IanB

REITs: Spreads as Wide as a '70s Necktie

Gaucho spelled the most important part of his critique properly: "GGP".

When Banks Stop Underwriting

Sadly, the moneycenter banks started giving up underwriting a decade ago when they switched the spreads on their loans from covenant-based to ratings-based. The same though occurred to me then - aren't the banks supposed to keep track of the health of their borrowers?

It was also interesting to note that the new pricing on some loans includes LIBOR plus the SUM of the spreads on the borrower's and the lender's CDS - now the borrower is paying for a downgrade of the lender's credit. Nice.

How Bad Was September for Hedge Funds?

Given the y-intercept of the best fit line, there's not a lot of alpha in them there hedge funds.

Preview of the Bank Buy-In

This could be even worse for the taxpayer than the original plan. We'll probably end up getting some noncumulative perpetual preferred with no voting rights and no exits, with a dividend that Warren Buffett would laugh at. Why in God's name shouldn't we dilute the shareholders? The shareholders (including myself) enjoyed the benefits of excess leverage on the upside, we should deal with it on the downside.

Subprime Mortgage Losses: Not as Bad as Advertised

Agreed, JKirk, many of the refi loans were probably made in the second half of 2007 when standards were starting to improve. However, I don't imagine that half of the 2006 subprime borrowers suddenly became better credits in 2007. Agreed also that many or most of those loans are still on the originators' books.

Subprime Mortgage Losses: Not as Bad as Advertised

A question: I would expect that the $282bn of the 2006 vintage that has been repaid was done with refi's, rather than cash paydowns. Since 2007 loans won't be getting refi'd any time soon, won't the loss profile of 2007 loans look more like that of the $318bn balance of the 2006 vintage? In other words, why should we expect the 2007 loans made to refi those 2006 balances to perform any better than the average 2006 loan?