FYI...Australia is just now writing down these things, while the US has been doing it for more than 6 months. Just wait.. China and the other Asian companies have loads of this stuff that they still have not written down.
Anyone that thinks the taxpayer exposure to the Fannie and Freddie bailout will be limited to $25 Billion as the congresscritters are claiming, is sorely deluding themselves.
And we have not even begun to see the damage from off balance sheet OTC derivatives the financial institutions carry.
The next step by Congress will be to delay FASB rule changes that were supposed to come on line later this year, changes that would have required bringing the off balance sheet junk on to the books.
The government should not subsidize home purchases. It could only inflate home prices.
Of course Bush’s subsidy is only one factor in a huge problem.
Did I foresee this big a problem? No but I was sure that there would be big negatives.
One thing I haven’t seen mentioned is that this financial crisis pretty much blows a hole in the idea of privatizing social security for at least a generation. SS is a lousy investment, but I don’t see anyone who’s lived through this ever agreeing to turn their “last resort” old age stipend over to Wall Street. Heck, it doesn’t do a whole lot for confidence in the whole 401K/self directed retirement paradigm.
There is plenty of blame and culpability to go around, from Congress who encouraged shoddy lending to people unqualified, to people who had no business borrowing the money in the first place, to lenders who practiced poor lending, to insurers who insured this stuff, to rating agencies who missed the risks, to insurance commissioners who never reviewed the risk portfolios of the insurers properly, to bank examiners who never saw this coming, to investment banks who bundled this stuff up and sold it to investors, to investors who thought it was OK to invest in “sub-prime” loans in the first place. This banker can blame S&P all he wants, but probably should also go look in the mirror.
EIther a brilliant move, or a dumb move.
They aren’t selling anything, they’ve simply taken a write-down on the stuff they own.
Now, if the market really does tank, they’ve already written off the loss, and they will look good when everybody else is still taking write-downs.
On the other hand, if people think it’s the fault of the bank, they might get hit so hard that they don’t survive.
If they can survive the hit to their earnings, there really wasn’t any risk. IF it turns out they are wrong, and in the end all these securities pay off, they will simply make a lot MORE money than they said.
Because they aren’t selling, they are just changing the book value.
BTW, anybody think that their house is really only worth 10% of what it was “worth” a year ago?
It is remarkable to see the ratings agencies punish the honest. If you mark-to-market, you are punished. If you mark-to-fantasy, they look away and pretend your finances are sound.
Of course, this is all part of the great Ponzi scheme. The ratings agencies have to play their part, which is to pretend most banks are not only solvent, but are well capitalized, so the sheeple won’t panic. They are trying to make sure this crisis unwinds as slow as possible. That should avoid the depression, but will insure a decade or more of pain.
S&P, “Shame, shame NAB. Naughty, naughty. You are NOT supposed to let the cat out of the bag.”
I read the company’s press release and their actual losses on the portfolio is 2%, and considering the real estate dowturn is years old now, that’s not too bad. I have to wonder why they are provisioning for a 90% loss. My guesses are tax purposes, or they want to pad their earnings in the future.
Ping.
If we try to print our way out if this, we're gonna piss off a lot friendly Nations!
Was it Norway? Where Wall St. wiped out an entire town with this stuff.