Youre not alone as far as not being completely caffeinated (sp?). At first glance, I thought the post was about gas-guzzling SUV sales being in more trouble
Lender borrows short to lend long. Issuer takes long loans and funds with shorter ABS. ABS purchased by CDO with even shorter duration. CDO funded by borrowing at even shorter duration. MMF does repo on SIV-lite overnight. IB calls lender's original short warehouse line. Everything blows up, in its own time.
good morning. CR said last nite that you might be able to comment on this nyt article by gretchen morgenson re cfc. what % of these loans are likely to be bought back by cfc?
I would like to comment on that, houston, but I really won't until I've looked at some of those documents myself. You got your coffee problem, you got your 100-page PSA download from EDGAR . . . the things I do for love.
Hedge fund implode meter recorded bigger hedge funds. Lots of smaller ones have gone already. Also those fund of fund. One hedge fund could be imploded within a fund of fund managed by a bank.
HBOS shores up a conduit (Europe's largest), a Cdn conduit (Canada's largest) cant rollover paper...see a patten here.... Commercial paper is getting stuck. Just like subprime got stuck.
Is this a liquidity problem or an optical problem of possible insolvantcy?
houston, the master servicer should be obligated to do what's in the best interest of the bondholders, which would probably be a good idea if they care about their reputation in the MBS market. i would guess they would be sued if they didn't. incidentally, indymac did the same thing, saying they would repurchase loans that they mod from the trust.
Ignoring the press spin on CFC/BofA transaction, do we know if BofA actually injected NEW capital into this CFC deal, or if they merely converted their share of the existing $11B drawdown into into preferred shares?
I hear that CFC will use the BOA money to make up for losses as they try and sell their shi* for less money so they are not holding. Trying to sell fast before next round.
Five-Year Credit Agreement, dated as of May 10, 2006 (the JPMorgan Five-Year Credit Agreement), among the Company, CHL, JPMorgan Chase Bank, N.A., as managing administrative agent, Bank of America, N.A., as administrative agent, ABN AMRO Bank N.V., as syndication agent, Citibank, N.A. and Deutsche Bank AG New York Branch, as documentation agents, and the lenders party thereto (the terms of which are incorporated by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K, filed with the SEC on May 16, 2006);
For the SIVs, it's not really their fault. No one could have predicted that borrowing short and lending long could ever, ever carry any risk whatsoever.
HBOS Treasury Services Plc Chief Executive Lindsay Mackay said Grampian, the biggest seller of asset-backed commercial paper in Europe, was unable to find investors willing to lend to it for more than one day."
Sitting back and thinking about this, it says "we know it is commercial paper, however, we aint going trust you for one day"
Interesting that this was just shy of 40B; and, how much was the infusion from the EB last night? [EB is cheaper than BoE.]
But all is well because everything is "not uncriticial"*.
Not to hijack this thread with CFC talk, but one more thought. If BofA still has it's share of the revolver and line, it now has different interests than the rest of its fellow the creditors.
BofA as the administrative agent on the loans and as an equity holder has a clear conflict of interests.
Interesting. Former FDIC Chairman Bill Seidman admits to Maria not more than ten minutes ago - this is a panic! FDICers are loath to utter the word panic. I hope it is not Alzheimer's.
"The fall in market prices of U.S. subprime mortgage securities over the last month is unprecedented," said [S&P's] Martin Winn.
"Our rating actions reflect the fact that this disruption in the secondary market for mortgage securities is both recent and dramatic and has a significant impact on the portfolios of these vehicles."
Last I checked (many years ago), an S&P rating reflected timely payment -- meaning that they'd downgrade as much for a late payment (liquidity issues) as for reduced payment (credit issues). Of course this makes sense, since liquidity issues can very quickly become credit issues; nevertheless the question to what extent asset realization (appropriately conducted) can be expected to cover the debt is also relevant. S&P's comments don't seem to me to clearly address this issue, which gets fairly technical from a legal perspective (starting with which jurisdiction's laws will govern the repossession and liquidation).
I translate this as a major win for the banks' ability to lend. Look at the fourth alternative: for the pledged security to be deemd "liquid and marketable," all you have to show is that it has "a robust historical record of an active market characterized by daily market prices." The word "historical" is the key.
Rodge Cohen, a quite famous banking lawyer who is S&C's current chairman, almost certainly would have requested them not to issue the letter if he hadn't liked the result. (Normal disclaimer of any nonpublic information whatsoever; all I know is what's in the letter.)
So, as long as I give them something that I mark to market daily based upon my "reasonable and appropriate" historical basis, no matter how or if it would actually trade today, they will lend against it? That sounds to me like the reincarnation of Enron.
No, what you give them has to have a "robust historical record" of an "active market characterized by daily market prices." Like prime mortgages, is my guess. My second guess is that this is designed to keep daily mark-to-markets in place, but allow for short-term disruptions in a normally liquid market without also disrupting capital requirements.
Also, the letter addresses capital charges for loans, not whether you can make loans. Banks are required to keep specified levels of capital against their assets (i.e., their loans) as a cushion against bad loans, so the riskier the asset, the more capital they're required to maintain. This letter mitigates the fear that a bank might be required to suddenly increase its capital (in a down or illiquid market) just because the market for the collateral is (temporarily) disrupted.
Most shocking was this and I quote from the news story:
"Some 146 banks bid for 40 billion euros ($54.2 billion) in three-month cash in an European Central Bank tender, the first time the central bank had conducted a three-month tender outside its regular schedule"
THAT IS not 15 or 20 or even 50 Banks...146 Banks!
The Solent is the strait of water between the south coast of England and the Isle of Wight. It is one of the main yachting hubs of the UK and thus the name of the fund mainsail. All very nautical!
I'm Salient.
Thankfully, I had completely swallowed my drink before reading this.
Youre not alone as far as not being completely caffeinated (sp?). At first glance, I thought the post was about gas-guzzling SUV sales being in more trouble
damn, how hungover are you?
Solent Green is people!!!!
I bet they can find a 401k money market mutual fund that will buy them.
So, to recap:
Lender borrows short to lend long. Issuer takes long loans and funds with shorter ABS. ABS purchased by CDO with even shorter duration. CDO funded by borrowing at even shorter duration. MMF does repo on SIV-lite overnight. IB calls lender's original short warehouse line. Everything blows up, in its own time.
It all makes sense to me now.
tanta,
good morning. CR said last nite that you might be able to comment on this nyt article by gretchen morgenson re cfc. what % of these loans are likely to be bought back by cfc?
Assurances On Buybacks Cost a Lender - NY Times
I would like to comment on that, houston, but I really won't until I've looked at some of those documents myself. You got your coffee problem, you got your 100-page PSA download from EDGAR . . . the things I do for love.
Financial Times has been amazing on some of this nonsense lately.
Soylent Capitol is mortgages!!!
Is there a site on the web that lists hedge funds that have gone bust?
it is solvent.
I'm going to open my own hedge fund,
Blade Runner Capital Partners LLC
Chris'
The Hedge Fund Implode-O-Meter - tracking the hedge fund implosion - leverage, speculation, SIVs, CDOs, arbitrage, interest rates, credit bubble
Here is hedge fund implode-meter:
The Hedge Fund Implode-O-Meter - tracking the hedge fund implosion - leverage, speculation, SIVs, CDOs, arbitrage, interest rates, credit bubble
Hedge fund implode meter recorded bigger hedge funds. Lots of smaller ones have gone already. Also those fund of fund. One hedge fund could be imploded within a fund of fund managed by a bank.
So the numbers should be much greater!
Thanks much.
Chris
HBOS shores up a conduit (Europe's largest), a Cdn conduit (Canada's largest) cant rollover paper...see a patten here.... Commercial paper is getting stuck. Just like subprime got stuck.
Is this a liquidity problem or an optical problem of possible insolvantcy?
houston, the master servicer should be obligated to do what's in the best interest of the bondholders, which would probably be a good idea if they care about their reputation in the MBS market. i would guess they would be sued if they didn't. incidentally, indymac did the same thing, saying they would repurchase loans that they mod from the trust.
CR/Tanta (or anyone really),
Ignoring the press spin on CFC/BofA transaction, do we know if BofA actually injected NEW capital into this CFC deal, or if they merely converted their share of the existing $11B drawdown into into preferred shares?
also, the deals from 2004 would be seriously paid down, so the volume from those deals shouldn't be much of an issue for mods.
the NYT lady was talking % of original UPB, i think, to get her numbers...
BofA was not part of the 11.48B as per the SEC filings:
JPMorgan 364-Day Credit Agreement $6.44 billion May 7, 2008
JPMorgan Five-Year Credit Agreement $2.64 billion May 10, 2011
Barclays 364-Day Credit Agreement $0.66 billion November 16, 2007
Barclays Five-Year Credit Agreement $1.54 billion November 17, 2011
William Street 364-Day Credit Agreement $0.06 billion May 8, 2008
William Street Five-Year Credit Agreement $0.14 billion May 10, 2011
Total $11.48 billio
"I bet they can find a 401k money market mutual fund that will buy them."
ac - would that money market mutual fund be FDIC insured or not?
oh... never mind.
Barley, there's no way Morgan is holding all that exposure. It has to be syndicated or clubbed, I would think.
I hear that CFC will use the BOA money to make up for losses as they try and sell their shi* for less money so they are not holding. Trying to sell fast before next round.
Barley,
Insolvantcy? Is that Greenspeak?
See what I mean - BofA is indeed a lender:
Five-Year Credit Agreement, dated as of May 10, 2006 (the JPMorgan Five-Year Credit Agreement), among the Company, CHL, JPMorgan Chase Bank, N.A., as managing administrative agent, Bank of America, N.A., as administrative agent, ABN AMRO Bank N.V., as syndication agent, Citibank, N.A. and Deutsche Bank AG New York Branch, as documentation agents, and the lenders party thereto (the terms of which are incorporated by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K, filed with the SEC on May 16, 2006);
For the SIVs, it's not really their fault. No one could have predicted that borrowing short and lending long could ever, ever carry any risk whatsoever.
FFDIC - lol!
I quote from the Bloomberg article..
"Unwilling to Lend
HBOS Treasury Services Plc Chief Executive Lindsay Mackay said Grampian, the biggest seller of asset-backed commercial paper in Europe, was unable to find investors willing to lend to it for more than one day."
Sitting back and thinking about this, it says "we know it is commercial paper, however, we aint going trust you for one day"
Interesting that this was just shy of 40B; and, how much was the infusion from the EB last night? [EB is cheaper than BoE.]
But all is well because everything is "not uncriticial"*.
*German Fin. Ministry Speak
Not to hijack this thread with CFC talk, but one more thought. If BofA still has it's share of the revolver and line, it now has different interests than the rest of its fellow the creditors.
BofA as the administrative agent on the loans and as an equity holder has a clear conflict of interests.
I don't think we have the full story yet.
Interesting. Former FDIC Chairman Bill Seidman admits to Maria not more than ten minutes ago - this is a panic! FDICers are loath to utter the word panic. I hope it is not Alzheimer's.
S&P cut Solent's and Avendis' SIVs' ratings from AAA to CCC+ and CCC, respectively. Overnight.
UPDATE 2-S&P slashes SIV-lite ratings on mortgage woes
| Reuters
"The fall in market prices of U.S. subprime mortgage securities over the last month is unprecedented," said [S&P's] Martin Winn.
"Our rating actions reflect the fact that this disruption in the secondary market for mortgage securities is both recent and dramatic and has a significant impact on the portfolios of these vehicles."
Last I checked (many years ago), an S&P rating reflected timely payment -- meaning that they'd downgrade as much for a late payment (liquidity issues) as for reduced payment (credit issues). Of course this makes sense, since liquidity issues can very quickly become credit issues; nevertheless the question to what extent asset realization (appropriately conducted) can be expected to cover the debt is also relevant. S&P's comments don't seem to me to clearly address this issue, which gets fairly technical from a legal perspective (starting with which jurisdiction's laws will govern the repossession and liquidation).
Have you Solyented your shorts yet? Or are you just InSolyent?
FFDIC - look at the FRB's letter about risk-weighting.
I'm not feeling the warm surge of confidence, here.
MOM -
I translate this as a major win for the banks' ability to lend. Look at the fourth alternative: for the pledged security to be deemd "liquid and marketable," all you have to show is that it has "a robust historical record of an active market characterized by daily market prices." The word "historical" is the key.
Rodge Cohen, a quite famous banking lawyer who is S&C's current chairman, almost certainly would have requested them not to issue the letter if he hadn't liked the result. (Normal disclaimer of any nonpublic information whatsoever; all I know is what's in the letter.)
So, as long as I give them something that I mark to market daily based upon my "reasonable and appropriate" historical basis, no matter how or if it would actually trade today, they will lend against it? That sounds to me like the reincarnation of Enron.
Ratefink,
No, what you give them has to have a "robust historical record" of an "active market characterized by daily market prices." Like prime mortgages, is my guess. My second guess is that this is designed to keep daily mark-to-markets in place, but allow for short-term disruptions in a normally liquid market without also disrupting capital requirements.
Also, the letter addresses capital charges for loans, not whether you can make loans. Banks are required to keep specified levels of capital against their assets (i.e., their loans) as a cushion against bad loans, so the riskier the asset, the more capital they're required to maintain. This letter mitigates the fear that a bank might be required to suddenly increase its capital (in a down or illiquid market) just because the market for the collateral is (temporarily) disrupted.
It may be solent or it may be soylent, but it certainly isn't solvent.
German banks grapple with sticky interbank lending
German banks grapple with sticky interbank lending
| Reuters
Most shocking was this and I quote from the news story:
"Some 146 banks bid for 40 billion euros ($54.2 billion) in three-month cash in an European Central Bank tender, the first time the central bank had conducted a three-month tender outside its regular schedule"
THAT IS not 15 or 20 or even 50 Banks...146 Banks!
The Solent is the strait of water between the south coast of England and the Isle of Wight. It is one of the main yachting hubs of the UK and thus the name of the fund mainsail. All very nautical!
146 banks. That is insane. I think Japan is going to have more trouble in Q2 than the US is having now.
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