According to The Independent, Bear Stearns boss took refuge in blogging as hedge funds imploded:
The sub-prime mortgage market meltdown threatens to become the first giant financial crisis of the 21st century. And it will be blogged.
They’ve got that one right. We’re here to blog about the sub-prime mortgage market meltdown, or just about anything else housing related. Doomers have company- Bear Stearn’s exec Rich Marin has also been blogging:
Mr Marin – "age: 53; astrological sign: Aquarius; interests: motorcycling, skiing; favourite music: Billy Joel, Meatloaf" – has been the head of asset management at Bear Stearns for four years, charged with turning the business into a high-fee, highly-aggressive manager through the launch of hedge funds.For the numbers stuff – the $30bn in failed bets on the mortgage market, the $3.2bn rescue package – you could hit the financial pages of the newspapers. For the blood, sweat and tears, there was Mr Marin’s blog.
So Mr. Marin- if you’re lurking out there, you’re welcome to join us with any links, comments stories or ideas- or perhaps you’ll enjoy the latest effort from OcEd:
As always guys, this thread’s for you!
UK House Bubble
Bubble Meter
Northern Virginia Housing Bubble Fallout
Mish's Global Economic Analysis
Ohio Fraudclosure
Breaking News Relevant Articles© Copyright 2012 Housing Doom | Copyright© 2011, AuthentiCraft, Inc.
S&P, Moody’s Hide Rising Risk on $200 Billion of Mortgage Bonds
http://www.bloomberg.com/apps/news?pid=20601087&sid=aN4sulHN19xc&refer=home
Old days: Bank provides loan to prospective home-owner.
21st century: Loan boutique loans to prospective home-owner, bundles loans and sells them to Wall Street investment Bank. Wall Street investment bank combines different bundles and gets a great rating from S&P, Moody’s & co based on positively-skewed “historical” data. Pension funds, mutual funds, hedge funds, foreign central banks and banks’ proprietary trading vehicles buy up overpriced, overrated (bonds, backed by) loans.
The main problem currently is not the inherent riskiness, but the illiquidity of the products. This as most “conservative” funds are not allowed to hold anything below “investment grade” credit rating on their books.
That’s why S&P and Moody’s refuse to downgrade the same bundles of mortgages that they gave the thumbs-up only recently. It would cause liquidity to dry up in the whole of the mortgage market, and no end-investor would be interested in playing the 21st century funny money game no more.
Imo, the longer they wait, the larger the chance we will end up lending directly from the bank accross the street again instead of indirectly from unknowing (foreign) investors. The transition will be painful beyond belief. Great Depression part 2.
The best site to watch this mayhem unfolding is this one by the way:
http://www.markit.com/information/affiliations/abx/history
It provides an overview of the price evolution of such CDO/mortgage bundle products per ratings class and doesn’t look too well.
NotSoFunnyMoney-
For those who arent used to reading the ABX charts- here’s an explanation:
So much for subprime "containment."
NSFM-
I’ve wondered if banks wouldn’t be forced back into a world where they hold their own paper.
If a bank is holding thousands of REOs and the liquidity is gone- how else will they unload them?
Twist,
You’re absolutely right. Wat the Credit Rating Agencies currently still label “Investment Grade” has been decided by the market to be merely “toxic waste”, a.k.a. Junk or “Sub-Investment Grade”.
Last week Fitch decided to downgrade a couple of CDO issues, and was promptly scrapped from its credit ratings suppliers list by the Federal Reserve!
Ben “there won’t be any overflow into other parts of the market” Bernanke is sure doing his best to quiet any cheerleaders jumping off the bandwagon. (-;
Twist,
Banks will indeed be forced back into the “normal” food chain of Homebuyer-Bank eventually… simply because of the drying up of demand for CDO ‘d mortgages in the investment market.
But in the mean time, all depends on the covenants (i.e. little details in the contracts) of the CDOs as to who’s taking the real loss in case of early default…
Now it’s “just” the hedge funds blowing up, I wonder how much of the bank’s own capital is tied up in the CDO mortgage market…
NSFM-
It’s not just Ben crying “containment.” Did you read the paper by the Chicago Fed and the sidebar? Lots of nice graphs, but they didn’t manage to prove a thing. [Post later.]
Pretty interesting story not getting much press.
First post here and not sure I did the link thingy right.
Hamburger-
The link didn’t show up. You can try it again, or a tinyurl, or tell us where to find it, and I’ll try and run it down.
You have our curiosity up now!
http://www.bloomberg.com/apps/news?pid=conews&tkr=CLBR:LN
Caliber Global Investment goes bust.
I find links at Reuters, FT and Market Watch. Nothing reported in NYT or WaPo that I can find.
Or we’ll see a whole lot more of funds blowing up… or we can expect a lot of lawsuits against fund managers, administrators and auditors in the future because of “mispricings”.
dang. looks like i messed up the link thing. how to turn it off?
I have to mention this article in NYT
http://www.nytimes.com/reuters/business/29cnd-bear.html?ref=business
but you should first read the linked “related article” – a puff piece on the nice CEO of BS and how his friend and bridge partner, MICHAEL LADEEN, identified in the article as “the foreign policy analyst”, !!! thinks so highly of Cayne – he’s just like Machivelli, though as per the latest linked article mentioned at the top “Hedge Fund Problems Lead to Ouster at Bear Stearns” – apparently not.
Since when did “ousted” mean “kept on as senior advisor”?
Las Vegas price drops starting to get serious.
However, someone should tell this reporter not to get too excited about May sales spikes in existing homes. That’s normal, based on a 60-day closing schedule of March purchases. Let’s see what happens the rest of the year.
http://www.inbusinesslasvegas.com/2007/06/29/feature1.html
– The Judge
Twist,
The Chicago Fed “Paper” is some great wishful thinking indeed.
http://www.chicagofed.org/publications/fedletter/cflaugust2007_241.pdf
I wonder why they forgot to mention that the ABX/CDO market (def.: market: that thing that is “always right”) is currently telling us that the fundamentals aren’t as pretty as they would like us to believe…