Fed warns of $100bn credit losses

[TechBear_Seattle]

Source: BBC

Federal Reserve chairman Ben Bernanke has warned that the crisis in the US sub-prime lending market could cost up to $100bn.

In a second day of testimony to Congress, Mr Bernanke said credit losses associated with sub-prime mortgage failures were "significant".

Wall Street is nervous about the exposure of banks and other lenders to the riskier sub-prime market.



Read more: http://news.bbc.co.uk/2/hi/business/6906914.stm

[Bonhomme Richard]

1. Cost who? One thing I will bet on is that it won't be...........

the guys that made all the money writing and selling those loans. That we can take to the bank.

[redqueen]

5. 'course not...

it'll be the taxpayers bailing the rich out, once again... just like the S&L debacle (Neil Bush included).

[ThomCat]

13. No, it will cost the taxpayers, and mostly the poor and lower

middle class taxpayers. The "investment class" will be shielded from most of this. x(

[zehnkatzen]

16. That's not a safe place either...

...'cos people steal from banks!
:D

[Neshanic]

2. Resolution Trust "The Next Generation"

[eppur_se_muova]

3. $100bn = "significant" ?

I wonder what it would take to be referred to as "really big"?

[BonnieJW]

4. Iraq

[billyoc]

6. Yes, any threat of walking away from $20 trillion

in oil reserves makes Business *extremely* nervous.

[CGowen]

15. I don't know, some say it's just some months of money printing

...
Last week Federal Reserve chairman Bernanke made to statements which are INTERESTING. The first being that inflation expectations are
“IMPERFECTLY ANCHORED” and that a “fiscal” crisis now threatens the near future and of course he speaks of the CDO, CMO (collateralized debt/mortgage obligations) crisis that is disrupting the credit markets.

What a perfect one two punch to people who may now be a little overconfident. It is being reported that between 200 and 600 BILLION dollars worth of these toxic BOMBS sit on the balance sheets of institutions and pension funds. Sounds like a lot, but it is barely 3 or 4 months of money printing at the current pace, and as I have previously mentioned, they have the checkbooks at the ready. They will print the money BEFORE it destroys the liquidity of the US financial system, on that you can rely. Only the LITTLE guy will be left out of the rescue, and he or she will be Hung/left out to DRY. It has been over 1500 days since the US markets have corrected over 10%, the longest stretch in HISTORY. So we are due.
...
http://www.marketoracle.co.uk/Article1562.html

-------------------
...
The US national debt now stands at $8.4 trillion dollars while the trade deficit has ballooned to $800 billion nearly 7% of GDP.

This is lunacy. No country, however powerful, can maintain these staggering numbers. The country is in hock up to its neck and has to borrow $2.5 billion per day just to stay above water. Presently, the Fed is expanding the money supply and buying back its own treasuries to hide the hemorrhaging from the public. Its utter madness.
...
http://www.informationclearinghouse.info/article13851.htm

[sendero]

20. I agree about the printing..

.... they've been doing that for 7 years. Where we might differ is the estimation of the cost of this printing.

It is eventually going to cost us all a lot, because nobody ever actually created wealth by printing money, they just diluted and redistributed the wealth that exists.

Actually, the falling dollar has some upsides, so who knows how it will all play out :)

[CGowen]

21. It doesn't look good

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/06/25/cncredit125.xml

http://pressesc.com/01180629622_dollar_falls

[Tempest]

7. If Bernanke is saying the losses will cost up to $100 billion

Then the real cost will be closer to $1 trillion.

The hedge fund market is capped at over $2 trillion. Two of Barclay's hedge funds, worth $30 billion, are now worthless according to company officials.

[northernsoul]

8. so, roughly equal to about 9 months of occupying Iraq?

Isn't Iraq costing us something like $12billion a month?

[lyonn]

9. Yet the stock market is like a rocket

Can anyone explain? I am market illiterate but I get this creepy feeling that around Oct. (isn't that usually when the market traditionally dive?) the price of stock will come tumbling down and people will be "shocked". Well, I said I was illiterate so.... Memories of the Reagan 80's....

[hack89]

12. Because it is a global economy. nt

[Deja Q]

14. Which isn't necessarily a bad thing.

India and China are prospering.

Africa will be next.

It's high time the world gets on a level playing field technologically.

The only downside is, why are American citizens the ones losing out right now? And will things get better?

[ldf]

18. yeah, it may be a global economy

but the real reason a lot of stocks are going up is because shareholders care about one thing. dividends.

those shareholders don't care who gets downsized, who gets laid off, who gets outsourced, what gets offshored... as long as they get their dividends. they don't give a damn who gets hurt, as long as they get their dividends. it's all about the "me" society. screw the "we" society.

so the ceo's who make the "big" decisions to downsize, layoff, oursource and offshore get HUGE compensation packages. while the workers that are left have to take pay cuts, benefits cuts, work multilple jobs just to come close to maintaining the standard of living they had. and they are losing.

and the bottom line of the companies get blacker and blacker, THANKS to the downsizing, laying off, outsourcing, offshoring and the screwing of the remaining workers. and the shareholders get their dividends.

meanwhile, we american workers, who GOT downsized, laid off, outsourced and offshored can just shop at... well... WALMART, because that is all we can afford. that's all we deserve.

greed, it is all about greed. and the american shareholders and the corporate decision makers are the greediest.

AND i'll bet that the huge majority of them are republicans.

[hack89]

19. You may be right,

though I question your contention that it is only Republican greed that is causing the problem. There are plenty of rich and affluent Democrats. The only point I was trying to make is that companies are not tied the American market for their growth and profitability. There is a massive growth in personal wealth in huge countries like China and India.

The American economy is splitting in two - a high tech economy with educated workers receiving high pay and a service economy for the rest (health care being a big part of this). We will never get all those low tech manufacturing jobs back - the solution is reform education to give more people a shot at the high tech jobs. (I also support universal health care - ones health should not depend on what kind of job you have.)

[roamer65]

10. Don't worry, they'll just print more.

...or just login to the Fed computers and type in the amount they want to debt monetize.

[Uben]

11. Hedge funds are losers

I read where the investors in certain hedge funds have lost virtually everything due to these sub prime mortgages. Most of the folks in these funds won't miss the money, but they did lose an enormous amount by our standards.

[zehnkatzen]

17. And we're nearly at 1 to 1 with the Canadian Dollar

If you want an idea on how healthy our economy is, i noted very recently that the American dollar is now worth CN$1.04. Not too long ago...say, right around the year 2000...the American dollar was worth about CN$1.40.

You don't hear this at all in the news, of course. just like you don't hear too much about the subprime meltdown in the news.

I don't know if I'll be prepared for the economic collapse when it happens (we fortunately we were able to secure a 30-year fixed for less than 6.00 per cent), but at least I won't be surprised. But that's only because I don't depend on network news anymore.

[JPZenger]

22. An Unregulated Industry

This crisis was easy to see coming. The industry let people claim an income without any supporting paperwork. They issued two mortgages to a borrower and hid one of them. They misled people about adjustable rate mortgages with exploding increases.

I hope the financiers who were behind this travesty take a financial bath. Instead, they are plotting for some way for the Federal government to bail out the lenders under the deceptive claim that the borrowers need help.

I believe the Federal government should outlaw early payment penalties for mortgages. Too many people are stuck in expensive adjustable rate mortgages that they cannot afford to replace because of the penalities.

The mortgage brokers are completely unregulated. Customers think they are working for the borrower, when they actually are working for the highest commission - which means the worst deal for the borrower.

The Federal agencies responsible for regulating financial institutions claimed they did not have authority to regulate. Instead, they occasionally issued "Guidance" to the lenders - they suggested that the lenders not do bad things.

[JPZenger]

23. Ironic that the Federal Govt. Used to Handle Riskier Mortgages

The ironic thing is that the Federal government used to accept the risk for borrowers with imperfect credit, little down-money and limited income. These people used to get mortgages that were guaranteed by the Federal Housing Administration. The private lenders used to turn these people down, and the FHA was the place of last resort. If a FHA borrower defaulted, it was the Federal government that had to sell the house and pay the mortgage.

Then the private lenders decided they didn't want to deal with FHA, and those lenders took on the riskier customers themselves. The amount of FHA mortgages has rapidly fallen. I guess the lenders felt they were going to sell the mortgage to someone else before it fell apart.

Now, one of the proposals is for the FHA to take on these high risk mortgages and bail everyone out - both the lenders and the borrowers. I prefer a system that only helps out the borrowers who acted in good faith but were deceived by fast increases in interest rates.

[CGowen]

24. I think the people who say it was greenlighted from above are right

......

The Fed started inflating the housing bubble in earnest around 2001, after the collapse of the dot.com bubble, which failed with the stock market decline of 2000-2002. Then, over a trillion dollars of wealth, including working peoples’ retirement savings, simply vanished.

Also according to mortgage specialists, it was in March 2001, two months after George W. Bush became president, that a “wave of intoxicated fraud” started. Mortgage companies began to be instructed, by the creditors/lenders, on how to package loan applications as "master strokes of forgery," so that completely unqualified buyers could purchase homes.

There could not have been a sudden onset of industry-wide illegal activity without direction from higher-up in the money chain. It could not have continued without reports being filed by whistleblowers with regulatory agencies. Today the government is prosecuting mortgage fraud, but they certainly had to know about it while it was actually going on.

The bubble was coordinated from Wall Street, where brokerages “bundled” the “creatively-financed” mortgages and sold them as bonds to retirement and mutual funds and to overseas investors. Portfolio managers were directed to buy subprime bonds as other bonds matured. It’s the subprime segment of the industry that has now collapsed, triggering, for instance, the recent highly-publicized demise of two Bear Stearns hedge funds.

........

http://www.globalresearch.ca/index.php?context=va&aid=6239

[Xenotime]

25. This will ruin the @merican economy...

With the dollar failing, the economy in the tank, stock bubble is going to pop big time.