Shakedown - Subprime jitters are spreading

The Economist. ^ | Mar 14th 2007

[Cementjungle]

Tip of the iceberg alert.

[jihadjim]

This whole sub-prime meltdown is much to do about nothing. The CNBC report I saw is that there is a $100B in sub-prime loans, lets assume for sake of argument that 25% default (highly unlikely) and result in foreclosure. Thats $25B of the loans. Lets assume backs only recover 50% of home value after foreclosure sale and carrying costs. Result is a $12.5B in losses. A drop in the bucket of a $5 Trillion economy.

These things end up becoming a self-fulfilling prophecy based more on hysteria than fact.

[Moonman62]

Lets assume backs only recover 50% of home value after foreclosure sale and carrying costs. Result is a $12.5B in losses. A drop in the bucket of a $5 Trillion economy.

If you are referring to GDP our economy is a lot larger than that. Real estate assets are larger still. But you're on the right track with your analysis. It's the proportion of the problem that really counts.

[biff]

If I remember correctly(and I have heard a lot of different subprime numbers kicked around) it is over 1 trillion "shady" loans reset in 2007. Not just a drop in the bucket as you suggest and the next few years have their share.

[M. Espinola]

"Liberals can't wait to bring back soup kitchen lines and public tents."

As long as they can blame Bush and get kick backs from the soup companies and tent manufactures.

[RunningWolf]

Yes a $100B in this economy equals a 2 day blip on the Dow, or even within one trading day.

[M. Espinola]

"This whole sub-prime meltdown is much to do about nothing."

In accordance with your posted remarks, the whole thing is being blown way out of proportion and nobody should be concerned?

Just for the record are you affiliated in any way with the housing & construction market or banking & loan industry?

The self-serving rhetoric of housing industry shills is loud and clear.

[M. Espinola]

"If I remember correctly(and I have heard a lot of different subprime numbers kicked around) it is over 1 trillion "shady" loans reset in 2007. Not just a drop in the bucket as you suggest and the next few years have their share."

Those which are stating repeatedly do not worry, doesn't that line sound like a rerun of the high-tech craze, when brokers were telling everyone the sky's the limit, right up until the second the entire house of cards came tumbling down?

[RunningWolf]

I wonder how far the tech craze rally/bubble would have lasted if it were not for the Y2K scare to put new wind into its sails.

[M. Espinola]

Below is some very interesting data.

[Rummenigge]

Real trouble whould be prime loans in trouble by rising interests. (Can't pay, can't sell, can't refinance)