Mr Mortgage

Private Equity to the Rescue of Banks?

They can't come 'riding to the rescue' until there is some transparency to their books with respect to the valuation of their assets. For example, WaMu has $55 billion in Pay Option ARMs, $60 billion in Home Equity Lines and $16 billion in Subprime. Performing, these loans types might fetch 10 cents to 50 cents on the dollar on a great day! Non-performing or as REO, you may get 30 to 50 cents of the new value of the underlying collateral. That would means WaMu is looking at a write down of $10s of millions yet to come. With the housing market continuing to fall and defaults now surging in Alt-A, Jumbo Prime and second mortgages, there is not enough clarity. Most of these banks that hold such large amount of mortgage paper are deep underwater if you were to sell assets to pay off liabilities and 'settle up'. I highly doubt if any private equity will be as foolish as BofA was with CFC or as foolish as TPG was with WaMu for years to come. Just my opinion.