Thursday, August 09, 2007

Still contained?

I recall hearing Bernake, Paulson, et al going on and on about how this issue was contained. What a load of crap.

From Bloomberg:

Aug. 9 (Bloomberg) -- U.S. stocks tumbled as subprime mortgage contagion
and hedge fund losses halted a three-day rally and sent brokerage shares to
their worst rout since 2002.

``The fear is feeding on itself,'' said Jeffrey Kleintop, who helps oversee more than $173 billion as chief market strategist at LPL Financial Services in Boston. ``It's what you don't know that seems to be taking over the market.''

Citigroup Inc., JPMorgan Chase & Co. and Goldman Sachs Group Inc. led the declines after BNP Paribas SA, France's biggest bank, barred withdrawals from funds that owned subprime loans. The Dow Jones Industrial Average fell 387 points and the S&P 500 slid 3 percent, their worst declines since a Feb. 27 drop spurred by a sell-off in China.

Also, fromBloomberg:

Aug. 9 (Bloomberg) -- The European Central Bank, in an unprecedented response to a sudden demand for cash from banks roiled by the subprime mortgage collapse in the U.S., loaned 94.8 billion euros ($130 billion) to assuage a credit crunch.
The overnight rates banks charge each other to lend in dollars soared to the highest in six years within hours of the biggest French bank halting withdrawals from funds linked to U.S. subprime mortgages. The London interbank offered rate rose to 5.86 percent today from 5.35 percent and in euros jumped to 4.31 percent from 4.11 percent.
The ECB said it would provide unlimited cash as the fastest increase in overnight Libor since June 2004 signaled banks are reducing the supply of money just as investors retreat because of losses from the U.S. real-estate slump. Paris-based BNP Paribas SA halted withdrawals from three investment funds today because the French bank couldn't value its holdings. Stocks in the U.S. and Europe fell, a turnaround from the past three days when investors concluded that credit market risks were abating.
``There seems to be a hole in the balance sheet of World Inc. that will have to be filled by government intervention,'' said Peter Lynch, chairman of private equity fund Prime Active Capital Plc in Dublin. ``The ECB is treating this like an emergency; it might make traders even more afraid.''


Marianne said...

It should be noted that there is a differentiated value for subprime or stated income loans in the commercial lending market. This loan type is not entirely bad despite the abuse of some in the residential lending arena. Oftentimes, individuals that want to start or acquire a small business, purchase a gas station, acquire a motel, open an auto repair shop or any of a myriad of sole proprietor establishements, and do not have the portfolio that would make them attractive to the big box leaders. Lending companies like Ocean Capital in Rhode Island offer subprime and stated income loans by using up close and personal evaluations of the borrower and the opportunity. We need companies like this to support new business opportunities.

Raynor said...

Federal Reserve Pumps Another $35B Into US Financial System Friday to Stem Credit Turmoil

WASHINGTON (AP) -- The Federal Reserve, trying to calm turmoil on Wall Street, announced Friday that it will pump as much money as needed into the U.S. financial system to help overcome the ill effects of a spreading credit crunch.

The Fed, in a short statement, said it will provide "reserves as necessary" to help the markets safely make their way. The central bank did not provide details but said it would do all it can to "facilitate the orderly functioning of financial markets."

* * *

The Federal Reserve Bank of New York, which carries out the central bank's market operation, moved to add $19 billion in temporary reserves Friday morning. A couple of hours later, it added another $16 billion in reserves.

Nothing to see here folks. Move along.

Anonymous said...