Global Subprime: Is Iceland On The Brink? [Housing Tracker]

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Global Subprime Fallout

Investors Expect Volatility As Credit Woes Persist. “Governments across Europe are rushing to prop up failing banks. On Sunday, Germany said it would follow suit with Ireland and Greece in guaranteeing all private bank accounts.” (Bloomberg, Oct. 7) 

Why Asian Banks Are Stronger Than US Banks. “Asian banks have so far averted the crippling run of failures afflicting the US and Europe. By staying away from risky US securities, prudent lenders in Asia may even stand to benefit from the current crisis, as stricken Western banks seek fresh capital. Asia is feeling the credit squeeze… but none of its financial institutions have collapsed… That’s because relatively few banks bought… US mortgage-backed assets.  Those that did had only limited exposure before last year’s subprime blowout: Asia currently accounts for only $24 billion of $550 billion in global subprime-related loan write-offs.” (Christian Science Monitor, Oct. 6) 

Barclays, RBS Said to Be in Talks on U.K. Government Funding. “The U.K. government may invest at least £45 billion ($79B) in banks including Royal Bank of Scotland Group Plc (RBS) and Barclays Plc (BCS) to bolster capital depleted by mortgage-related losses, two people with knowledge of the situation said.” (Bloomberg, Oct. 5)

Feeling Wall Street's pain, from Manila to Paris. “Nearly 5,000 miles from Wall Street, Dmitry Zhiltsov's recruiting agency is bleeding clients, as investment banks that once hunted Russia's financial wizards succumb to the U.S. meltdown… As world financial markets grew more sophisticated in recent years, more and more regular households shunned basic savings accounts and entrusted their money to complex and promising investments whose risks few non-specialists understand… Regulators have received more than 3,500 complaints related to Lehman Brothers investment products in Hong Kong, where the outstanding value of Lehman-related products amounted to about $2B.” (AP via Yahoo! Finance, Oct. 4)

Iceland Markets Hit by Bank Bailout Fears. “Iceland’s currency… dropped 8% against the euro since Monday [after halving this year]. On Monday the government [bailed out] Glitnir Bank, the country's third-biggest bank… heightening concerns that Iceland might have to prop up its other banks, too, but that it lacks the resources to do so. Iceland has a population of just 300,000 and a 2007 GDP of around $20 billion -- less now that the currency has fallen so sharply. Its major banks have foreign-currency liabilities totaling $120B… Markit Group: On Friday it cost $1.5 million up front plus $500,000 a year to insure $10M of Icelandic debt against default. That is up from $271,000 a year with no up-front fee a month ago.” (WSJ, Oct. 4)

                                                                           

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