through participatory notes issued by Lehman Brothers Investment Management, a Sebi-registered foreign institutional investor, include West Coast Paper Mills (down 5.31%), Edelweiss Capital (down 6.67%), KPIT Cummins Infosystems (down 11.48%), among others. Participatory notes are derivative instruments through which foreign investors that are not registered in India can trade on the Indian markets. Lehman itself recorded a loss of more than Rs50 crore today on its investments in India, nearly 10% of its current holding worth over Rs500 crore.” (Business Standard, Sept. 16)

What Freddie-Fannie Bailout Means For Asia?  “Four of the top five international holders of Fannie and Freddie paper are Asian… Analyst Logan Wright, Stone & McCarthy Research: Chinese banks “were probably facing significant losses.”  In July, the Bank of China trimmed its holdings of the agencies’ debt by selling or choosing not to roll over $4.6 billion of their bonds. After increasing by an average of $22B a month in H1’07, central bank holdings of Fannie and Freddie securities on the Fed’s books fell by $27B from mid-July through early September… “We never had any doubt” Washington will come to the rescue, says Ha Keun Cheol, an economist at Korea’s central bank.” (Economic Times, June 15)

As Europe Watches Wall Street Fall, Schadenfreude Gives Way to Worry. “On Monday, shares of UBS (UBS)… fell 14.5%, nearing an 11-year low, amid fears that the bank would be forced to take billions more in write-downs. Meanwhile, the Belgian bank Dexia announced that it owned unsecured Lehman bonds worth €500 million ($713M), with additional exposure possible... [Yet] Europe may end up with some winners from the subprime mess… particularly in Germany, where the financial sector, long considered stodgy, stuck to its basic recipe of cultivating long-term relationships with big industrial companies and conservative retail clients.“ (NY Times, Sept. 15) 

HBOS Falls to Low in London After Lehman Bankruptcy. “HBOS Plc, the U.K.'s biggest mortgage lender… holds £6.6B of Alt-A loans… HBOS was Britain's biggest lender to landlords last year and provided loans to subprime borrowers through its Birmingham Midshires unit. About 2% of its £235B of mortgage loans were in arrears as of June 30, the company said in July… HBOS, which gets almost half of its finance from capital markets, faces higher funding costs and is selling assets amid the credit market turmoil. The bank may raise as much as A$7B ($5.7B) from the sale of its Australian assets. HBOS raised £4B ($7.2B) from investors in July.” (Bloomberg, Sept. 15) 

Lehman Brothers Halts Dutch Subprime Mortgage Business-Source. “Lehman Brothers Holdings Inc. has suspended selling new mortgages to consumers in the Netherlands, a person within a subsidiary company [said,] quoting an internal email. Lehman Brothers entered the Dutch retail mortgage market in 2004 with its "Elq Hypotheken" brand and focused on the so-called non-conforming mortgages, serving consumers with a higher than average risk profile.” (Reuters, Sept. 15) 

S&P Warns Foreclosure Discounts Are To Rise. “S&P: UK: Lenders' losses from sales of repossessed properties are expected to reach 22% of the market value of the home by the time UK house prices reach their floor… The study looked only at homes bought by those with subprime mortgages because these are disproportionately represented among home foreclosures. Although subprime mortgages account for only 3%-4% of all home loans, they are about 30% of all foreclosures… S&P said it expected peak-to-trough drop in house prices of 25%-30%. [Also,] houses sold after foreclosure appeared to achieve even lower sale prices than the declines implied by recent house prices indices.” (Financial Times, Sept. 15) 

Japan, China, Korea Join Central Bank Attempts to Calm Markets. “The Bank of Japan added ¥1.5T ($14.4B) to the financial system and China cut interest rates as Asian central banks attempted to calm markets after Lehman Brothers Holdings Inc. filed for bankruptcy... China lowered its benchmark rate for the first time in six years late yesterday and may act again. Japanese bonds jumped, sending the yield on the benchmark 10-year bond to its biggest drop in five years on concern the credit crisis will worsen.” (Bloomberg, Sept. 15) 

Second Leg Of Subprime Crisis Underway - S.Korea. “Jun Kwang-woo, the head of South Korea's Financial Services Commission [financial regulator] said Tuesday that while ongoing financial market turmoil could be painful, he still sees many positive aspects in the local economy. "The second leg of the subprime crisis has begun. It could be painful but a recovery, once in place, may be rapid." Jun also said positive aspects for South Korea included a sound local financial sector and softening commodities prices.” (Reuters, Sept. 15)

Old Mutual CE Quits On US Subprime Loss. “South Africa: JIM Sutcliffe , who has been CE of Old Mutual for eight years, yesterday became SA’s first subprime casualty when he resigned amid large write-downs and urgent cash injections linked to the insurer’s US Life business… Old Mutual’s stock dropped 8% when the news first broke. The US Life business reported in August that a product from its Bermuda unit had incurred liabilities and had been withdrawn… Freddie Mac (FRE) and Fannie Mae’s (FNM) bailout… caused a downgrade of their bonds. Old Mutual was holding bonds through one of its affiliates, Dwight Asset Management, and recorded a write-down of $135m.” (Business Day, Sept. 11)

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Comments

[williambanzai7:]

MONEY FOR NOTHING--RESIDENTIAL MORTGAGE BACKED SECURITIES
(to the Melody of Money for Nothing by Dire Straits)


I want my, I want my Blackberry
I want my, I want my Blackberry

Now look at them yo-yos thats the way you do it
Shovelin CDOs on CNBC
That aint workin thats the way you do it
Money for nothin-- asset backed securities
Now that aint workin thats the way you do it
Lemme tell ya them guys aint dumb
Maybe get a blister on your little finger
A blister from your Blackberry

[Chorus]
We gotta securitize more subprime products
Custom derivatives--OTC
We gotta move these toxic tranches
We gotta screw Moody's, S&P

See the little faggot in the pinstripes and suspenders
Yeah buddy that ain't his own hair
That little faggot got his own jet airplane
That little faggot hes a Billionaire

[Chorus]
We gotta securitize more subprime products
Custom derivative origination fees
We gotta move these toxic tranches
We gotta screw those GSEs

I shoulda learned about structured products
I shoulda learned to be a quant
Look at that mama, she got it stickin in the squawk box
Man we could have some fun
And hes up there, whats that? hawaiian noises?
Hes bangin on the bongoes like Ben Bernanke
That aint workin thats the way you do it
Get your money for nothin-- asset backed securities

[Chorus]
We gotta securitize more subprime products
Custom derivatives---S.P.I.V....
We gotta move these toxic tranches
We gotta screw the monos and AIG,

Listen here, that aint workin thats the way you do it
Shoveling CDOs on CNBC
That aint workin thats the way you do it
Money for nothin--asset backed securities
Money for nothin--asset backed securities

I want my, I want my blackberry
I want my, I want my blackberry

(All rights reserved WilliamBanzai7 2008)

2008 Sep 17 03:40 PM

[neeb??:]

Aside from a few added(?) notes (could we play this without some of those extra CDO tranches maybe?) I think this piece should get recorded...

2008 Sep 17 09:00 PM

[A J SESSA:]

alls well that ends well we 'll just have to let it play out and see/ having been thru 1929 and 1981 21% interest and everything in between just sit back and let er rip

2008 Sep 20 05:22 PM