We didn't care nearly as much back then. It would've been prudent for MBIA to repeat itself until it sunk in so there were a slightly rational response.
Dont get pissed, just some background news from a few years back; Im thinking Orange County Squared:
Five days earlier, California's Orange County had announced that its investment fund of $7.4 billion faced losses of $1.5 billion, the result of a confluence of sharply higher interest rates and an investment strategy that relied primarily on derivatives and enormous leverage. The problem, in a nutshell: County Treasurer Robert L. Citron borrowed $14 billion, investing the money in interest-sensitive derivatives contracts, hoping to increase returns for his fund. When rates turned up, Orange County was forced to pay more on its borrowings than it was earning on its investments.
Quickly, the crisis played itself out. First, Orange County missed a $200 million payment on $2.6 billion in reverse repurchase agreements, a form of securitized loans, to First Boston Corp. With the county close to default, First Boston immediately liquidated its entire holdings of Orange County collateral, made up primarily of government bonds.
"SCARED TO DEATH." At 5 p.m. California time, the county supervisors hoisted the white flag. Facing the prospect of further liquidations and pressure from agencies clamoring to recover their investments in the fund, Orange County and its fund filed for Chapter 9 protection from bankruptcy in Santa Ana Federal Court. Suddenly, up to a dozen firms, among them Merrill Lynch, Morgan Stanley, and Nomura Securities International, were stuck holding billions in loans that Orange County would not honor. It still isn't clear whether those firms are prohibited from liquidating their collateral in the wake of the filing. "People are scared to death," says one Wall Street executive. "No one wants to be last to get their money."
Orange County's stunning bankruptcy filing, the largest ever in the municipal world, cast a chill over U.S. markets--driven partly by investor worries about other portfolio losses. On Dec. 7, prices in the $1.2 trillion municipal bond market sank more than a full point--a huge drop in that market. Treasuries took a hit as well, pushing the yield on 30-year bonds up to 7.89%. Even stocks were hurt, with the Dow Jones industrial average declining 10.43, led by financial companies, including brokerages that lent money to Orange County.
Back in Orange County, lawyers and regulators are sharpening their claws. Many of the 187 school districts, transportation authorities, and cities that invested in the fund already are mulling suits. The most likely targets: the Wall Street firms that lent Orange County money. The agencies expect "securities firms to shoulder some of the responsibility," says Haig Nargesian, senior analyst at Moody's Investors Service. Regulators also are probing the fund. The Commodity Futures Trading Commission has announced an investigation. And the SEC wants to know if Orange County was using the proceeds of bond issues to invest in derivatives--and, if so, whether proper discl
S&P ran a stress test to determine the losses bond insurers would take on securities backed by subprime mortgages, including CDOs. Losses were projected at $3.1 billion for MBIA, $1.8 billion for Ambac, and $2.2 billion for Financial Guaranty Insurance Co.
Here is trouble, MBIA thought it ws Ambac, and vica versa and Moody's and Fitch thought that they could also swap places: I think they are all just confused in this chaos and have no idea why they have such high salaries?
Re: dditional potential sources of the difference between Ambacs mark and marks of the banks are based on structural distinctions and include:
1. Composition of the collateral. Ambac has noted that later vintage high-grade ABS CDOs
(particularly those with 2007 and late 2006 vintage underlying collateral) and high-grade ABS CDOs that have a larger inner CDO component have suffered more severe MTM losses.
Subordination and structure. The amount of first loss subordination and credit migration
triggers also can impact the market value of the senior tranche. In general, Ambac requires a
thicker layer of AAA subordination than is typical in the market, substantially reducing MTM.
What percentage of the $550 billion par of guaranteed obligations are represented by direct
subprime RMBS and by CDS on ABS CDOs, including the CDO-squared deals?
Ambacs portfolio is a highly selective sub-segment of the market. Our direct subprime RMBS business represents 1.6% of Ambacs $550 billion in guarantees outstanding. CDS on ABS CDOs represents 4.8% of the portfolio.
2. Please explain why Ambac believes it will not pay claims on its Mezzanine ABS CDOs.
Ambacs view of these insured transactions is based on ongoing and detailed analyses of the
individual transactions themselves. In the case of the CDO-squared transactions, for example, this
includes a review of all the 15,000+ CUSIPs underlying the inner CDOs which comprise the CDO- squared portfolio. These analyses take account of the particular characteristics of those transactions, e.g., the importance of vintage and the distribution of the individual RMBS securities within the CDOs which underlie the CDO-squared transactions
Does Ambac issue quarterly reports?
Yes, Ambac provides a quarterly operating supplement via hard copy and our web site. Also, all of our earnings releases are posted on the web site.
"But Mr Dent, the plans have been available in the local planning office for the last nine month."
"Oh yes, well as soon as I heard I went straight round to see them, yesterday afternoon. You hadn't exactly gone out of your way to call attention to them, had you? I mean, like actually telling anybody or anything."
"But the plans were on display ..."
"On display? I eventually had to go down to the cellar to find them."
"That's the display department."
"With a flashlight."
"Ah, well the lights had probably gone."
"So had the stairs."
"But look, you found the notice didn't you?"
"Yes," said Arthur, "yes I did. It was on display in the bottom of a locked filing cabinet stuck in a disused lavatory with a sign on the door saying 'Beware of the Leopard'."
Overall, SCA believes that during the current year, it has generated $400 million to $600 million of additional capital from the expanded use of reinsurance and the adjustment to the net present value of future installment premiums calculation alone. As part of our capital planning practices, we have stressed our capital position for a scenario involving a two-notch downgrade of all our direct CDO of ABS and CDO squared exposure within our portfolio.
Again, the outcome of this scenario depends on which rating agency model you consider, so we present ranges. A two-notch downgrade of our CDO of ABS and CDO squared portfolio will require SCA to set aside between $175 million to $200 million of additional capital. But please keep in mind that the CDO tranche we wrapped can withstand between a three- to four-notch downgrade of 100% of the underlying collateral without being subject to a downgrade itself.
Before I ramp up, I'd like to describe some metrics around our insured portfolio. As you can imagine, we have chosen to add the three HELOC transactions, which I referenced earlier, to our credit watch list. The total net exposure associated with these three HELOCs is just under $1.5 billion. After accounting for the addition of these deals, the aggregate net exposure of our watch list credits at the end of the third quarter was $2.3 billion, which represents 1.5% of our total insured portfolio.
Now I'd like to take a more detailed look at our exposure to residential mortgage-backed securities, or RMBS. At the end of the third quarter, our direct RMBS portfolio totaled $8.9 billion, or 5.8% of our total insured portfolio. This $8.9 billion is comprised of 56 different deals. I'm pleased to say that none of these deals have been downgraded or have experienced a ratings outlook change as a result of any of the ratings actions by Moody's, Standard & Poor's and Fitch since the end of the second quarter.
Let me now turn to our CDO portfolio, our CDA portfolio totaled $44.3 billion at the end of the third quarter. None of our wrapped tranches have been downgraded or experienced a ratings outlook change as a result of any of the ratings actions by Moody's, Standard & Poor's and Fitch over the past few months.
As you might know, ratings reviews by the rating agencies for all CDOs remain ongoing. As we have stated before, we have not written a single CDO of mezzanine asset-backed securities since 2004. Our exposure to mezzanine ABS CDOs, where residential mortgage-backed securities comprise at least half of the collateral, amounted to only $301 million at the end of the third quarter.
DARIN ARITA, ANALYST, DEUTSCHE BANK: Hi, good morning. I guess I'm just doting on that. Turning to your view of the inner CDO collateral, can you talk about how your view of that collateral, if you have an assessment of the ratings there and how that compares with the current rating agency ratings?
ED HUBBARD: Yes, good morning Darin. Since we have the benefit of Sohail's presence here -- as we had mentioned earlier, Sohail runs our CDO practice -- so let me turn it over to Sohail.
SOHAIL RASUL, GROUP MANAGING DIRECTOR, SECURITY CAPITAL ASSURANCE LTD.: Yes, good morning, Darin. Yes, we obviously have visibility into the inner CDOs, as Ed said, and we are looking at the performance of those inner CDO buckets. The ratings of each of the positions within those are coming under stress, as you would imagine in this market. Where we take comfort is that we have at the outer CDO levels, sufficient subordination to be able to absorb a significant amount of deterioration within those inner CDO buckets. And that still remains the case today.
DARIN ARITA: All right. So you're -- I guess just to be clear on that, are your expectations for these inner CDOs, I guess, different from what the current rating agency ratings are? Because the expectatio
That is from Q3 2007 SECURITY CAPITAL ASSURANCE LIMITED Earnings Conference Call - Final
Good morning, ladies and gentlemen, and welcome to the Security Capital Assurance 2007 Third Quarter Earnings Conference Call. As a reminder, this conference call is being recorded.
OT -- waiting for this market correction is a bit of a pain. The market drifts or moves down on the bad news, as it should, then in the afternoon, the market moves up on the S&P 500 futures purchases by the hedgies.
Panic from the mutual fund managers cannot come fast enough for me. I'm irritated at my 'red' closings being stolen.
Quickly, the crisis played itself out. First, Orange County missed a $200 million payment on $2.6 billion in reverse repurchase agreements, a form of securitized loans, to First Boston Corp. With the county close to default, First Boston immediately liquidated its entire holdings of Orange County collateral, made up primarily of government bonds.
We also remain comfortable with the credit quality of our high-grade ABS CDOs. And while recognizing that it is still early days, we do not expect to suffer any losses. Given the recent rating agency actions in the RMBS and CDO sectors, our ABS CDOs are performing well within the tolerance's structure into these deals.
Underlying our ABS CDOs are nearly 3,700 unique securities or pieces of collateral. Of these securities, 16.9% have been downgraded with an additional 4.6% placed on negative watch since the end of the second quarter by either Moody's, Standard & Poor's or Fitch. For those securities which were downgraded, the average downgrade amount was 2.8 notches.
"And the way I think about it is this: that historically when a homebuyer, homeowner has a problem, a default's clearly not in the homeowner's interest. And it's clearly not in the lender's interest. It's very costly; defaults are very costly. So in a normal world the two sides come together and they strike a deal."
This smells of pure fear. Again, trying the PR approach, making s&*t up that any sane person knows is total crap and bad financial advice. A default right now is in many, many, home"owners" interest. If they really own a home, as in, don't have a mortgage, it isn't an issue. If they have a mortgage, they are underwater, and prices are clearly going to fall further, hmm, sure seems to me if Paulson were put in that position he would figure out pretty quickly that the cost of walking and defaulting would be recouped much faster than trying to pay off on a what is a horrible investment going forward. Most of these peeps have no skin in the game, and the ones who do, still doesn't matter - Hanky knows darn well what sunk costs are. He just doesn't want non-financially minded folks to figure it out. But guess what? It's not rocket science, even if Lewis (the potato brain) doesn't understand it.
I am bothered by your mass-pasting of entire transcripts or SEC filings, or other. We can read stuff for ourselves. If you will not highlight and analyze significant sentences, I would love it if you refrain from doing this.
This is totally BOGUS. Of course the rating agencies and WP were told abotu this in advance, but the stock market was not. MBIA of course stops there.
I don't get what they're doing. They are trying to respond to the media bashing that says that MBIA didn't tell THE MARKET about this. Well, it's true, and even MBIA isn't claimnig that it did tell the market. IMO their PR tonight is designed as a smoke-screen for idiotic investors to get their stock price short squeezed back up.
At least in my part of california,people who bought in '06 with 20% down,and who used an I/O loan are paying AT LEAST 3 times what it would cost to rent the same home.and quite a few have no equity.oopsie.
Since the SEC doc or info related to this matter was not obvious or previously posted, i thought I would help point to the docs and matters of concern, but since my posts are so offensive, perhaps I should wait for informed readers to find the docs at a much later date -- if at all
Second that. The Paulson interview with the LA Times is remarkable.
The editorial board is skeptical bordering on hostile (rightfully so, in my view).
Paulson is on his heels the whole time, or so it seems to me reading.
Paulson becomes increasingly condescending. e.g., . . . and again, I don't know how much more clearly I can say this. . . , ". . . if you understood my point . . .", "So you'd like to see it (housing market) distorted down too", "So you would put homeownership in a different category than all others (types of credit)."
4.\tPaulsons hackery is showing. e.g., "I think this is an innovative way and a practical way the private sector's come together to deal with a problem that they've never come up with before, and that's an innovative way. Just repeat key words like innovative, Henry remember, innovative.
"This is totally BOGUS. Of course the rating agencies and WP were told abotu this in advance, but the stock market was not. MBIA of course stops there."
It's even worse than that as it shows what kind of BS the ratings agencies allowed to remain. This isn't just a limited hangout by MBIA, this is now a cover job for the raters.
MBIA: (picks up phone) Yes
Fitch: Do you f'ing jerks want an immediate downgrade to zzz-. We just had a meeting and created it.
MBIA: Well not really.
Fitch: Then get out there and do some bleeding damage control (slams phone down)
MBIA: (picks up phone) Hello?
Moody's and S&P conference call: Are you f'ing nuts! No really, you D-Bags! We own you! Fix this thing!
(slams phone down).
MBIA: Well that was unpleasant. Get the accountants to come up with some cover gents, or we're toast.
Misean - just like the UK is two years behind the US on its bust, SoCal is a bit behind the San Diego. The only difference is that when San Diego thinks it is going to recover, it gets hit with the neg-am option-arm resets, while SoCal will be just understanding how ugly it can get before it gets infinitely uglier for the same reason.
Oh I'm not anywhere near saying SoCal is immune, I just don't follow SD too closely...Didn't know it had gotten that bad there. I expect to see some serious fit hit the shan here, however.
BBC TV. Quite funny, but not anywhere near as good as the books. Hard to do well as a movie. Of course they said that about Tolkien...and then came Peter Jackson...
"Is that clip from the movie of the TV show?"
12th Percentile | 12.20.07 - 9:23 pm
I thought it was from the original radio show. I hope to be listening to it during this weekend's holiday driving.
Perhaps M. Coté will edify us with his (superior) erudition in the comments.
Misean,I live outside of sebastopol ca,and actual sales are at '04 prices for the most part.$1.25M gets you a nice property.google 6975 Orchard Station Rd,95472.It has about $125k in deferred maintenance,but was very well built and has a good floor plan.It takes an hour and five minutes to get to the sf financial district. It is now in escrow after 7 months on the market.High quality Estate properties are moving,low and mid range stuff is real sticky,mostly short sales and REO's.In early '06 there were probably 40 properties on the mls at $500k or below countywide.now it is above 1,100.aahh,the whine country.
ACA and MBIA problems, have to start to hit pension fund asset quality limits. Then we shall have mark to market prices for those deep in the basement, tier 3 bank "assets". The IB's have got to be sweating bullets.
Myth Busters showed how it was possible for a person slamming themselves against a high rise window on a wheely chair to bust through. I imagine some of the people involved in this are watching those clips and preparing a final strategy.
In December 1863, Hugh McCulloch, then Comptroller of the Currency of the United States and later Secretary of the Treasury, addressed a letter to all national banks. Here are some of the paragraphs.
Let no loans be made that are not secured beyond a reasonable contingency. Do nothing to foster and encourage speculation. Give facilities only to legitimate and prudent transactions. Never renew a note or bill merely because you may not know where to place the money with equal advantage if the paper is paid.
Distribute your loans rather than concentrate them in a few hands. Large loans to a single individual or firm, although sometimes proper and necessary, are generally injudicious, and frequently unsafe. Large borrowers are apt to control the bank; and when this is the relation between a bank and its customers, it is not difficult to decide which in the end will suffer.
If you doubt the propriety of discounting an offering, give the bank the benefit of the doubt and decline it; never make a discount if you doubt the propriety of doing so. If you have reasons to distrust the integrity of a customer, close his account. Never deal with a rascal under the impression that you can prevent him from cheating you. The risk in such cases is greater than the profit.
Pay your officers such salaries as will enable them to live comfortably and respectably without stealing; and require of them their entire services. If an officer lives beyond his income, dismiss him; even if his excess of expenditures can be explained consistently with his integrity, still dismiss him. Extravagance, if not a crime, very naturally leads to crime. A man cannot be a safe officer of a bank who spends more than he earns.
The capital of a bank should be reality, not a fiction; and it should be owned by those who have money to lend, and not by borrowers.
Pursue a straightforward, upright, legitimate banking business. Splendid financing is not legitimate banking, and splendid financiers in banking are generally either humbugs or rascals.
Nope not the radio show. Which I have. Douglas Adams actually wrote 3 versions...and started the fourth for the movie, before he checked out...way too early.
There's very few muni bonds in pension funds. Pension funds don't get any tax benefit from tax-exempt bonds and a lot have Investment Policy Statements that don't allow them.
The BBC radioplay was nearly word for word the book. The television miniseries suffered only slightly from budget constraints. The big budget movie suffered terribly from lack thereof. Pretty much anything as sublimely incredible as the current financial cogs flying off the machine was covered by the late lamented Mr. Adams.
Greenspan, Bernanke, Paulson, and W will go down in history as the economic "hacks" that they are, as the US economy heads into a recession of potentially historic proportion. W should have listened long ago to his father, as "it's the economy (once again), stupid!"...
More amazing, IMO, are the self-proclaimed "smart money" fools like Warburg (MBI), Bank of America (CFC), China Fund (BX)& (BSC) & (MS) and numerous others throwing good money after bad.
The LA Times piece with Paulson is exceptional - that is the MSM actaully getting its groove back - what twigged me was the word count, Paulson uses 'investor' 13 times and 'homeowner' 5 times (excluding the homeownership discussion at the end, 'homeownership' has a 6 count there).
Any lack of clarity on who he is working for here?
"The Calculated Risk blog responded to the Fed's auction with a prayer for the times: "Grant me the capital to accept the things I cannot change; the reserves to change the things that I can; and the Fed auction when all that blows up."
-From the WSJ
RJ
Hmm.. This is interesting in the sense of unfortunate/ugly coincidence (or perhaps not such a coincidence). According to this blurb in the middle of a Bloomberg Opinion Article retrospective series on Subprime, the rating agencies (Moodys mainly) experienced a "Cultural Change" right before the credit/derivative boom and became more warm and fuzzy. Mainly it seems this happened because they went public and needed to maximize client retention and "customer service" to pump up profits.
Colorado's Jefferson County School District sued Moody's in 1995 claiming the company issued a negative rating after the district refused to hire Moody's to evaluate its bonds. While the suit was dismissed in 1996, the dispute set off a three-year antitrust investigation by the Department of Justice that ended in 1999 with no action.
The probe led to the ouster of Thomas McGuire, Moody's chief of corporate ratings, and started a cultural shift,'' as Moody's prepared to go public, says Ann Rutledge, an analyst who left in 1999 after four years. In early 2000 the board of Dun & Bradstreet Corp., Moody's parent, voted to split into separate publicly traded companies. Employees were required to take a six-week class onissuer relationships'' with listening exercises, Rutledge says.
Customer Service
There used to be a strong sense that we weren't a touchy, feely company,'' says Rutledge, who is now a principal at R&R Consulting, along with her husband, Raynes, a fellow Moody's alum.Our attitude used to be: We're not here to be your friend. We're here to look at credit quality. But that began to change.''
Initiatives such as the listening exercises were part of the company's emphasis on customer service, says Warren Kornfeld, managing director of Moody's.
We care very deeply what people think,'' Kornfeld says.We want to have a dialogue with investors, and we want to have a dialogue with issuers. Our value to the market is our accessibility.''
The lure of profits as the housing market began a run of five record-breaking years in 2000 fueled the change, says Graham Fisher's Rosner.
``They went from looking at companies that already existed to having a role in structuring securities,'' Rosner says.
..."
I question that. I believe it is based on Slartibartfast's Bistromathic drive. From wikipedia:
"The first nonabsolute number is the number of people for whom the table is reserved. This will vary during the course of the first three telephone calls to the restaurant, and then bear no apparent relation to the number of people who actually turn up, or the number of people who subsequently join them after the show/match/party/gig, or to the number of people who leave when they see who else has shown up.
The second nonabsolute number is the given time of arrival, which is now known to be one of those most bizarre mathematical concepts, a recipriversexcluson, a number whose existence can only be defined as being anything other than itself. In other words, the given time of arrival is the one moment of time at which it is impossible that any member of the party will arrive. Recipriversexclusons now play a vital part in many branches of mathematics, including statistics and accountancy, and also form the basic equations used to engineer the SEP Field.
The third and most mysterious piece of nonabsoluteness of all lies in the relationship between the number of items on the bill, the cost of each item, the number of people at the table and what they are each prepared to pay for. (The number of people who have actually brought any money is only a sub-phenomenon in this field.)"
The rest can be found here...cough Doc Holliday-cough:
I mentioned this in passing awhile back.. but I think I'm going to start pushing the idea more..
Has anyone considered what it would be like if there were a Debtors' Union?
The one thing the most people in the U.S. have in common (from college educated people to blue collar workers with no High School diploma) is debt. You could link the middle and lower classes together in one super block..
Just the threat of a nationwide "payment strike", could really stir shit up.
"Has anyone considered what it would be like if there were a Debtors' Union?"
Yeah let's all go into debt to our eyeballs and then claim insolvency to those we borrowed from and demand they forgive our debts, but let us keep what we bought with their money.
Sounds workable. I'm sure nothing bad could happen from that idea. I mean Mexico and CA/SA countries our such economic power houses. Good idea.
Sounds workable. I'm sure nothing bad could happen from that idea. I mean Mexico and CA/SA countries our such economic power houses. Good idea.
Well.. I figure, why should the cheesebags at the top get a pass since they know how to put an LLC between themselves and the debt they take on.
Anyhow, I'm not saying the Debtors Union would serve to void debts.. it would serve to negotiate for better terms.
If I'm getting squeezed by some bank because they decided to raise my APR on some credit card I use... I'd like a Union to settle the dispute for me.. I know a number of people who made stupid decisions in their youth.. but have always payed their Credit Cards on time.. just one day, the issuing company juices the APR..
Now, you can call them up and raise hell and maybe get it reduced, but I bet there are a lot of people who don't realize they can do that.
I think you are arguing from shaky ground if you want to suggest that lenders are not the ones with all the power in this situation (as it is currently understood). Though, I don't think you are suggesting that.. you probably just think I'm suggesting people should reneg on their Hummer leases or something..
I also have a hard time seeing what is wrong with people realizing that they aren't beholden to creditors.
"Well.. I figure, why should the cheesebags at the top get a pass since they know how to put an LLC between themselves and the debt they take on."
Oh I want the lenders to take in on the chin hard. And it appears they are. But such schemes only increase the cost of credit to the borrowers. Let the pigmen fail, because of their own counter party risk. That CLEANSES the system and doesn't impair the system down the road.
Almost all such systems you want actually end up benefiting the pigmen, to the detriment of the future.
"Now, you can call them up and raise hell and maybe get it reduced, but I bet there are a lot of people who don't realize they can do that."
Well then don't borrow. If you are unwilling/unable to understand the terms of the contract, well I'm crying crocodile tears.
"If I'm getting squeezed by some bank because they decided to raise my APR on some credit card I use... I'd like a Union to settle the dispute for me.. I know a number of people who made stupid decisions in their youth.. but have always payed their Credit Cards on time.. just one day, the issuing company juices the APR.."
All of this is in the contract. I liken contracts for EZ money as deals with the Devil. Someone is offering you money for nothing is LYING. I'm all for the school of hard knocks.
"I think you are arguing from shaky ground if you want to suggest that lenders are not the ones with all the power in this situation (as it is currently understood). Though, I don't think you are suggesting that.. you probably just think I'm suggesting people should reneg on their Hummer leases or something.. :)"
Bingo!
"I also have a hard time seeing what is wrong with people realizing that they aren't beholden to creditors."
They are if they sign the contract. I'm not, I gave up the plastic and debt years ago. I paid for all my Christmas presents this year with cash. If the pain of this makes people save instead of go into debt, so much the better...for all of us.
This idea that "it was much ado about nuthin' " got discussed in the original MBIA thread by X, Y and moi. I even went so far as to think out aloud that I was going to go long on MBIA in due course. I duly did at 20.85 towards the end of the day.. We'll see but looking at the after hours trading, I'm in the money ( so far ! ).
Now if the doc didn't pollute the threads people could have read that discussion and some could have played the game that I did and ( in terms of AH action ) be in the money.
So, doc, STFU please. You cost people money.
FWIW, I'm not staying long MBIA, long.
As regards HHGTHG, I would have commented but reading thru the comments it seems I'm in the company of the anorak brigade. And I thought I was in the anorak brigade.
Dryfly - "So if its disclosed and contained, why is everyone so jumpy?"
Because everyone suddenly realizes that the old dead horse they were beating ("MBS, CDOs and other derivatives distribute risk. That's a good thing!") is now highly unstable and widely distributed nitroglycerin.
WSJ - Merrill May Get Capital Infusion / Singapore's Temasek Is in Advanced Talks To Invest up to $5 Billion ($5B ain't gonna cut it) Merrill May Get Capital Infusion - WSJ.com
re Doug Adams
Dont quite think J & B etc does justice to the material.
What is needed is the stuff that grows off the earth to do justice (yeah yeah, they grow in hydroponic stuff too)
Recall 30 years ago listening to the vinyl (brought back by a friend in the UK)
I'll have to give this short shrift now (since I've gotta go have a beer with a girl), but.. we're in the current situation we are now because of the totally ridiculous way the system goes about providing debt to the average person.
I think that you agree that this entire structure appears to be un-maintainable over the long term.
Maybe we are all idiots.. (I'd buy that).. but I think the people who owe money getting organized and realizing that the debt they're in is unsustainable.. I think that would be a good first step.
The next step is poking a effing stick in the eye of the dipshits who set that structure up.
O ok, I'll succumb - just to be totally clear, the radio series was FIRST ( there are kinks around whether it was just DA but we'll leave it alone ).
I remember it well - I only tuned in because of Peter Jones(the book narrator), who was famous for his repartee in radio stuff like "I'm Sorry I haven't a Clue" and "Just a Minute" and very soon the whole post grad uni crowd followed it. They would always credit the music to Bernie Leadon and it took me a couple of shots of getting out the Eagles album ( the one with the goats skull I think ) and looking thru the credits to assure myself it was all one and the same.
It WAS strange that they credited it to Bernie Leadon and not the Eagles. Very Auntie Beeb.
-K
P.S. Thanks to an incidental reference by a contributor on your blog, Robert Cote, I discovered QI, downloaded the 5 series and enjoy it. Reminds me of those BBC Radio 4, high table erudite conversations - but all done without the hoighty toighty.
eli's position is laughable...unless one resides in France or other numerous historically glorious now moribund nation-states.
What eli espouses is the underbelly of socialism. Wretched people of equal ilk to those who originally invented and gamed the game. These folks invented nothing and entered with Cheshire grins colored brown as they swept in for the easy economic kill.
The nation will survive. The foreign-born whose greed blinded them, the less than average intelligent who sought to follow the crowd? They're "out".
Instead of applauding the USG for at least closing the mortgage lending barn door, irrespective of how late, eli wants to bring into reality Animal Farm.
Government loans are fixed rate and assumable for refinancing existing housing.
The bank who initially underwrote any loan that qualifies for refinacing at 5.1 %, 30 fixed, assumable will be charged the difference between the market rate and 5.1 %.
Primary residence only and sufficient assets and income to support the loan ( a tuff one).
The interest rate differential will be guarantted by the Federal Reserve and the bank will be assessed the difference.
Any banking institutions that is assesed a loan default recinfiuration will be automatically be taxed at a rate of 75 % of reported profits.
The paragraph reads:
"The Calculated Risk blog responded to the Fed's auction with a prayer for the times: "Grant me the capital to accept the things I cannot change; the reserves to change the things that I can; and the Fed auction when all that blows up."
sk
Anorak, thought that was some sumerian god.
Never got a chance to reply to the "doting relatives". Not very doting, even the sisters, two weeks into the stay ask "when are you going back"
On a total different level, should talk. I have/had somewhere a pricing model and complete system for weather derivatives. Spent a year back home and getting it together. Sort of lost motivation somewhere.
Since we are offering prayers these from my blog contributors might bring a smile:
At 3:14 PM, Rob Dawg said...
Yea, though I walk through the valley of the shadow of debt, I will fear no consequence: for the Fed art with me; thy credit window and thy staff they comfort me.
At 3:28 PM, Property Flopper said...
You anoint my head with credit; my cashback overflows. Surely creditors and debt will follow me all the days of my life, and I will dwell in the house of bankruptcy forever.
At 3:44 PM, Rob Dawg said...
"Woe to those who join house to house and field to field, until there is no more room, and you are made to dwell alone in the midst of the land. Jehovah of heaven's armies has sworn in my hearing: "Surely many houses shall be desolate, large and beautiful houses, without inhabitant." Isaiah 5:8-9
And I didn't have to change a word.
At 5:10 PM, Edgar said...
Psalms 37:1-8 "Fret not thyself because of evildoers, neither be thou envious against the workers of iniquity. For they shall soon be cut down like the grass, and wither as the green herb. Trust in the LORD, and do good; [so] shalt thou dwell in the land, and verily thou shalt be fed. Delight thyself also in the LORD; and he shall give thee the desires of thine heart. Commit thy way unto the LORD; trust also in him; and he shall bring [it] to pass. And he shall bring forth thy righteousness as the light, and thy judgment as the noonday. Rest in the LORD, and wait patiently for him: fret not thyself because of him who prospereth in his way, because of the man who bringeth wicked devices to pass. Cease from anger, and forsake wrath: fret not thyself in any wise to do evil."
At 5:12 PM, Edgar said...
Lord, won't you buy me, a Mercedes Benz...
My friends all have HELOCs, I must make amends...
Worked hard all my lifetime for chump change,
So Lord, won't you buy me, a McMansion on the range.
At 5:14 PM, Edgar said...
Thus saith Edgar Almighty:
And I will strike down with great vengeance upon the evil maggot banksters, fraudsters, and flippers. All are scum in my sight.
At 5:16 PM, Edgar said...
Tenth commandment: Thou shalt not covet thy neighbor's MEW.
That was simply the dumbest thing I have heard a moron utter in a very long time. Thanks for destroying Christmas and forcing many rebellious children to take the next step into heroin and/or suicide. Guys like you are real peaches. Get help, Robert. We support you.
The original 'Who watches the Watchmen' is actually Juvenal, from Satire VI.
Here's the Loeb translation
'I know well the advice and warnings of my old friends--"Put on a lock and keep your wife indoors." Yes, but who is to ward the warders? They get paid in kind for holding their tongues as to their young lady's escapades; participation seals their lips. The wily wife arranges accordingly and begins with them. . . . '
And a slightly more apt version for here
I know well the advice and warnings of my old comrades in the Market --"Hire a rating firm and keep the loan where you can watch it"
Yes, but who is to rate the raters?
They get paid in kind for holding their tongues as to the vendor's escapades;
participation in future issues seals their lips.
The wily vendor arranges accordingly and begins with them. . . .
"eli's position is laughable...unless one resides in France or other numerous historically glorious now moribund nation-states."
No reason to slap one with a 2X4 when a quiet rebuttal would do.
You have to know when to hold 'em and when to fold 'em..and the old gambler's soft touch will likely have more of an impact than a louiseville slugger.
I know, I know...pot..black..kettle...
Sometimes though, pulling in the horns is a positive.
Misean | 12.21.07 - 12:11 am | #
I think Teddy (lets see if i can spell Theodore) Roosevelt said it a little better.
"Talk softly and carry a big stick" or some thing like that.
Does that seem like the GW Bush/Cheyney adage as well.
Hmm... need to think more.
Who was it who said "Owww my head hurts
and that's kinda fired me up on this malarkey. The very thing I call it should suggest to you my cynicism about the filthy lucre, AS MUCH AS I ENJOY IT AND QUITE COMFORTABLE WITH GAINING MORE - but there is a macabre fascination for me into this depravity of human beings ( o yeah I'm one and not immune to it ) and I love it - "like the smell of one's own shit" as Dario Fo, an Italian Trotskyite novelist "Accidental Death of An anarchist ( Water boarding tape destruction anybody?) " said.
I hate to be the friend that tells you about your dillusions but, I you have selected me as that person. I luv ya man ! But we have to be strong and take our crazy ideas out and not... not look at the credit crisis as if it where a painful rectitude that protrudes from our butt but instead, be strong. Thanks for caring it's the g****n Corona talking.
Soooo... if MBIA did previously disclose their CDO holdings, and the market reacted as it did to a reiteration of the disclosure, what does that say about market efficiency?
I'd say it's a laboratory proof that markets are not efficient at incorporating information into pricing.
jus me
...and the market reacted as it did to a reiteration of the disclosure, what does that say about market efficiency?
Precisely. Its insane that efficient market theory is taught in college as if it has validity - or so I'm told - an economics grad should correct me if I'm wrong.
Separately, this "inefficiency" was discussed in the earlier MBIA thread and suitable bets placed.
Its a fluid market, one in which its hard to fit the "news" to the "reaction". Why was MBIA's stock down and credit default premium up so much? Because analysts don't read footnotes? Yes, partially (Tanta would have caught it, of course). But also because a AAA insurer shouldn't have CDS that trades like junk. So something that reminds the market of that fact has an unpleasant tendency to drive down the stock price.
I mention the above not because I want to comment on a particular stock, but because it is a microcosm of overall market psychology.
John Mauldin had an interesting piece on his site a while back on chaos theory. Turns out scientists tried to model the breaking point of a "system" by building sand piles one grain at a time, and then seeing if slope failures were "catastrophic". What they found was that one grain of sand could trigger a widespread collapse of the pile if 1) the sides were steep; and 2) the sides were interconnected. The steeper the sides, the higher the chance of a catastrophe.
The analogy with the markets is that "steepness" corresponds to "denial", and "interconnectedness" corresponds to "leverage".
The day the grain of sand causes a failure in the system, we'll all have a hard time explaining why the particular news on that day was so important.
zinc | 12.20.07 - 11:53 pm | I suggest that those blockheads that want to chat: take your pussy asses down the hall to someone who gives a fat F*** what you have too say
Zinc
Were you referring to me. Go to my home page, its got a phone number. You can call me. My name is distinctive, as is my signature (since 1990). 12% Irish does the trick
O yeah I quickly broke it before I wrote something mean about doc about 7 days back, for obvious reasons. Sigh the cat's out of the bag.
Leave it till the New Year. I live on the Brit calendar NOTHING, apart from bonking, boozing and more boozing happens from around the 15th Dec to 6th Jan.
So if its disclosed and contained, why is everyone so jumpy?
dryfly | 12.20.07 - 11:03 pm | #
Epiphany! English words used by financial types who used to be physics majors; the guys who talk about "free energy" and adiabatic expansion. I gotta find the glossary damn it.
sbarrkum- You need to come back and do some productive work. At great personal sacrifice I will trade places with you for one year. Although it will be painful to be incarcerated on some idyllic tropical isle, I'm willing to make that sacrifice. I have my prescription snorkel mask packed. Just waiting for your call.
My wish for you is an opportunity to fullfill your dreams. Of course you cannot concieve of a reality in which you do not attain that which you think you want --- but there actually exists a reality for you that might be judged "far below your station".
So if you ass-wipes are affended by my brusk expression -- so be it. Let us begin this weekend --- I will be in front of the Safeway at Tangerine and 1 St in Tucson Arizona. I will be the dark haired man that looks like a middle linebaker ( that was my my place)ready to
sdtfs | 12.21.07 - 2:28 am |
I think I am pushing buttons. Nope, I live in Long island city.
believe me (right), as a CR blogger you would be welcome where ever I live,
The "island place" was my 401K in 2003.
sbarrkum - Well,at least I'll have something to dream about. A picture to replace that photo CR used to have.
zinc- You've got an uphill battle keeping the late night folks 'on thread'. Your best bet is to try to offer some 'on topic' bait. Heck, Tanta has a hard time in the day time and she's got the keys to the blackbox.
NEW YORK (AP) -- This might have been one of Wall Street's most dismal years in a decade, but that hasn't stopped bonus checks from rising an average of 14 percent.
Four of the biggest U.S. investment banks -- Goldman Sachs Group Inc., Morgan Stanley, Lehman Brothers Holdings Inc. and Bear Stearns Cos. -- will pay out about $49.6 billion in compensation this year. Of that, bonuses are traditionally estimated to represent 60 percent, or almost $30 billion.
Roubini has a great column on MBIA and the like. Utterly flawed model, he says. If MBIA's AAA rating is reduced, bankruptcy looms. And of course its rating...well I won't spell it out. Amazing that it still sells for $20 a share or thereabouts.
Zinc: Did you ever graduate from anywhere? Kindergarten? Grade school? I won't mention High School since that is out of the question. I ask this after reading your posts with your spelling and your "language."
In Arizona one bets on the date the temperature hits 100 degrees. Anyone want to bet on the date (or week) when the first big MM fund breaks the buck (and panic ensues)?
By Lina Saigol in London and James Politi in New York
Published: December 20 2007 19:20 | Last updated: December 21 2007 01:23
The volume of mergers and acquisitions worldwide suffered a dramatic fall in the second half of the year as credit dried up for private equity deals and many chief executives scrapped plans for bold takeovers.
Global M&A in the year to date reached $4,740bn surpassing last years record of $3,910bn. But volume in the second half dropped 26 per cent and September was the lowest month since November 2005, according to Dealogic, the data provider.
""Someone asked me, 'Are we bankrupt?'" Mr. Nardelli said at the meeting. "Technically, no. Operationally, yes. The only thing that keeps us from going into bankruptcy is the $10 billion investors entrusted us with."
In an interview yesterday, Mr. Nardelli acknowledged making the comment, saying it was intended to "convey a sense of urgency" among employees."
The muni market is unlike any other market in finance in one respect.
It includes many thousands of very thinly traded issues, including some where no trades take place for days at a time; and
The primary market is high-income individuals, who buy two-thirds of all bonds outright or through funds.
It means, if high-income individuals went on strike and avoided the market for any length of time, trading would freeze up. Anyone who wanted out of the market might have to sell at a large loss. Prices on thinly traded issues could drop by 20-30%. NAVs on some muni funds could drop by 10-15%.
Can anybody who lives in California or knows about Mello-Roos answer this question:
Who is responsible for the Mello-Roos assessments on homes that aren't built or homes that are partially finished and can't be sold?
In other words, assuming infrastructure improvements have already been made via revenue bonds, who is responsible for repaying those bonds if homeowners don't?
Isn't this a big potential problem for the muni market?
The capital markets are currently penalizing issuers, insurers, lending institutions, and ratings agencies.
Evidence of this is prevalent with the increased cost of capital raising.
This is a severe warning shot across the entire credit landscape to prevent a reoccurance of past mistakes.
The repurcussions will begin to show throughout the economy with further tightening of credit, smaller balance sheets in the end, and a recessionary landscape.
I believe these effects will begin to surface as the weak credits continue to experience significant pressure and cannot refinance due to the previously mentioned changes. This will be a long cycle, will cleanse in many respects, will hamper growth for an extended period, will keep interest rates low, will force deleveraging, and lead to below par returns.
The above mentioned Chrysler problems are indicative of what is to come. Bankruptcies will rise and the lbo, pe market is effectively dead. Which, by the way, people scoffed when I predicted this at what could now be termed the peak.
I think we are tending to focus on the bad here and then imagine this is a universal event.
For example CDO's on subprime loans. Subprime was expected to have around a 15% failure rate. Depending on how the top receiving buckets of the CDO are organised and how many slices are below them in the pecking order those top slices are fairly safe since they will get All the income that was intended to be distributed to all the lower slices.
There are many millions of homes in america so even millions of foreclosures is not the end of the world. Many subprime loans in many parts of the country are not going to fail
And so to munis. Some munis will do badly. And some will be fine.
Looking thru the lens of this blog it is possible to imagine we are at the end of the world.
Difficult times but surely not as bad as some are saying??
Two questions: Roubini suggested that if MBIA's AAA rating is reduced it will go bankrupt. Right? And what are the chances that its rating will be reduced?
I'm not caught up in this blog because I work in this business and talk to a lot of people.
About one-third of all munis are held by tax-exempt mutual funds. These funds hold very little cash and have low rates of redemption normally. But what if high-income investors got nervous and started pulling money out?
The funds would have to sell bonds into a thin market. On some bonds, they are calculating NAV (the daily redemption price) based on trades several days old. So valuation could get tricky in the weeks ahead.
There's an obvious solution, which is to increase a fund's cash levels to meet redemptions. But are the large muni funds doing it?
There's an article in today's NY Post that mentions there were "conditions" on Warburg's funding of MBIA that haven't been met and that provide an escape hatch for Warburg to walk away.
This deal never smelled right to me.
It always smelled more like PR than real. Either way, it's not smart for Warburg.
More MBIA news. Seems to me if I were Warburg Pincus I would be thinking real hard about that walk up the aisle and maybe looking for clauses I didn't like in my pre-nup.
"Dec. 21 (Bloomberg) -- State and local borrowers are discovering that buying municipal bond insurance from MBIA Inc. and Ambac Financial Group Inc. is a waste of money..."
Something's gotta give...simply not sustainable. Period.
U.S. Nov. real disposable incomes fall 0.3%, 2nd drop in row
8:30 AM ET, Dec 21, 2007 - 12 minutes ago
08.\tU.S. Nov. personal savings rate falls to negative 0.5%
If it becomes widespread that municipalities forego insurance and get the same deal from investors...there goes the business model for the insurers....
They need that current revenue stream to pay the claims on all the bad deals they made the last three years. Without it, they are BK.
I read that Vlad Putin owns several oil companies and is worth 50 billion USD. Maybe you could sell Alaska back again? what did it cost? about 100,000?
The concern of a buyers strike is real, because those individuals buying paper outright usually also hold to term. As the old notes come due, it becomes easy not to roll it over and hold cash and squeeze those who have to sell. Of course you gotta pick your spots.....
Stop inhaling the sewer gas from your fellow CEOs. Spend some time reading Calculated Risk, and go out and learn something about the underwriting business from people like Tanta. Better yet, just resign because you continue to make yourself look like either a fool or a crook. Learn some history too because if things get really bad people will end up living in Paulsonvilles. Do you want that as your legacy?
"Oh no you didn't," sayeth Fitch. Hmmm.
If true, that one analyst quoted in all the stories today looks like an even bigger idiot.
We didn't care nearly as much back then. It would've been prudent for MBIA to repeat itself until it sunk in so there were a slightly rational response.
Maybe they coughed over the "inner" bit of "inner CDO's"...
Analyst:"Sorry, what was that..?"
MBIA: "/cough/er CDO's"
Analyst: "CDO's you said?"
MBIA: "yep."
See? This was all a bunch of hullaballoo about nothing.
Chuck Dohrenwend, a Warburg Pincus spokesman, declined to comment.
Hm. How to interpret "no comment" in this situation, I wonder?
In other words, the credibility of the ratings cartel is even more of a joke than previously thought. What a relief.
/snark
Crackheads everywhere!
Warburg might have missed it in their due diligence. Cool. No material adverse change.
Dont get pissed, just some background news from a few years back; Im thinking Orange County Squared:
Five days earlier, California's Orange County had announced that its investment fund of $7.4 billion faced losses of $1.5 billion, the result of a confluence of sharply higher interest rates and an investment strategy that relied primarily on derivatives and enormous leverage. The problem, in a nutshell: County Treasurer Robert L. Citron borrowed $14 billion, investing the money in interest-sensitive derivatives contracts, hoping to increase returns for his fund. When rates turned up, Orange County was forced to pay more on its borrowings than it was earning on its investments.
Quickly, the crisis played itself out. First, Orange County missed a $200 million payment on $2.6 billion in reverse repurchase agreements, a form of securitized loans, to First Boston Corp. With the county close to default, First Boston immediately liquidated its entire holdings of Orange County collateral, made up primarily of government bonds.
"SCARED TO DEATH." At 5 p.m. California time, the county supervisors hoisted the white flag. Facing the prospect of further liquidations and pressure from agencies clamoring to recover their investments in the fund, Orange County and its fund filed for Chapter 9 protection from bankruptcy in Santa Ana Federal Court. Suddenly, up to a dozen firms, among them Merrill Lynch, Morgan Stanley, and Nomura Securities International, were stuck holding billions in loans that Orange County would not honor. It still isn't clear whether those firms are prohibited from liquidating their collateral in the wake of the filing. "People are scared to death," says one Wall Street executive. "No one wants to be last to get their money."
Orange County's stunning bankruptcy filing, the largest ever in the municipal world, cast a chill over U.S. markets--driven partly by investor worries about other portfolio losses. On Dec. 7, prices in the $1.2 trillion municipal bond market sank more than a full point--a huge drop in that market. Treasuries took a hit as well, pushing the yield on 30-year bonds up to 7.89%. Even stocks were hurt, with the Dow Jones industrial average declining 10.43, led by financial companies, including brokerages that lent money to Orange County.
Back in Orange County, lawyers and regulators are sharpening their claws. Many of the 187 school districts, transportation authorities, and cities that invested in the fund already are mulling suits. The most likely targets: the Wall Street firms that lent Orange County money. The agencies expect "securities firms to shoulder some of the responsibility," says Haig Nargesian, senior analyst at Moody's Investors Service. Regulators also are probing the fund. The Commodity Futures Trading Commission has announced an investigation. And the SEC wants to know if Orange County was using the proceeds of bond issues to invest in derivatives--and, if so, whether proper discl
Stress Test
S&P ran a stress test to determine the losses bond insurers would take on securities backed by subprime mortgages, including CDOs. Losses were projected at $3.1 billion for MBIA, $1.8 billion for Ambac, and $2.2 billion for Financial Guaranty Insurance Co.
Now I feel much better.
Here is trouble, MBIA thought it ws Ambac, and vica versa and Moody's and Fitch thought that they could also swap places: I think they are all just confused in this chaos and have no idea why they have such high salaries?
Re: dditional potential sources of the difference between Ambacs mark and marks of the banks are based on structural distinctions and include:
1. Composition of the collateral. Ambac has noted that later vintage high-grade ABS CDOs
(particularly those with 2007 and late 2006 vintage underlying collateral) and high-grade ABS CDOs that have a larger inner CDO component have suffered more severe MTM losses.
triggers also can impact the market value of the senior tranche. In general, Ambac requires a
thicker layer of AAA subordination than is typical in the market, substantially reducing MTM.
What percentage of the $550 billion par of guaranteed obligations are represented by direct
subprime RMBS and by CDS on ABS CDOs, including the CDO-squared deals?
Ambacs portfolio is a highly selective sub-segment of the market. Our direct subprime RMBS business represents 1.6% of Ambacs $550 billion in guarantees outstanding. CDS on ABS CDOs represents 4.8% of the portfolio.
2. Please explain why Ambac believes it will not pay claims on its Mezzanine ABS CDOs.
Ambacs view of these insured transactions is based on ongoing and detailed analyses of the
individual transactions themselves. In the case of the CDO-squared transactions, for example, this
includes a review of all the 15,000+ CUSIPs underlying the inner CDOs which comprise the CDO- squared portfolio. These analyses take account of the particular characteristics of those transactions, e.g., the importance of vintage and the distribution of the individual RMBS securities within the CDOs which underlie the CDO-squared transactions
Does Ambac issue quarterly reports?
Yes, Ambac provides a quarterly operating supplement via hard copy and our web site. Also, all of our earnings releases are posted on the web site.
"But Mr Dent, the plans have been available in the local planning office for the last nine month."
"Oh yes, well as soon as I heard I went straight round to see them, yesterday afternoon. You hadn't exactly gone out of your way to call attention to them, had you? I mean, like actually telling anybody or anything."
"But the plans were on display ..."
"On display? I eventually had to go down to the cellar to find them."
"That's the display department."
"With a flashlight."
"Ah, well the lights had probably gone."
"So had the stairs."
"But look, you found the notice didn't you?"
"Yes," said Arthur, "yes I did. It was on display in the bottom of a locked filing cabinet stuck in a disused lavatory with a sign on the door saying 'Beware of the Leopard'."
Ha, ha, B-B-!
My father is from Harlingen. Good folks, down in South Texas.
Ok, is this it:
Overall, SCA believes that during the current year, it has generated $400 million to $600 million of additional capital from the expanded use of reinsurance and the adjustment to the net present value of future installment premiums calculation alone. As part of our capital planning practices, we have stressed our capital position for a scenario involving a two-notch downgrade of all our direct CDO of ABS and CDO squared exposure within our portfolio.
Again, the outcome of this scenario depends on which rating agency model you consider, so we present ranges. A two-notch downgrade of our CDO of ABS and CDO squared portfolio will require SCA to set aside between $175 million to $200 million of additional capital. But please keep in mind that the CDO tranche we wrapped can withstand between a three- to four-notch downgrade of 100% of the underlying collateral without being subject to a downgrade itself.
Before I ramp up, I'd like to describe some metrics around our insured portfolio. As you can imagine, we have chosen to add the three HELOC transactions, which I referenced earlier, to our credit watch list. The total net exposure associated with these three HELOCs is just under $1.5 billion. After accounting for the addition of these deals, the aggregate net exposure of our watch list credits at the end of the third quarter was $2.3 billion, which represents 1.5% of our total insured portfolio.
Now I'd like to take a more detailed look at our exposure to residential mortgage-backed securities, or RMBS. At the end of the third quarter, our direct RMBS portfolio totaled $8.9 billion, or 5.8% of our total insured portfolio. This $8.9 billion is comprised of 56 different deals. I'm pleased to say that none of these deals have been downgraded or have experienced a ratings outlook change as a result of any of the ratings actions by Moody's, Standard & Poor's and Fitch since the end of the second quarter.
Let me now turn to our CDO portfolio, our CDA portfolio totaled $44.3 billion at the end of the third quarter. None of our wrapped tranches have been downgraded or experienced a ratings outlook change as a result of any of the ratings actions by Moody's, Standard & Poor's and Fitch over the past few months.
As you might know, ratings reviews by the rating agencies for all CDOs remain ongoing. As we have stated before, we have not written a single CDO of mezzanine asset-backed securities since 2004. Our exposure to mezzanine ABS CDOs, where residential mortgage-backed securities comprise at least half of the collateral, amounted to only $301 million at the end of the third quarter.
DARIN ARITA, ANALYST, DEUTSCHE BANK: Hi, good morning. I guess I'm just doting on that. Turning to your view of the inner CDO collateral, can you talk about how your view of that collateral, if you have an assessment of the ratings there and how that compares with the current rating agency ratings?
ED HUBBARD: Yes, good morning Darin. Since we have the benefit of Sohail's presence here -- as we had mentioned earlier, Sohail runs our CDO practice -- so let me turn it over to Sohail.
SOHAIL RASUL, GROUP MANAGING DIRECTOR, SECURITY CAPITAL ASSURANCE LTD.: Yes, good morning, Darin. Yes, we obviously have visibility into the inner CDOs, as Ed said, and we are looking at the performance of those inner CDO buckets. The ratings of each of the positions within those are coming under stress, as you would imagine in this market. Where we take comfort is that we have at the outer CDO levels, sufficient subordination to be able to absorb a significant amount of deterioration within those inner CDO buckets. And that still remains the case today.
DARIN ARITA: All right. So you're -- I guess just to be clear on that, are your expectations for these inner CDOs, I guess, different from what the current rating agency ratings are? Because the expectatio
OT thread jack:
Paulson and the LA Times editorial board. I would love to see Tanta's take on this.
"These are not normal times" -- latimes.com
I guess the whole post didnt pop up:
That is from Q3 2007 SECURITY CAPITAL ASSURANCE LIMITED Earnings Conference Call - Final
Good morning, ladies and gentlemen, and welcome to the Security Capital Assurance 2007 Third Quarter Earnings Conference Call. As a reminder, this conference call is being recorded.
Q3 2007 SECURITY CAPITAL ASSURANCE LIMITED Earnings Conference Call - Final - - insurancenewsnet.com
OT -- waiting for this market correction is a bit of a pain. The market drifts or moves down on the bad news, as it should, then in the afternoon, the market moves up on the S&P 500 futures purchases by the hedgies.
Panic from the mutual fund managers cannot come fast enough for me. I'm irritated at my 'red' closings being stolen.
S&P, Moody's, and Fitch
Three blind mice
Three blind mice
See how they run
See how they run
The bond insurers can't cut the mustard, the whole system is a fraud.
Quickly, the crisis played itself out. First, Orange County missed a $200 million payment on $2.6 billion in reverse repurchase agreements, a form of securitized loans, to First Boston Corp. With the county close to default, First Boston immediately liquidated its entire holdings of Orange County collateral, made up primarily of government bonds.
Thanks for discoverin the mercy of links, doc.
We also remain comfortable with the credit quality of our high-grade ABS CDOs. And while recognizing that it is still early days, we do not expect to suffer any losses. Given the recent rating agency actions in the RMBS and CDO sectors, our ABS CDOs are performing well within the tolerance's structure into these deals.
Underlying our ABS CDOs are nearly 3,700 unique securities or pieces of collateral. Of these securities, 16.9% have been downgraded with an additional 4.6% placed on negative watch since the end of the second quarter by either Moody's, Standard & Poor's or Fitch. For those securities which were downgraded, the average downgrade amount was 2.8 notches.
That's quite an interview sunset beach guy - Hank Paulson defining 'market failure' for us...
Mr. Paulson pacing in his office, waiting for a return call from Mr. Hu.
Like a crack fiend, where can he get his fix now?
He hopes Mr. Hu knew he was only kidding about revaluation.
Robert Cote,
Damn you that's where I was going.
So here...From the BBC
Go to the 3:30 mark:
YouTube -
Cheers,
re : Paulson - great quote :
"And the way I think about it is this: that historically when a homebuyer, homeowner has a problem, a default's clearly not in the homeowner's interest. And it's clearly not in the lender's interest. It's very costly; defaults are very costly. So in a normal world the two sides come together and they strike a deal."
This smells of pure fear. Again, trying the PR approach, making s&*t up that any sane person knows is total crap and bad financial advice. A default right now is in many, many, home"owners" interest. If they really own a home, as in, don't have a mortgage, it isn't an issue. If they have a mortgage, they are underwater, and prices are clearly going to fall further, hmm, sure seems to me if Paulson were put in that position he would figure out pretty quickly that the cost of walking and defaulting would be recouped much faster than trying to pay off on a what is a horrible investment going forward. Most of these peeps have no skin in the game, and the ones who do, still doesn't matter - Hanky knows darn well what sunk costs are. He just doesn't want non-financially minded folks to figure it out. But guess what? It's not rocket science, even if Lewis (the potato brain) doesn't understand it.
I wonder why no one calls them on this BS...
Los Angeles Times - California, L.A., Entertainment and World news - latimes.com center
sunsetbeachguy | 12.20.07 - 8:30 pm | #
I would also. They should have kept Paulson locked in that room for a lot longer, you could smell the sweat from here.
To doc holiday,
I am bothered by your mass-pasting of entire transcripts or SEC filings, or other. We can read stuff for ourselves. If you will not highlight and analyze significant sentences, I would love it if you refrain from doing this.
doc holiday
I for one agree with probert. Besides, it will be easier to read in the original.
Re: MBIA
This is totally BOGUS. Of course the rating agencies and WP were told abotu this in advance, but the stock market was not. MBIA of course stops there.
I don't get what they're doing. They are trying to respond to the media bashing that says that MBIA didn't tell THE MARKET about this. Well, it's true, and even MBIA isn't claimnig that it did tell the market. IMO their PR tonight is designed as a smoke-screen for idiotic investors to get their stock price short squeezed back up.
I won't be the first but I shall try to be clearest.
Doc Holiday, there are a great many people who will cheer the announcement of your getting your own blog.
At least in my part of california,people who bought in '06 with 20% down,and who used an I/O loan are paying AT LEAST 3 times what it would cost to rent the same home.and quite a few have no equity.oopsie.
Tom Stone,
What part of CA, as that's not YET the case in SoCal.
Cheers,
Since the SEC doc or info related to this matter was not obvious or previously posted, i thought I would help point to the docs and matters of concern, but since my posts are so offensive, perhaps I should wait for informed readers to find the docs at a much later date -- if at all
Second that. The Paulson interview with the LA Times is remarkable.
4.\tPaulsons hackery is showing. e.g., "I think this is an innovative way and a practical way the private sector's come together to deal with a problem that they've never come up with before, and that's an innovative way. Just repeat key words like innovative, Henry remember, innovative.
So, this is how Paulson sell his plan? Good lord.
probert,
"This is totally BOGUS. Of course the rating agencies and WP were told abotu this in advance, but the stock market was not. MBIA of course stops there."
It's even worse than that as it shows what kind of BS the ratings agencies allowed to remain. This isn't just a limited hangout by MBIA, this is now a cover job for the raters.
MBIA: (picks up phone) Yes
Fitch: Do you f'ing jerks want an immediate downgrade to zzz-. We just had a meeting and created it.
MBIA: Well not really.
Fitch: Then get out there and do some bleeding damage control (slams phone down)
MBIA: (picks up phone) Hello?
Moody's and S&P conference call: Are you f'ing nuts! No really, you D-Bags! We own you! Fix this thing!
(slams phone down).
MBIA: Well that was unpleasant. Get the accountants to come up with some cover gents, or we're toast.
Cheers,
thanks for the Hitchhiker's references. I've only read the books. Is that clip from the movie of the TV show?
Now, its time for a Galactic Gargleblaster
Misean - just like the UK is two years behind the US on its bust, SoCal is a bit behind the San Diego. The only difference is that when San Diego thinks it is going to recover, it gets hit with the neg-am option-arm resets, while SoCal will be just understanding how ugly it can get before it gets infinitely uglier for the same reason.
Geoff,
Oh I'm not anywhere near saying SoCal is immune, I just don't follow SD too closely...Didn't know it had gotten that bad there. I expect to see some serious fit hit the shan here, however.
Cheers,
12th Percentile,
"Is that clip from the movie of the TV show?"
BBC TV. Quite funny, but not anywhere near as good as the books. Hard to do well as a movie. Of course they said that about Tolkien...and then came Peter Jackson...
Hey Pete, you want a new challenge...just asking.
(He probably reads CR, everyone else does)
Cheers,
"Is that clip from the movie of the TV show?"
12th Percentile | 12.20.07 - 9:23 pm
I thought it was from the original radio show. I hope to be listening to it during this weekend's holiday driving.
Perhaps M. Coté will edify us with his (superior) erudition in the comments.
Misean,I live outside of sebastopol ca,and actual sales are at '04 prices for the most part.$1.25M gets you a nice property.google 6975 Orchard Station Rd,95472.It has about $125k in deferred maintenance,but was very well built and has a good floor plan.It takes an hour and five minutes to get to the sf financial district. It is now in escrow after 7 months on the market.High quality Estate properties are moving,low and mid range stuff is real sticky,mostly short sales and REO's.In early '06 there were probably 40 properties on the mls at $500k or below countywide.now it is above 1,100.aahh,the whine country.
ACA and MBIA problems, have to start to hit pension fund asset quality limits. Then we shall have mark to market prices for those deep in the basement, tier 3 bank "assets". The IB's have got to be sweating bullets.
Myth Busters showed how it was possible for a person slamming themselves against a high rise window on a wheely chair to bust through. I imagine some of the people involved in this are watching those clips and preparing a final strategy.
Just a thought.
YouTube -
Cheers,
In December 1863, Hugh McCulloch, then Comptroller of the Currency of the United States and later Secretary of the Treasury, addressed a letter to all national banks. Here are some of the paragraphs.
Let no loans be made that are not secured beyond a reasonable contingency. Do nothing to foster and encourage speculation. Give facilities only to legitimate and prudent transactions. Never renew a note or bill merely because you may not know where to place the money with equal advantage if the paper is paid.
Distribute your loans rather than concentrate them in a few hands. Large loans to a single individual or firm, although sometimes proper and necessary, are generally injudicious, and frequently unsafe. Large borrowers are apt to control the bank; and when this is the relation between a bank and its customers, it is not difficult to decide which in the end will suffer.
If you doubt the propriety of discounting an offering, give the bank the benefit of the doubt and decline it; never make a discount if you doubt the propriety of doing so. If you have reasons to distrust the integrity of a customer, close his account. Never deal with a rascal under the impression that you can prevent him from cheating you. The risk in such cases is greater than the profit.
Pay your officers such salaries as will enable them to live comfortably and respectably without stealing; and require of them their entire services. If an officer lives beyond his income, dismiss him; even if his excess of expenditures can be explained consistently with his integrity, still dismiss him. Extravagance, if not a crime, very naturally leads to crime. A man cannot be a safe officer of a bank who spends more than he earns.
The capital of a bank should be reality, not a fiction; and it should be owned by those who have money to lend, and not by borrowers.
Pursue a straightforward, upright, legitimate banking business. Splendid financing is not legitimate banking, and splendid financiers in banking are generally either humbugs or rascals.
source: Attention AOL Journals Users -- United States - People Connection Blog: AIM Community Network
psychodave,
Nope not the radio show. Which I have. Douglas Adams actually wrote 3 versions...and started the fourth for the movie, before he checked out...way too early.
Cheers,
Misean,
There's very few muni bonds in pension funds. Pension funds don't get any tax benefit from tax-exempt bonds and a lot have Investment Policy Statements that don't allow them.
Insurance companies and banks.
The BBC radioplay was nearly word for word the book. The television miniseries suffered only slightly from budget constraints. The big budget movie suffered terribly from lack thereof. Pretty much anything as sublimely incredible as the current financial cogs flying off the machine was covered by the late lamented Mr. Adams.
Greenspan, Bernanke, Paulson, and W will go down in history as the economic "hacks" that they are, as the US economy heads into a recession of potentially historic proportion. W should have listened long ago to his father, as "it's the economy (once again), stupid!"...
More amazing, IMO, are the self-proclaimed "smart money" fools like Warburg (MBI), Bank of America (CFC), China Fund (BX)& (BSC) & (MS) and numerous others throwing good money after bad.
Early innings of a real ugly game here, folks...
The LA Times piece with Paulson is exceptional - that is the MSM actaully getting its groove back - what twigged me was the word count, Paulson uses 'investor' 13 times and 'homeowner' 5 times (excluding the homeownership discussion at the end, 'homeownership' has a 6 count there).
Any lack of clarity on who he is working for here?
Any lack of clarity on who he is working for here?
energyecon | 12.20.07 - 10:18 pm | #
Ummm, nope.
Add another vote for Doc Holiday to take a holiday. An optional link and words all your own is what we want to read.
The RA's must haved used an improbability drive.
rich,
I'm along the lines of thinking that the pension's bought some CDO's...the FL blowup in State MM funds has me twitchy.
As for the insurance co's...Ibelieve they have some fairly stringent asset quality standards..well at least to ratings of the stuff...so...
If I'm wrong OK, but a mark to market event is looming.
Cheers,
"The Calculated Risk blog responded to the Fed's auction with a prayer for the times: "Grant me the capital to accept the things I cannot change; the reserves to change the things that I can; and the Fed auction when all that blows up."
-From the WSJ
RJ
RJ:
Link please?
Hmm.. This is interesting in the sense of unfortunate/ugly coincidence (or perhaps not such a coincidence). According to this blurb in the middle of a Bloomberg Opinion Article retrospective series on Subprime, the rating agencies (Moodys mainly) experienced a "Cultural Change" right before the credit/derivative boom and became more warm and fuzzy. Mainly it seems this happened because they went public and needed to maximize client retention and "customer service" to pump up profits.
Not good.
Rating Subprime Investment Grade Made `Joke' of Credit Experts - Bloomberg.com
"...
`Cultural Shift'
Colorado's Jefferson County School District sued Moody's in 1995 claiming the company issued a negative rating after the district refused to hire Moody's to evaluate its bonds. While the suit was dismissed in 1996, the dispute set off a three-year antitrust investigation by the Department of Justice that ended in 1999 with no action.
The probe led to the ouster of Thomas McGuire, Moody's chief of corporate ratings, and started a cultural shift,'' as Moody's prepared to go public, says Ann Rutledge, an analyst who left in 1999 after four years. In early 2000 the board of Dun & Bradstreet Corp., Moody's parent, voted to split into separate publicly traded companies. Employees were required to take a six-week class onissuer relationships'' with listening exercises, Rutledge says.
Customer Service
There used to be a strong sense that we weren't a touchy, feely company,'' says Rutledge, who is now a principal at R&R Consulting, along with her husband, Raynes, a fellow Moody's alum.Our attitude used to be: We're not here to be your friend. We're here to look at credit quality. But that began to change.''
Initiatives such as the listening exercises were part of the company's emphasis on customer service, says Warren Kornfeld, managing director of Moody's.
We care very deeply what people think,'' Kornfeld says.We want to have a dialogue with investors, and we want to have a dialogue with issuers. Our value to the market is our accessibility.''
The lure of profits as the housing market began a run of five record-breaking years in 2000 fueled the change, says Graham Fisher's Rosner.
``They went from looking at companies that already existed to having a role in structuring securities,'' Rosner says.
..."
RJ - could we have a WSJ link?Kudlow's CA group wants to frame it.
Time for more J&B... .. .
tg,
I question that. I believe it is based on Slartibartfast's Bistromathic drive. From wikipedia:
"The first nonabsolute number is the number of people for whom the table is reserved. This will vary during the course of the first three telephone calls to the restaurant, and then bear no apparent relation to the number of people who actually turn up, or the number of people who subsequently join them after the show/match/party/gig, or to the number of people who leave when they see who else has shown up.
The second nonabsolute number is the given time of arrival, which is now known to be one of those most bizarre mathematical concepts, a recipriversexcluson, a number whose existence can only be defined as being anything other than itself. In other words, the given time of arrival is the one moment of time at which it is impossible that any member of the party will arrive. Recipriversexclusons now play a vital part in many branches of mathematics, including statistics and accountancy, and also form the basic equations used to engineer the SEP Field.
The third and most mysterious piece of nonabsoluteness of all lies in the relationship between the number of items on the bill, the cost of each item, the number of people at the table and what they are each prepared to pay for. (The number of people who have actually brought any money is only a sub-phenomenon in this field.)"
The rest can be found here...cough Doc Holliday-cough:
Technology in The Hitchhiker's Guide to the Galaxy - Wikipedia, the free encyclopedia
Cheers,
I mentioned this in passing awhile back.. but I think I'm going to start pushing the idea more..
Has anyone considered what it would be like if there were a Debtors' Union?
The one thing the most people in the U.S. have in common (from college educated people to blue collar workers with no High School diploma) is debt. You could link the middle and lower classes together in one super block..
Just the threat of a nationwide "payment strike", could really stir shit up.
There is prior-art from Mexico.. El Barzón
I think this will be the next big social movement..
Who's with me?!
Debo no niego, pago lo justo!!!
Who watches the watchmen?
MBS, CDS, CDOs, a lot of YATs.
Who watches the watchmen?
Andrew,
Just the mention of that gives me the zap... Alan Moore.. damn, that is a great work of art..
eli,
"Has anyone considered what it would be like if there were a Debtors' Union?"
Yeah let's all go into debt to our eyeballs and then claim insolvency to those we borrowed from and demand they forgive our debts, but let us keep what we bought with their money.
Sounds workable. I'm sure nothing bad could happen from that idea. I mean Mexico and CA/SA countries our such economic power houses. Good idea.
Cheers,
Worries Remain After Fed, ECB Moves
Fed, ECB Moves Have Worked, But Worries Remain - WSJ.com
energycon
Just posted you "jingle keys" ditty on the Krugman blog. Says it will be published if approved.
regards
sbarrkum
Sounds workable. I'm sure nothing bad could happen from that idea. I mean Mexico and CA/SA countries our such economic power houses. Good idea.
Well.. I figure, why should the cheesebags at the top get a pass since they know how to put an LLC between themselves and the debt they take on.
Anyhow, I'm not saying the Debtors Union would serve to void debts.. it would serve to negotiate for better terms.
If I'm getting squeezed by some bank because they decided to raise my APR on some credit card I use... I'd like a Union to settle the dispute for me.. I know a number of people who made stupid decisions in their youth.. but have always payed their Credit Cards on time.. just one day, the issuing company juices the APR..
Now, you can call them up and raise hell and maybe get it reduced, but I bet there are a lot of people who don't realize they can do that.
I think you are arguing from shaky ground if you want to suggest that lenders are not the ones with all the power in this situation (as it is currently understood). Though, I don't think you are suggesting that.. you probably just think I'm suggesting people should reneg on their Hummer leases or something..
I also have a hard time seeing what is wrong with people realizing that they aren't beholden to creditors.
I question that. I believe it is based on Slartibartfast's Bistromathic drive.
My bad.
Quis custodiet ipsos custodes?
Quis custodiet ipsos custodes? - Wikipedia, the free encyclopedia
LOL. My goodness, my inner Geek is showing. eli, actually I got it from the Commander of the City Watch, Sam Vimes, of the Terry Prachett series (Samuel Vimes) - Wikipedia, the free encyclopedia, not the Watchmen series (Watchmen) - Wikipedia, the free encyclopedia.
You know looking at CR's title...
MBIA: "CDO Exposure Was Previously Disclosed"
Almost makes you think disclosed really is the new contained...
So if its disclosed and contained, why is everyone so jumpy?
eli,
"Well.. I figure, why should the cheesebags at the top get a pass since they know how to put an LLC between themselves and the debt they take on."
Oh I want the lenders to take in on the chin hard. And it appears they are. But such schemes only increase the cost of credit to the borrowers. Let the pigmen fail, because of their own counter party risk. That CLEANSES the system and doesn't impair the system down the road.
Almost all such systems you want actually end up benefiting the pigmen, to the detriment of the future.
"Now, you can call them up and raise hell and maybe get it reduced, but I bet there are a lot of people who don't realize they can do that."
Well then don't borrow. If you are unwilling/unable to understand the terms of the contract, well I'm crying crocodile tears.
"If I'm getting squeezed by some bank because they decided to raise my APR on some credit card I use... I'd like a Union to settle the dispute for me.. I know a number of people who made stupid decisions in their youth.. but have always payed their Credit Cards on time.. just one day, the issuing company juices the APR.."
All of this is in the contract. I liken contracts for EZ money as deals with the Devil. Someone is offering you money for nothing is LYING. I'm all for the school of hard knocks.
"I think you are arguing from shaky ground if you want to suggest that lenders are not the ones with all the power in this situation (as it is currently understood). Though, I don't think you are suggesting that.. you probably just think I'm suggesting people should reneg on their Hummer leases or something.. :)"
Bingo!
"I also have a hard time seeing what is wrong with people realizing that they aren't beholden to creditors."
They are if they sign the contract. I'm not, I gave up the plastic and debt years ago. I paid for all my Christmas presents this year with cash. If the pain of this makes people save instead of go into debt, so much the better...for all of us.
JMHO...and Merry Christmas!
(I got to do a great Santa today at the office)
Cheers,
Andrew,
hehe.. well, if you haven't read "Watchmen", I highly recommend it.. that phrase always reminds me of it...
Though, I do like the "Quis custodiet ipsos custodes?".. it emphasizes that this is an eternal concern.
This idea that "it was much ado about nuthin' " got discussed in the original MBIA thread by X, Y and moi. I even went so far as to think out aloud that I was going to go long on MBIA in due course. I duly did at 20.85 towards the end of the day.. We'll see but looking at the after hours trading, I'm in the money ( so far ! ).
Now if the doc didn't pollute the threads people could have read that discussion and some could have played the game that I did and ( in terms of AH action ) be in the money.
So, doc, STFU please. You cost people money.
FWIW, I'm not staying long MBIA, long.
As regards HHGTHG, I would have commented but reading thru the comments it seems I'm in the company of the anorak brigade. And I thought I was in the anorak brigade.
-K
Dryfly - "So if its disclosed and contained, why is everyone so jumpy?"
Because everyone suddenly realizes that the old dead horse they were beating ("MBS, CDOs and other derivatives distribute risk. That's a good thing!") is now highly unstable and widely distributed nitroglycerin.
jg,
Yeah, most forget about that drive. It's cloaked in the Other Peoples Problem field.
Cheers,
YouTube - Awesome scene from Apocalypse Now!
Whose the commanding officer here?
Ain't you?
Get the Paulson?
So now we are starting to pass the Do Long bridge- we still have to keep going up that river...
It just keeps getting wierder and wierder...
Next shoes to fall, swap trades and forex markets. If they go, we are truly at the end of the journey for the dollar....
Someday this war's gonna end...
WSJ - Merrill May Get Capital Infusion / Singapore's Temasek Is in Advanced Talks To Invest up to $5 Billion ($5B ain't gonna cut it)
Merrill May Get Capital Infusion - WSJ.com
re Doug Adams
Dont quite think J & B etc does justice to the material.
What is needed is the stuff that grows off the earth to do justice (yeah yeah, they grow in hydroponic stuff too)
Recall 30 years ago listening to the vinyl (brought back by a friend in the UK)
regards
sbarrkum
Misean,
I'll have to give this short shrift now (since I've gotta go have a beer with a girl), but.. we're in the current situation we are now because of the totally ridiculous way the system goes about providing debt to the average person.
I think that you agree that this entire structure appears to be un-maintainable over the long term.
Maybe we are all idiots.. (I'd buy that).. but I think the people who owe money getting organized and realizing that the debt they're in is unsustainable.. I think that would be a good first step.
The next step is poking a effing stick in the eye of the dipshits who set that structure up.
But.. i have a deep anarchist's streak in me...
I'll be a better debater another night.
Sorry.
O ok, I'll succumb - just to be totally clear, the radio series was FIRST ( there are kinks around whether it was just DA but we'll leave it alone ).
I remember it well - I only tuned in because of Peter Jones(the book narrator), who was famous for his repartee in radio stuff like "I'm Sorry I haven't a Clue" and "Just a Minute" and very soon the whole post grad uni crowd followed it. They would always credit the music to Bernie Leadon and it took me a couple of shots of getting out the Eagles album ( the one with the goats skull I think ) and looking thru the credits to assure myself it was all one and the same.
It WAS strange that they credited it to Bernie Leadon and not the Eagles. Very Auntie Beeb.
-K
P.S. Thanks to an incidental reference by a contributor on your blog, Robert Cote, I discovered QI, downloaded the 5 series and enjoy it. Reminds me of those BBC Radio 4, high table erudite conversations - but all done without the hoighty toighty.
eli,
"But.. i have a deep anarchist's streak in me... :)"
Mine is deeper.
Cheers,
P.S. enjoy that beer. And of course the young lady. Hopefully it will be a fine German beer.
sk,
Of course it was the radio series first. The Book was written much later. I fI recall Doug Adams wrote it whilst writing for Dr. Who.
Cheers,
eli's position is laughable...unless one resides in France or other numerous historically glorious now moribund nation-states.
What eli espouses is the underbelly of socialism. Wretched people of equal ilk to those who originally invented and gamed the game. These folks invented nothing and entered with Cheshire grins colored brown as they swept in for the easy economic kill.
The nation will survive. The foreign-born whose greed blinded them, the less than average intelligent who sought to follow the crowd? They're "out".
Instead of applauding the USG for at least closing the mortgage lending barn door, irrespective of how late, eli wants to bring into reality Animal Farm.
canada refusing to bail out the commercial paper market which is imploding..
Harper Rejects `Bottomless' Canada Commercial-Paper Bailout - Bloomberg.com
Jefferson is rolling in his grave at this comedy!
Let us simplify the argument.
Government loans are fixed rate and assumable for refinancing existing housing.
The bank who initially underwrote any loan that qualifies for refinacing at 5.1 %, 30 fixed, assumable will be charged the difference between the market rate and 5.1 %.
Primary residence only and sufficient assets and income to support the loan ( a tuff one).
The interest rate differential will be guarantted by the Federal Reserve and the bank will be assessed the difference.
Any banking institutions that is assesed a loan default recinfiuration will be automatically be taxed at a rate of 75 % of reported profits.
Continue.....
FFDIC:
Here is the link in case someone hasn't already posted. Its the last paragraph.
Fed, ECB Moves Have Worked, But Worries Remain - WSJ.com
The paragraph reads:
"The Calculated Risk blog responded to the Fed's auction with a prayer for the times: "Grant me the capital to accept the things I cannot change; the reserves to change the things that I can; and the Fed auction when all that blows up."
sk
Anorak, thought that was some sumerian god.
Never got a chance to reply to the "doting relatives". Not very doting, even the sisters, two weeks into the stay ask "when are you going back"
On a total different level, should talk. I have/had somewhere a pricing model and complete system for weather derivatives. Spent a year back home and getting it together. Sort of lost motivation somewhere.
regards
sbarkum
I suggest that those blockheads that want to chat: take your pussy asses down the hall to someone who gives a fat F*** what you have too say
Thank You from every one else
Since we are offering prayers these from my blog contributors might bring a smile:
At 3:14 PM, Rob Dawg said...
Yea, though I walk through the valley of the shadow of debt, I will fear no consequence: for the Fed art with me; thy credit window and thy staff they comfort me.
At 3:28 PM, Property Flopper said...
You anoint my head with credit; my cashback overflows. Surely creditors and debt will follow me all the days of my life, and I will dwell in the house of bankruptcy forever.
At 3:44 PM, Rob Dawg said...
"Woe to those who join house to house and field to field, until there is no more room, and you are made to dwell alone in the midst of the land. Jehovah of heaven's armies has sworn in my hearing: "Surely many houses shall be desolate, large and beautiful houses, without inhabitant." Isaiah 5:8-9
And I didn't have to change a word.
At 5:10 PM, Edgar said...
Psalms 37:1-8 "Fret not thyself because of evildoers, neither be thou envious against the workers of iniquity. For they shall soon be cut down like the grass, and wither as the green herb. Trust in the LORD, and do good; [so] shalt thou dwell in the land, and verily thou shalt be fed. Delight thyself also in the LORD; and he shall give thee the desires of thine heart. Commit thy way unto the LORD; trust also in him; and he shall bring [it] to pass. And he shall bring forth thy righteousness as the light, and thy judgment as the noonday. Rest in the LORD, and wait patiently for him: fret not thyself because of him who prospereth in his way, because of the man who bringeth wicked devices to pass. Cease from anger, and forsake wrath: fret not thyself in any wise to do evil."
At 5:12 PM, Edgar said...
Lord, won't you buy me, a Mercedes Benz...
My friends all have HELOCs, I must make amends...
Worked hard all my lifetime for chump change,
So Lord, won't you buy me, a McMansion on the range.
At 5:14 PM, Edgar said...
Thus saith Edgar Almighty:
And I will strike down with great vengeance upon the evil maggot banksters, fraudsters, and flippers. All are scum in my sight.
At 5:16 PM, Edgar said...
Tenth commandment: Thou shalt not covet thy neighbor's MEW.
duh
Robert Cote
That was simply the dumbest thing I have heard a moron utter in a very long time. Thanks for destroying Christmas and forcing many rebellious children to take the next step into heroin and/or suicide. Guys like you are real peaches. Get help, Robert. We support you.
The original 'Who watches the Watchmen' is actually Juvenal, from Satire VI.
Here's the Loeb translation
'I know well the advice and warnings of my old friends--"Put on a lock and keep your wife indoors." Yes, but who is to ward the warders? They get paid in kind for holding their tongues as to their young lady's escapades; participation seals their lips. The wily wife arranges accordingly and begins with them. . . . '
And a slightly more apt version for here
I know well the advice and warnings of my old comrades in the Market --"Hire a rating firm and keep the loan where you can watch it"
Yes, but who is to rate the raters?
They get paid in kind for holding their tongues as to the vendor's escapades;
participation in future issues seals their lips.
The wily vendor arranges accordingly and begins with them. . . .
Paul Krugman: Blindly Into the Bubble
OP-ED COLUMNIST; Blindly Into the Bubble - NY Times
GuadiaRay,
"eli's position is laughable...unless one resides in France or other numerous historically glorious now moribund nation-states."
No reason to slap one with a 2X4 when a quiet rebuttal would do.
You have to know when to hold 'em and when to fold 'em..and the old gambler's soft touch will likely have more of an impact than a louiseville slugger.
I know, I know...pot..black..kettle...
Sometimes though, pulling in the horns is a positive.
Just saying..
Cheers,
Robert Coté | Homepage | 12.20.07 - 11:53 pm | #
You taketh the Lords name in vain.
...oh wait a sec, maybe its the other guys
zinc,
Holly heepajeebus, where did that come from...
Valium might be in order man...
Cheers,
Misean | 12.21.07 - 12:11 am | #
I think Teddy (lets see if i can spell Theodore) Roosevelt said it a little better.
"Talk softly and carry a big stick" or some thing like that.
Does that seem like the GW Bush/Cheyney adage as well.
Hmm... need to think more.
Who was it who said "Owww my head hurts
London Times - Credit crisis to become lawyers' picnic as banks face class action claims
Credit crisis to become lawyers’ picnic as banks face class-action claims - Times Online
...On a total different level, should talk. ...weather derivatives...
sbarkum
Absolutely. I've just read Satyajit Das'
"Traders Guns and Money "
Amazon.com: Traders, Guns & Money: Knowns and unknowns in the dazzling world of derivatives (9780273704744): Satyajit Das: Books
and that's kinda fired me up on this malarkey. The very thing I call it should suggest to you my cynicism about the filthy lucre, AS MUCH AS I ENJOY IT AND QUITE COMFORTABLE WITH GAINING MORE - but there is a macabre fascination for me into this depravity of human beings ( o yeah I'm one and not immune to it ) and I love it - "like the smell of one's own shit" as Dario Fo, an Italian Trotskyite novelist "Accidental Death of An anarchist ( Water boarding tape destruction anybody?) " said.
So surely. I'll touch base in the New Year.
-K
Nobody could have foreseen this.
Misean
" zinc,
Holly heepajeebus, where did that come from...
Valium might be in order man...
Cheers,"
I hate to be the friend that tells you about your dillusions but, I you have selected me as that person. I luv ya man ! But we have to be strong and take our crazy ideas out and not... not look at the credit crisis as if it where a painful rectitude that protrudes from our butt but instead, be strong. Thanks for caring it's the g****n Corona talking.
sbarrkum,
""Talk softly and carry a big stick" or some thing like that.
Does that seem like the GW Bush/Cheyney adage as well.
Hmm... need to think more. "
Can't a guy try be original?
"Who was it who said "Owww my head hurts"
Perhaps this:
YouTube - D. P. Gumby - My Brain Hurts!
or this:
YouTube -
Cheers,
Let us keep our head as Americans and set our government straight.
zinc,
OK...I've had a few Coronas myself...enjoy some of the MP just posted...I'm going to.
Cheers,
Soooo... if MBIA did previously disclose their CDO holdings, and the market reacted as it did to a reiteration of the disclosure, what does that say about market efficiency?
I'd say it's a laboratory proof that markets are not efficient at incorporating information into pricing.
Huhnh.
Sallie Mae on the hook to buy lots of shares at higher than market prices...
Sallie Mae Delays Stock Repurchase - NY Times
jus me
...and the market reacted as it did to a reiteration of the disclosure, what does that say about market efficiency?
Precisely. Its insane that efficient market theory is taught in college as if it has validity - or so I'm told - an economics grad should correct me if I'm wrong.
Separately, this "inefficiency" was discussed in the earlier MBIA thread and suitable bets placed.
-K
sk,
wow.
Your home page link does not work anymore.
regards
sbarrkum
sk--
Its a fluid market, one in which its hard to fit the "news" to the "reaction". Why was MBIA's stock down and credit default premium up so much? Because analysts don't read footnotes? Yes, partially (Tanta would have caught it, of course). But also because a AAA insurer shouldn't have CDS that trades like junk. So something that reminds the market of that fact has an unpleasant tendency to drive down the stock price.
I mention the above not because I want to comment on a particular stock, but because it is a microcosm of overall market psychology.
John Mauldin had an interesting piece on his site a while back on chaos theory. Turns out scientists tried to model the breaking point of a "system" by building sand piles one grain at a time, and then seeing if slope failures were "catastrophic". What they found was that one grain of sand could trigger a widespread collapse of the pile if 1) the sides were steep; and 2) the sides were interconnected. The steeper the sides, the higher the chance of a catastrophe.
The analogy with the markets is that "steepness" corresponds to "denial", and "interconnectedness" corresponds to "leverage".
The day the grain of sand causes a failure in the system, we'll all have a hard time explaining why the particular news on that day was so important.
sk,
You can't have an efficient market if the money granting authortity is a gov't sponsored monopoly/cartel.
Cheers,
Misean
I wasn't apologizing, I was trying to let you down easy, brother. Make no mistake, I think your posts are crap.
Oh yeah
Cheers
zinc | 12.20.07 - 11:53 pm |
I suggest that those blockheads that want to chat: take your pussy asses down the hall to someone who gives a fat F*** what you have too say
Zinc
Were you referring to me. Go to my home page, its got a phone number. You can call me. My name is distinctive, as is my signature (since 1990). 12% Irish does the trick
sbarrkum
wow.
Your home page link does not work anymore.
O yeah I quickly broke it before I wrote something mean about doc about 7 days back, for obvious reasons. Sigh the cat's out of the bag.
Leave it till the New Year. I live on the Brit calendar NOTHING, apart from bonking, boozing and more boozing happens from around the 15th Dec to 6th Jan.
-K
Misean --
What on earth does "money-granting authority" have to do with market efficiency/inefficiency?
So if its disclosed and contained, why is everyone so jumpy?
dryfly | 12.20.07 - 11:03 pm | #
Epiphany! English words used by financial types who used to be physics majors; the guys who talk about "free energy" and adiabatic expansion. I gotta find the glossary damn it.
You guys need to chill out, so grab a refreshment and check out Bruno Martini's "Estate."
Jazz Jewel
zinc, there are many decaffeinated brands that taste almost as good as the real thing.
sbarrkum- You need to come back and do some productive work. At great personal sacrifice I will trade places with you for one year. Although it will be painful to be incarcerated on some idyllic tropical isle, I'm willing to make that sacrifice. I have my prescription snorkel mask packed. Just waiting for your call.
My wish for you is an opportunity to fullfill your dreams. Of course you cannot concieve of a reality in which you do not attain that which you think you want --- but there actually exists a reality for you that might be judged "far below your station".
So if you ass-wipes are affended by my brusk expression -- so be it. Let us begin this weekend --- I will be in front of the Safeway at Tangerine and 1 St in Tucson Arizona. I will be the dark haired man that looks like a middle linebaker ( that was my my place)ready to
sdtfs | 12.21.07 - 2:28 am |
I think I am pushing buttons. Nope, I live in Long island city.
believe me (right), as a CR blogger you would be welcome where ever I live,
The "island place" was my 401K in 2003.
sbarrkum - Well,at least I'll have something to dream about. A picture to replace that photo CR used to have.
zinc- You've got an uphill battle keeping the late night folks 'on thread'. Your best bet is to try to offer some 'on topic' bait. Heck, Tanta has a hard time in the day time and she's got the keys to the blackbox.
This article by Jim Kunstler is great:
Failure Beyong Finance
Clusterfuck Nation by Jim Kunstler : Failure Beyond Finance
NEW YORK (AP) -- This might have been one of Wall Street's most dismal years in a decade, but that hasn't stopped bonus checks from rising an average of 14 percent.
Four of the biggest U.S. investment banks -- Goldman Sachs Group Inc., Morgan Stanley, Lehman Brothers Holdings Inc. and Bear Stearns Cos. -- will pay out about $49.6 billion in compensation this year. Of that, bonuses are traditionally estimated to represent 60 percent, or almost $30 billion.
The looting continues....
Roubini has a great column on MBIA and the like. Utterly flawed model, he says. If MBIA's AAA rating is reduced, bankruptcy looms. And of course its rating...well I won't spell it out. Amazing that it still sells for $20 a share or thereabouts.
Zinc: Did you ever graduate from anywhere? Kindergarten? Grade school? I won't mention High School since that is out of the question. I ask this after reading your posts with your spelling and your "language."
In Arizona one bets on the date the temperature hits 100 degrees. Anyone want to bet on the date (or week) when the first big MM fund breaks the buck (and panic ensues)?
lets stay focused on the subject matter of the blog please.
Thanks
I don't read any comment until after I scroll down to see if it's from the bizarre Doc H.
Somebody teach him how to filter and edit his material. Please?
OT (on maybe On Topic):
Keybank announces first loss in 6 years based on commercial construction loans. As a result, will dramiatically curtail issuance of such loans.
Key to post first loss in six years | Business Archive Site - cleveland.com
How will this affect the stock market?
Deal volumes suffer sharp fall
By Lina Saigol in London and James Politi in New York
Published: December 20 2007 19:20 | Last updated: December 21 2007 01:23
The volume of mergers and acquisitions worldwide suffered a dramatic fall in the second half of the year as credit dried up for private equity deals and many chief executives scrapped plans for bold takeovers.
Global M&A in the year to date reached $4,740bn surpassing last years record of $3,910bn. But volume in the second half dropped 26 per cent and September was the lowest month since November 2005, according to Dealogic, the data provider.
""Someone asked me, 'Are we bankrupt?'" Mr. Nardelli said at the meeting. "Technically, no. Operationally, yes. The only thing that keeps us from going into bankruptcy is the $10 billion investors entrusted us with."
In an interview yesterday, Mr. Nardelli acknowledged making the comment, saying it was intended to "convey a sense of urgency" among employees."
Chrysler Faces Financial Pinch, Sees Asset Sales - WSJ.com
"Technically, no. Operationally, yes. The only thing that keeps us from going into bankruptcy is the $10 billion investors entrusted us with."
So it is like negative equity on a ninja loan?
So "Operationally bankrupt" = No money for window cleaners until you sell a few windows??
Eh?
The muni market is unlike any other market in finance in one respect.
It includes many thousands of very thinly traded issues, including some where no trades take place for days at a time; and
The primary market is high-income individuals, who buy two-thirds of all bonds outright or through funds.
It means, if high-income individuals went on strike and avoided the market for any length of time, trading would freeze up. Anyone who wanted out of the market might have to sell at a large loss. Prices on thinly traded issues could drop by 20-30%. NAVs on some muni funds could drop by 10-15%.
Can anybody who lives in California or knows about Mello-Roos answer this question:
Who is responsible for the Mello-Roos assessments on homes that aren't built or homes that are partially finished and can't be sold?
In other words, assuming infrastructure improvements have already been made via revenue bonds, who is responsible for repaying those bonds if homeowners don't?
Isn't this a big potential problem for the muni market?
rich-
The capital markets are currently penalizing issuers, insurers, lending institutions, and ratings agencies.
Evidence of this is prevalent with the increased cost of capital raising.
This is a severe warning shot across the entire credit landscape to prevent a reoccurance of past mistakes.
The repurcussions will begin to show throughout the economy with further tightening of credit, smaller balance sheets in the end, and a recessionary landscape.
I believe these effects will begin to surface as the weak credits continue to experience significant pressure and cannot refinance due to the previously mentioned changes. This will be a long cycle, will cleanse in many respects, will hamper growth for an extended period, will keep interest rates low, will force deleveraging, and lead to below par returns.
The above mentioned Chrysler problems are indicative of what is to come. Bankruptcies will rise and the lbo, pe market is effectively dead. Which, by the way, people scoffed when I predicted this at what could now be termed the peak.
Tough period ahead, but, manageable.
Rich
I think we are tending to focus on the bad here and then imagine this is a universal event.
For example CDO's on subprime loans. Subprime was expected to have around a 15% failure rate. Depending on how the top receiving buckets of the CDO are organised and how many slices are below them in the pecking order those top slices are fairly safe since they will get All the income that was intended to be distributed to all the lower slices.
There are many millions of homes in america so even millions of foreclosures is not the end of the world. Many subprime loans in many parts of the country are not going to fail
And so to munis. Some munis will do badly. And some will be fine.
Looking thru the lens of this blog it is possible to imagine we are at the end of the world.
Difficult times but surely not as bad as some are saying??
Two questions: Roubini suggested that if MBIA's AAA rating is reduced it will go bankrupt. Right? And what are the chances that its rating will be reduced?
Worried,
I'm not caught up in this blog because I work in this business and talk to a lot of people.
About one-third of all munis are held by tax-exempt mutual funds. These funds hold very little cash and have low rates of redemption normally. But what if high-income investors got nervous and started pulling money out?
The funds would have to sell bonds into a thin market. On some bonds, they are calculating NAV (the daily redemption price) based on trades several days old. So valuation could get tricky in the weeks ahead.
There's an obvious solution, which is to increase a fund's cash levels to meet redemptions. But are the large muni funds doing it?
There's an article in today's NY Post that mentions there were "conditions" on Warburg's funding of MBIA that haven't been met and that provide an escape hatch for Warburg to walk away.
This deal never smelled right to me.
It always smelled more like PR than real. Either way, it's not smart for Warburg.
More MBIA news. Seems to me if I were Warburg Pincus I would be thinking real hard about that walk up the aisle and maybe looking for clauses I didn't like in my pre-nup.
"Dec. 21 (Bloomberg) -- State and local borrowers are discovering that buying municipal bond insurance from MBIA Inc. and Ambac Financial Group Inc. is a waste of money..."
Muni Insurance Worthless as Borrowers Shun Ambac (Update2) - Bloomberg.com
Something's gotta give...simply not sustainable. Period.
U.S. Nov. real disposable incomes fall 0.3%, 2nd drop in row
8:30 AM ET, Dec 21, 2007 - 12 minutes ago
08.\tU.S. Nov. personal savings rate falls to negative 0.5%
sterlingerl -
Thanks for the link.
If it becomes widespread that municipalities forego insurance and get the same deal from investors...there goes the business model for the insurers....
They need that current revenue stream to pay the claims on all the bad deals they made the last three years. Without it, they are BK.
MBIA, Ambac, FRE, FNM, SLM ... as Tom Cruise said in A Few Good Men, "And the hits just keep on comin'."
I'll say it again: We are all counterparties now.
" MBIA, Ambac, FRE, FNM, SLM ... as Tom Cruise said in A Few Good Men, "And the hits just keep on comin'."
I'll say it again: We are all counterparties now."
hmmmmmm. If you want to force that deal you might have to allow some of the counterparties to have california or washington state.
Assuming they are not already pleged to somebody
I read that Vlad Putin owns several oil companies and is worth 50 billion USD. Maybe you could sell Alaska back again? what did it cost? about 100,000?
Rich,
The concern of a buyers strike is real, because those individuals buying paper outright usually also hold to term. As the old notes come due, it becomes easy not to roll it over and hold cash and squeeze those who have to sell. Of course you gotta pick your spots.....
Memo to Secretary Paulson:
Stop inhaling the sewer gas from your fellow CEOs. Spend some time reading Calculated Risk, and go out and learn something about the underwriting business from people like Tanta. Better yet, just resign because you continue to make yourself look like either a fool or a crook. Learn some history too because if things get really bad people will end up living in Paulsonvilles. Do you want that as your legacy?