Latest On Hedge Funds, Banks And Bailouts [Housing Tracker] 6 comments
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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
“What the Fed said was that it wasn’t just opening the window. It is taking out the window sill and chipping out the bricks around it.” - Daniel Alpert, managing partner at Westwood Capital, on the $900 billion the Fed made available to banks on Monday. But lending stayed frozen. On today’s help menu? The Fed is considering buying up short-term commercial debt. (NY Times, Oct. 6)
“You’re dealing with massive amounts of information that flow in over months. You almost never have an ‘Oh, my God’ moment. Even now, most of the loans we bought are doing fine.” – Former Fannie Mae CEO Daniel Mudd on why Fannie kept buying riskier and riskier loans. He said it was almost impossible to see what was coming because Fannie only interacted with lenders and not borrowers, so they could only get a delayed reading on real market conditions. (NY Times, Oct. 4)
Subprime Banking Fallout
Fannie, Freddie to Sell Bad Assets. “Reuters: Mortgage giants Fannie Mae (FNM) and Freddie Mac (FRE) might soon approach the Treasury Department to sell off some bad assets… Bad mortgages account for 2 to 4 percent of the entities’ total $12 trillion of outstanding mortgage debt, according to Federal Housing Finance Agency director James Lockhart.” (Housing Wire, Oct. 6)
Ex-CEO Of S&L Bought By Wachovia Defends Record. “Herb Sandler, [former CEO of Golden West and its subsidiary World Savings, sold to Wachovia (WB) in 2006]: Wachovia has charged off about $850 million of its $122 billion pick-a-pay portfolio so far, but management has indicated the losses could rise to $12B. If Wells Fargo (WFC)… buys Wachovia, it intends to take a $32B hit on the pick-a-pay portfolio - implying the loans, on average, are only worth 74 cents on the dollar. Sandler contends the loss projections are grossly exaggerated and… doubts the losses on World's former mortgage portfolio will rise above $10B, largely because none of the loans were made to subprime borrowers.” (Builder Online, Oct. 6)
Market Rout Even Has Bears Screaming. “Bill Ackman, who heads the Pershing Square hedge fund [and has been short financials for a long time] has switched gears, snapping up significant stakes in Wachovia and American International Group Inc.(AIG)—his first investments in financial institutions in five years. Mr. Ackman said he began acquiring a 180 million-share, or 9%, stake in Wachovia last Monday, after the North Carolina bank agreed to be acquired by Citigroup Inc. Since then, he’s had the good fortune to see his stake rise significantly after Wells Fargo & Co. trumped Citi’s (C) bid late last week.” (Crain’s NY Business, Oct. 6)
Bank On This: Bank Failures Will Rise In Next Year. “Enfeebled by huge losses on risky home loans, the banking industry is now on the shakiest ground since the early 1990s, when more than 800 federally insured institutions failed in a three-year period. That was during the clean-up phase of a decade-long savings-and-loan meltdown that wound up costing U.S. taxpayers $170B-$205 billion, after adjusting for inflation. The government's commitment to spend up to $700B buying bad debts from ailing banks is likely to save some institutions that would have otherwise died, but analysts doubt it will be enough to avert a major shakeout.” (AP, Oct. 6)
Now Wall Street May Shun $700bn Bail-Out. “Fears are mounting that many Wall Street banks and financial firms will refuse to participate in the US government's $700bn bail-out package... [The bailout limits] stock-related pay and banning 'golden parachutes' for executives… of companies who participate… Goldman Sachs (GS) and Merrill Lynch (MER)… might choose not to participate in the bail-out as there is a growing view on Wall Street that the market may be bottoming out. Analysts also believe that the mere presence of the government as buyer of last resort will be enough to get credit markets moving again, and that a large number of banks would not need to take part for the legislation to succeed.” (Guardian UK, Oct. 5)
Smaller Hedge Funds Struggle As Money Pipeline Dries Up. “Hedge fund investor advisor Hennessee Group: September looks to be the worst month in a decade [for hedge funds]… The day of reckoning can arrive remarkably fast for managers with assets under the half-billion-dollar mark… Smaller hedge funds have advantages, such as being nimble in shifting markets. But… many are unable to attract big institutional investors such as pension funds and endowments, which are less likely to flee when times get tough… But most of the [$2 trillion industry] money lately has gone to multibillion-dollar funds… Hedge Fund Research: Three-fourths of the estimated 10,000 hedge funds globally have less than $500 million in assets.” (WSJ, Oct. 4)
MBIA Cries Fraud; Sues Countrywide. “MBIA Insurance Inc.(MBI) filed a suit Tuesday against several units of Countrywide Financial Corp. (CFC) (BAC) over $14 billion in guarantees it provided for Countrywide mortgage bonds, alleging the lender fraudulently misrepresented its loan underwriting standards. The bonds in question packaged home equity loans and second lien mortgages between 2005 and 2007 – such loans have reaped some of the highest levels of late payment and default rates as housing prices have fallen.” (Housing Wire, Oct. 3)
Last Bank Crisis Arose In Late 1980s, Early ’90s. “A February 1992 Chronicle story reported how the RTC was selling off properties in Atlanta at below appraised value… A March 1992 Atlanta Business Chronicle story reported that… the RTC sought $26.5M from seven officials of First Federal Savings and Loan Association of Atlanta, charging that their negligence led to First Federal’s failure in 1989. A December 1994 story headlined “RTC targets nine S&L officials,” reported how the RTC was trying to pin $20.7M in losses at the defunct Cobb Federal Savings Bank on nine former bank officers and directors. The Chronicle also reported how the S&L Crisis generated a lot of business for consultants, accountants and law firms.” (Atlanta Business Chronicle, Oct. 3)
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This article has 6 comments:
Congress has been ignoring this mess for years !! Now all of them run like rats trying to save their butts.
“Bill Ackman, who heads the Pershing Square hedge fund [and has been short financials for a long time] has switched gears, snapping up significant stakes in Wachovia and American International Group Inc.(AIG)—his first investments in financial institutions in five years. Mr. Ackman said he began acquiring a 180 million-share, or 9%, stake in Wachovia last Monday, after the North Carolina bank agreed to be acquired by Citigroup Inc. Since then, he’s had the good fortune to see his stake rise significantly after Wells Fargo & Co. trumped Citi’s (C) bid late last week.” (Crain’s NY Business, Oct. 6)
Sounds like a case of sour grapes to me.
On Oct 07 05:16 PM zebra zebra wrote:
> SELL!! AIG is DONE!!