Monday, August 20, 2007 11:44:55 AM
US Housing Market Rattles Traders from Frankfurt to Sydney:
US debt jolts world markets,
Soaring foreclosure rates and a sharp slump in the US housing market have rattled traders from Frankfurt to Sydney.
By Ron Scherer | Staff writer of The Christian Science Monitor
from the August 17, 2007 edition
Snippet:
Reporter Ron Scherer discusses how recent turmoil in global financial markets is impacting US home mortgage rates.
New York - Over the past six years, Chinese central bankers, French pension-fund managers, and staid German bankers have been the piggy bank for America's housing boom.
In that time, foreign loans to help Americans get mortgages have quadrupled to nearly $1 trillion.
That's one reason soaring foreclosure rates in the US and a sharp slump in the housing market have rattled traders from Frankfurt au Main in Germany to Pitt Street in Sydney, Australia. The prospect of large losses has caused stock markets to tumble worldwide. And central banks have injected billions of dollars to prevent a credit crunch from becoming a financial rout.
On Thursday, there were more signs that the financial markets were trying to cope with the crisis. Instead of just providing overnight liquidity, the Federal Reserve lengthened its cash injection to 14 days. At the same time, Countrywide Financial Corp., the nation's largest mortgage lender, borrowed $11.5 billion from 40 banks. And central banks in Australia and Asia continued to inject funds into their banking system.
In the past, such financial market turmoil would have probably driven the US economy into a recession. "The financial problems may have taken a few banks down and maybe driven the economy into a recession," says Jay Bryson, an international economist at Wachovia Bank in Charlotte, N.C.
However, this time a financial innovation called securitization has allowed the packaging of mortgages and other debt obligations that have been sold to investors around the globe.
"If you allow a bank in France to have a piece of the mortgage market, it should in theory be better because when things go sour everyone takes a little bit of a loss," says Mr. Bryson. "What we've found is that people don't even like these little losses."
•In Canada, the Bank of Canada injected liquidity into the market after a large investment fund, Coventree, sought funding after it could not roll over $1 billion in short term loans.
•In Paris, BNP Paribas froze the assets of three funds that had invested in mortgage-backed securities because it wasn't possible to determine their value. The bank also has loans out to US lender Homebanc, which is in bankruptcy.
•In Germany, IKB Deutsche Industriebank AG was bailed out by a consortium of other German banks, which invested $3.5 billion euros. IKB said it held about $24 billion in subprime mortgages, loans made to people with risky credit. According to press reports, the losses could be up to 20 percent of the portfolio.
•The Swiss investment banker, UBS estimates that the top nine Japanese banks have an exposure of $8.4 billion in subprime loans and may be facing losses of 10 percent of that amount...
Full Article:
http://www.csmonitor.com/2007/0817/p01s02-usec.html
US debt jolts world markets,
Soaring foreclosure rates and a sharp slump in the US housing market have rattled traders from Frankfurt to Sydney.
By Ron Scherer | Staff writer of The Christian Science Monitor
from the August 17, 2007 edition
Snippet:
Reporter Ron Scherer discusses how recent turmoil in global financial markets is impacting US home mortgage rates.
New York - Over the past six years, Chinese central bankers, French pension-fund managers, and staid German bankers have been the piggy bank for America's housing boom.
In that time, foreign loans to help Americans get mortgages have quadrupled to nearly $1 trillion.
That's one reason soaring foreclosure rates in the US and a sharp slump in the housing market have rattled traders from Frankfurt au Main in Germany to Pitt Street in Sydney, Australia. The prospect of large losses has caused stock markets to tumble worldwide. And central banks have injected billions of dollars to prevent a credit crunch from becoming a financial rout.
On Thursday, there were more signs that the financial markets were trying to cope with the crisis. Instead of just providing overnight liquidity, the Federal Reserve lengthened its cash injection to 14 days. At the same time, Countrywide Financial Corp., the nation's largest mortgage lender, borrowed $11.5 billion from 40 banks. And central banks in Australia and Asia continued to inject funds into their banking system.
In the past, such financial market turmoil would have probably driven the US economy into a recession. "The financial problems may have taken a few banks down and maybe driven the economy into a recession," says Jay Bryson, an international economist at Wachovia Bank in Charlotte, N.C.
However, this time a financial innovation called securitization has allowed the packaging of mortgages and other debt obligations that have been sold to investors around the globe.
"If you allow a bank in France to have a piece of the mortgage market, it should in theory be better because when things go sour everyone takes a little bit of a loss," says Mr. Bryson. "What we've found is that people don't even like these little losses."
•In Canada, the Bank of Canada injected liquidity into the market after a large investment fund, Coventree, sought funding after it could not roll over $1 billion in short term loans.
•In Paris, BNP Paribas froze the assets of three funds that had invested in mortgage-backed securities because it wasn't possible to determine their value. The bank also has loans out to US lender Homebanc, which is in bankruptcy.
•In Germany, IKB Deutsche Industriebank AG was bailed out by a consortium of other German banks, which invested $3.5 billion euros. IKB said it held about $24 billion in subprime mortgages, loans made to people with risky credit. According to press reports, the losses could be up to 20 percent of the portfolio.
•The Swiss investment banker, UBS estimates that the top nine Japanese banks have an exposure of $8.4 billion in subprime loans and may be facing losses of 10 percent of that amount...
Full Article:
http://www.csmonitor.com/2007/0817/p01s02-usec.html
Beware Bull's Ready to Run - Before investing $ do your own dd. All posts are my opinion.
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