September 19, 2007

What effect (if any) will the Fed's desperate rate cut have on the housing crash?


Have at it...

Fed cut impact on housing

The Fed Funds rate affects a range of consumer loans, including home equity and mortgages. Lower mortgage rates would add to the number of home buyers able to afford to make purchases, increasing demand for properties and buoying home prices. Buyers generally care less about the actual purchase price than they do about the size of their payments. If rates drop, so will monthly debt obligations.

However, the real problem in the housing market is not interest rates, according to Keith Gumbinger, vice president for HSH Associates, a mortgage industry publisher. It is that there is not enough money available for making loans.

"The liquidity problem hasn't changed," Gumbinger said. "The primary issue is trust between buyers and holders of debt." Investors holding worthless or heavily discounted paper are not eager to buy more.

Home prices in many parts of the country remain out of reach for average Americans, leading to slow sales and lengthening inventories of houses on the market. Also adding to listings is a flood of new foreclosures hitting the market.

56 comments:

Anonymous said...

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Quotes from Diana Olick's post in response to the Fed cut:

Bill Seidman/Fmr. Head of FDIC, CNBC Chief Commentator: "If credit is bad, rates don’t count. I don’t care if you lower the rate 100 basis points. It may improve some of the profits of those institutions that lost a lot of money due to bad credit, but it does not address itself to the real problem, which is bad lending. And let me emphasize: it’s not just subprime, it’s substandard lending."

Jay Brinkmann/Mortgage Bankers Assoc.: "The Fed rate cut has already been priced in. Usually a Fed rate cut has little to do with consumer mortgage rates except to the extent that it signals an outlook on inflation. Greenspan's famous conundrum was that he kept raising short term rates and long-term rates did not move."

Howard Glaser/Fmr. HUD Official, Mortgage Industry Consultant: "My view is that the effect is likely to be limited – probably a short -term psychological boost more than a fix for mortgage market liquidity. The underlying problems that have made investors skittish about buying mortgage-backed securities are not addressed by a rate cut. In particular, concern about accurate assessment of risk of MBS pools remains a hurdle. The rate cut may help in the jumbo market, where illiquidity was[sic will] do more to investor psychology than actual performance problems. So capital may come back there and help stabilize that market, where pricing has been terrible."

More Glaser: "And the Alt A/Subprime markets will not be affected at all by a rate cut. Subprime will drop from 700 billion in the first half of the year to 300 billion in the second half of the year (FBR) and nothing will stop that. The loan types that made that volume possible simply can’t be made today (due to regulatory changes)---you could lower the rate to zero and those loans are still not coming back."

This cut has very little, if anything, to do with providing relief for main street, it has everything to do with providing profits and bonuses for the fat cats of wall street PERIOD.

Paul E. Math said...

I tend to agree with the assessment that this rate cut will have little effect on the housing decline. It may delay the onset of fear by giving a few observers false hope but in the end nothing changes. Affordability is still low, nobody wants to touch subprime so that whole segment of demand will continue to disappear. I don't even think the liquidity crunch is affected all that much since, if you mark this subprime crap to market, these hedge funds are still crashing for the same reasons as before.

This rate cut is just a desperate act of a fed that sees that writing on the wall and is doing what little it can to postpone the inevitable. I don't know what todays cpi numbers are but we can expect them to rise in the future putting pressure on BB to bring that helicopter back into the hangar.

Anonymous said...

nope, it will continue to readjust down.

Anonymous said...

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Oh Keefer Keeer Keefer. Stop spinning dude. It's over. You lose. Ben B did the right thing. He saved 70% of the population (homeowners) and threw 30% (renters) under the bus.

Sorry. I feel for you I really do, but come on man, you sound ridiculous trying to make it seem like this won't help housing.

Anonymous said...

Stick seventeen knives in your heart (ok, maybe someone else's) and pull two out and let me know the status of the victim.

The seventeen rate increases prior to this cut have produced their desired effect.

Housing is a wounded animal and it will be years before it recovers.

With the broader economy in recession, the rate cut was necessary medicine although I think the dosage was too high.

Roccman said...

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none

Anonymous said...

None, it was done to give the banks more money to cover their azzes when they get called...

DOPES said...

I WILL CAUSE YOU ALL TO KEEP RENTING!
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DOPES!
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Batman said...

Currencies all getting shaken up:

http://tinyurl.com/2ozk7n

Soon the chinese will buy all the US land. At least the US got all those neat happy meal toys in return.

Darreningainesvilllefl said...

Very little. Banks and Lenders will not now start doing 100% and stated income loans again. People do not have savings and that is most people. You need a high score, over 700 and at least 5% down. This rate drop will help only cry baby Waaallstreet.

LI Surfer said...

No effect on housing, b/c of the oversupply of inventory prices cannot rise, therefore, the speculators and flippers still can not cover their purchase costs and more loans will be foreclosed. Adding fuel to the fire. The only thing that could slow the disaster is rising prices (back to the Ponzi scheme) and that's not going to happen any time soon.

AMIGAUSER said...

The price of housing will now stabilize
Why should home owners lower the price of their homes, when interest rates are going down?
Why should they reduce their prices - Fanny Mae has now just had its loan levels increased?
Its time now to recognize that markets are rigged for the benefit of the Wall Street establishment, therefore you should buy assets that will go up in times of inflation :-

Supermarkets
Copyrighted goods
Real Estate
Finance companies

Don't let the gold bugs con you with their inflation protection nonsense, ask them how much did gold go up in the inflationary 80s and 90s.

Anonymous said...

Most of the variable rate loans that are re-pricing are tied to the LIBOR and if the Fed cut has no effect on LIBOR it won't help those debtors who havea mortgage tied to same. The ball is now in the court of those who control LIBOR.

Smug Bastard

Mammoth said...

“What effect will the Fed's desperate rate cut have on the housing crash?”

As I’ve recently mentioned in posts here, for the past 6 weeks I have been fixing up my recently-vacated rental house with the intention of selling it.

For dollars which are in the process of evaporating? Screw HP and the "sell now" mantra here!

Now it looks like I would be better off to just roll the dice and pull another tenant out of the hat. This time around, the house will rent with positive cash flow, and the tenants can pay down the ~$75K in principal that remains.
----------------
So...the effect on the housing crash? One less home added to the already-bloated inventory, and one less transaction for the banks, mortgage companies, title companies and the appraisers to milk $$$ out of. Fvck em!

-Mammoth

Anonymous said...

ROFL@DOPES.

ARM resets are tied to LIBOR, which is in the the 6%+ range, the ARM resets are typically 1mo LIBOR + XX basis points.

The crash will continue, this is the fed pumping the stock market bubble one last time before it too bursts.

Also, the dollar suffered 1% inflation between 2 and 4:30pm yesterday!

Great job ben! /sarcasm.

Counterintuitive Investor said...

Anonymous said...
"Most of the variable rate loans that are re-pricing are tied to the LIBOR and if the Fed cut has no effect on LIBOR it won't help those debtors who havea mortgage tied to same. The ball is now in the court of those who control LIBOR.

Smug Bastard"

Hey smug bastard, did you happen to notice the rates of LIBOR this morning? 30 basis point drop. Face the facts gentlemen, the doom and gloom bubble has just burst. We had a housing bubble up, then we had a housing gloom and doom bubble down. Both are done, now the market is finding homeostasis. Even the dollar has not done to badly considering.

Housing permits are dropping steeply. No new inventory, lower rates will make folks start buying and inventory will be used up faster. Fannie and Freddie are expanding their loan limits.

Pack it up gentlemen, you had some fun, but the fun is over. Oh and Keith, how is that short position on CFC. Remember from the last 50 point reduction at the discount window BEFORE the market open, the fed HATES shorts and will continue to cut you off at the knees. Tread lightly.

save the greenbacks said...

Ummm no, anon 1:22, we all lose. By cutting rates, the Fed just ignited a massive inflation wildfire. Housing is dead and its not coming back, regardless of rates. But now, "homeowners" and renters get to live through hyperinflation of everything else. Please try to understand that Ben B. dosen't give a s*it about you, Joe Sixpack the homeowner. His move was intended to help out his banker buddies. And the score is Lenders-1 Borrowers-0

bobbyg said...

This move will bait out the i-banks and hedge funds so house prices in the NY Metro area will be propped up. The rest of the country is screwed big time. I predicted this Fed would cave three months ago so I moved into gold and foreign currency CDs. I wrote the following email to the FED this morning. I urge all of you to do the same:

Tuesday, September 18 will be forever remembered as the day that the Fed confirmed the suspicions of its critics that the Fed’s real mission is not to insure price stability but rather to bolster asset prices. The decision to lower the Fed Funds Rate by a full 50 basis points confirms the existence of the Greenspan cum Bernanke Put and shows clearly that the Fed is not beholden to the American People but rather to the corporate elites, investment banks, hedge funds and the well-heeled investors who have gobbled up the “innovative” products churned out of the machinery of modern financial “engineering”. In the stark face of $82/bbl oil, $700+ gold and a US dollar in free fall, the Fed felt it was wise to print even more money. The current Fed will be well-remembered by future generations of Americans as having sacrificed their standard of living in order to bail out Wall Street speculators who should have been forced to eat the bitter fruit of their own mal-investments. This is the death knell of American free-market capitalism and the birth of Plutocracy. Congratulations.

Anonymous said...

Sweet, now I can go out and buy that new home now that the Fed has lowered rates and housing pri9ces will go back up- NOT.

Trevor Cordes said...

Pay attention to this: long bond rates are going UP after the rate cut. They went up a bit yesterday, and a lot today! 30yr 4.86, 10yr 4.54, 5yr 4.21. Curve is steepening. Rate cut is not affecting the long-end (worse, the opposite!). Most fixed mortgages are keyed off the 10yr & 30yr. If they keep going up, the cut will BACKFIRE. Everyone is scrambling to turn ARM into fixed right now (and that is what the govt "bailout/help plans" want to help you do).

For over 3 years the bond market has been blind, stupid, on crack, etc. It's been manipulated to signal non-inflation by the Asians recycling dollars. Either the bond traders just remembered they're supposed to be "vigilantes", or the Asians are getting frisky and are accelerating (surreptitiously) their bond sales.

Either way, watch those 10yr rates. Watch gold. Watch oil. Watch the US$. Forget the stock market for now, the smart and powerful money (foreigners) that pull all the strings at the end of the day are telling us all something. If inflation wasn't a problem, ALL these indicators would be doing the opposite of what they are right now.

blameless said...

The fix is in -- for lenders and big investors. Rates for mortgages are going down, maybe to record low levels (election year), and the GSEs will soon be buying jumbo loans up to $880K. Year-end bonuses are on the line so Wall Street fat cats will do whatever it takes to keep those safe and sound.

Sorry HPers, while you all sit there with arms folded wondering why no one sees it your way, the party goes on.

bank regulator said...

"Ummm no, anon 1:22, we all lose. By cutting rates, the Fed just ignited a massive inflation wildfire. Housing is dead and its not coming back, regardless of rates."

Umm no, greenbacks, you can't have it both ways. Predicting deflation in housing while everything else inflates is nonsense. Home prices will be lifted by inflation just like everything else. Wages will go up too. Where I live average wages have increase 20% in just the past two years, and the unemployment rate is 3%.

And please stop throwing around the term "hyperinflation" unless you really mean it. Inflation of 2%-3% a month is bad, but it's not hyperinflation. When it gets to 100% a month you might start to use the "H" word and not sound stupid.

Anonymous said...

DOPES said...
I WILL CAUSE YOU ALL TO KEEP RENTING!
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DOPES!
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September 19, 2007 2:19 PM
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Behold the only thing the Fed Rate cut will revive/bolster, the rate of DOPES/Troll comments on HP!!

tin foil hat salesman said...

Hey bobbyg, your email to the Fed was worded perfectly. I'm sure your comments were duly noted and cataloged for future reference by the authorities. Let us know how the weather is down in Gitmo.

Anonymous said...

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NONE!

People will continue to overspend and live recklessly. We will be dealing with hard times sooner or later!



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Sheeple said...

What effect (if any) will the Fed's desperate rate cut have on the housing crash?

It flushes more sheep blankets out of savings and prolongs the pain of debit service while creating more debit and inflation.

Ron said...

under Fed terms 50% of the people couldn't qualify for the loans anyway proposed. So what is it really going to change?

This was by and for the banks, the Fed is a bunch of private banks so no surprise there. If anyone dumb enough to think this was for housing, or this is going to save housing...here's your sign!

Anonymous said...

But now, "homeowners" and renters get to live through hyperinflation of everything else.

Gawd I just love the double-think I see on this (and other) blogs. Somehow we are going to both have huge deflation and hyperinflation all at the same time? O right, the deflation is going to happen in just one asset class (the one you don't have and want to buy) while everything else inflates until people are pushing bales of money around in shopping carts. Or my favorite, we will have great-depression level deflation followed by hyperinflation (perfect for you RE market timers, no?). Oy vey.

Anonymous said...

Ben B did the right thing. He saved 70% of the population (homeowners) and threw 30% (renters) under the bus.

Yes, thank you Ben. Thanks for lowerering the miniscule interest I get on savings accounts. Thanks for letting inflation take over and eat away at my monthly income even more. Thanks for rewarding the swindlers of Wall Street while honest people such as myself who outright own their homes pay the freight for the irresponsible.

This is going to help the housing market? - How? No sane bank will lend a dime right now since credit is so tight.

Anonymous said...

Hey smug bastard, did you happen to notice the rates of LIBOR this morning? 30 basis point drop. Face the facts gentlemen, the doom and gloom bubble has just burst.

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Awesome!! The doom and gloob bubble just burst.

Post of the month.

Anonymous said...

Results from an internet media poll:

Seven out of 10 respondents in our poll said they wanted Fed chairman Ben Bernanke to lower interest rates at the agency’s meeting on Tuesday, while only 6 percent believed that rates should be raised.

The poll also disclosed that an amazingly large number of respondents – 65 percent – feel that their personal wealth has been affected by higher rates and credit cost increases. Here are the poll questions and results:


What should the Federal Reserve do with interest rates at their Sept. 18 meeting?
Lower rates: 70 percent
Raise rates: 6 percent
Keep rates the same: 24 percent


What is your overall opinion of Ben Bernanke’s job performance?
Good: 46 percent
Poor: 21 percent
No opinion: 33 percent

Out at the peak said...

The naive will assume it will help housing. False perception might make a few people get interested in housing, but overall it will not help the consumer/home debtor.

If Bernanke says he'd rather have a "strong economy" over inflation, he's going to run the rate down to zero. We will experience both the Japan housing bust and German hyperinflation for imported goods at the same time.

Anonymous said...

I will keep renting my house from the landlord for 50% of the cost of renting from the bank. The extra money I have will be invested in commodities and foreign stocks through a foreign brokerage. That will make it easier to leave the country when the financial system collapses.

Anonymous said...

A-duh. We learned this in freshman investment and finance classes.

BONDS set the prices for mortgages, not Fed Funds rate. Period.

And given the changes in pricing for bonds and their adjusting for greater risks, the mortgage rates will continue upwards.

Unless only the U.S. Govt wants to be the holder of the mortgages at artificially low rates, which is not sustainable. So even that wont work.

Anonymous said...

"Don't let the gold bugs con you with their inflation protection nonsense, ask them how much did gold go up in the inflationary 80s and 90s."

Yeah how about the 70's you fool. That was real inflation and gold soared. How about this decade, its tripled and is alot less risky than stocks at this point. Gold has more upside potential than downside risk. Rich foreighners and central banks want it and are figuring how to do so on the cheap.Debts are going to soar. Over the long haul gold will do so well and i love idiost like you who don't believe. You buy my shares at the top.

You think homes and stocks will keep going up? the obvious fact that all things go through cycles rebukes that.

brokersleaveyoubroke said...

It seems that the only thing Ben accomplished was to give the trolls something to talk about. It's still just false hope.
Houses have risen/fallen at the same pace as wages since money was invented. They have a long way to fall before they get back to where they should be in comparison to wages. Any arguement otherwise is just a variation of the "it's different this time" theme. How the hell are people going to buy up the excess inventory now that you need a big down payment, very little debt and a great credit score? There are less qualified buyers now then there were before the inventory was way overbuilt. No more flippers and no more subprime borrowers and there are still about a million homes that face forclosure because the buyers never could afford the house in the first place.
Oh, and also, the mortgage interest rate is not determined by the fed but by investors who buy the debt. Right now those investors don't want it at any price.
And lastly, the bailout bill that congress is trying to get through calls for spending less then a billion dollars to help bailout people in trouble. There are several TRILLION dollars of outstanding subprime and alt-A (liars) loans. I would ask who congress thinks would be stupid enough to believe this is a meaningfull bailout but the trolls on this board have already demonstrated who is that stupid.

Anonymous said...

HAD TO PROP UP HOUSING IN ORDER TO KEEP THE TAX REVENUES COMING INTO THE LOCAL POLITICIANS CROOKED TAX AND SPEND SCHEEMES

panicearly said...

it`ll help a few poor bastards catch some falling knives...the remaining
few suckers that think they are getting value just because of some 40% discount bullshit. let them have at it..

Anonymous said...

“What effect will the Fed's desperate rate cut have on the housing crash?”

Doesn't this make the resetting toxic ARM loans reset to a lower increase?

Doesn't that allow more people to qualify to refinance their loans to a 30 year fixed?

Which will drop foreclosure rates?

Which will decrease inventory of unsold homes?

Anonymous said...

Uncle Ben made it clear to China we can't pay you back! In fact you (China) just lost oh about a few billion U.S. dollars.

Great! Now China will control the U.S. dollar by threatening to sell U.S. Treasuries. Just what we needed in the worst housing meltdown in the history of the world. No question Uncle Ben has been reading too much HP.

Anonymous said...

The rate cut is not about mortgages. Sure Uncle Ben talks the talk for political cover, but it is about short term financial liquidity for the overall economy. Mortgages are just one part of a global credit crisis. Granted this blog is about housing, but Uncle Ben would not have cut rates just to save a few homedebtors and investment bankers. Anybody check mortgage rates today. They are up 5 -10 basis points and the number of programs keeps falling. Whoops!! The overwhelming majority of Americans are just fine. It is the deadbeat 5-8% that are causing all the problems. Unfortunatley the losses from this minority of homedebtors are causing huge liquidity issues for the lenders/investors.

Anonymous said...

AMIGAUSER said...
The price of housing will now stabilize
Why should home owners lower the price of their homes, when interest rates are going down?
Why should they reduce their prices - Fanny Mae has now just had its loan levels increased?
Its time now to recognize that markets are rigged for the benefit of the Wall Street establishment, therefore you should buy assets that will go up in times of inflation :-

Supermarkets
Copyrighted goods
Real Estate
Finance companies

Don't let the gold bugs con you with their inflation protection nonsense, ask them how much did gold go up in the inflationary 80s and 90s.

September 19, 2007 2:37 PM

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My gold is stomping the sh*t out of your real estate, and will continue to do so for a long time to come.

Ironically, the rate cut just means that real estate will drop even faster when measured in real money (i.e., gold and silver), though I am sure many homedebting sheeple will think that prices are stabilizing.

Do you think wages are going to be going up at anywhere near the rate of inflation? Time to wake up and smell the globalization, sheeple! Your debt traps are only worth what someone else is willing and able to pay for them!

Anonymous said...

bank regulator said...

...

Predicting deflation in housing while everything else inflates is nonsense. Home prices will be lifted by inflation just like everything else. Wages will go up too. Where I live average wages have increase 20% in just the past two years, and the unemployment rate is 3%.

...

September 19, 2007 3:41 PM

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Housing went up relative to most everything else -- a lot. Now housing will go down relative to most everything else -- a lot. It's really quite simple. That's what happens when a speculative bubble bursts.

Wages up 20% in 2 years? Yeah, right... and then you woke up.

Anonymous said...

tin foil hat salesman said...
Hey bobbyg, your email to the Fed was worded perfectly. I'm sure your comments were duly noted and cataloged for future reference by the authorities. Let us know how the weather is down in Gitmo.

September 19, 2007 3:55 PM

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Hey, at least he'll get free first-rate medical care down there! (See "Sicko.")

Anonymous said...

None if this continue to happen.

http://today.reuters.com/news/
articleinvesting.aspx?type=
bondsNews&storyID=2007-09-
19T203441Z_01_N19308434_
RTRIDST_0_INDYMACBANCORP-
MOODYS-JUNK-UPDATE-2.XML

Moody's cuts IndyMac Bancorp to junk status

The credit rating agency lowered IndyMac's issuer rating, which measures the ability to honor unsecured obligations, one notch to "Ba1," its highest junk grade, from "Baa3."

Moody's also cut the long-term deposit rating for IndyMac Bank to "Baa3" from "Baa2" and the short-term deposit rating to "P-3" from "P-2." The bank's preferred stock was cut to "Ba2" from "Ba1." Further cuts are possible, Moody's said.

The downgrade reflects a decline in IndyMac's financials that stems from difficult mortgage industry conditions, Moody's said.

"IndyMac faces a long-term challenge to restore profitability to historical levels," wrote Sean Jones, a Moody's senior vice president.

In an interview, IndyMac Chief Executive Michael Perry called the downgrade "disappointing" and said the thrift is well positioned to ride out disruptions in the mortgage market, with "strong" liquidity and capital and no financing issues.

Anonymous said...

Anonymous said...
But now, "homeowners" and renters get to live through hyperinflation of everything else.

Gawd I just love the double-think I see on this (and other) blogs. Somehow we are going to both have huge deflation and hyperinflation all at the same time? O right, the deflation is going to happen in just one asset class (the one you don't have and want to buy) while everything else inflates until people are pushing bales of money around in shopping carts. Or my favorite, we will have great-depression level deflation followed by hyperinflation (perfect for you RE market timers, no?). Oy vey.

September 19, 2007 4:17 PM

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1. Stagflation is here.
2. Wages will lag inflation. Badly.
3. Real estate will underperform.
4. Bubble epicenter real estate will underperform dramatically.

Anonymous said...

Sounds like Robert Toll wants the Fed to cut more

http://www.delawareonline.com/apps/
pbcs.dll/article?AID=/20070919/
BUSINESS/70919023/1003

“Does anybody want to call this as the bottom because of the Fed cut?” Robert Toll said to analysts Tuesday at the Credit Suisse 2007 Homebuilder Conference. “I don’t think you can call it yet.”

“When that Sunday report gets a bump up, we can call a bottom,” Toll said. “Not yet.”

But Toll, famously optimistic about a housing rebound that has yet to materialize, poked fun at himself, telling his audience that “anything I say should be viewed with suspicion. Use your mind. Don’t believe me.”

the other trader said...

The rate cuts will slow down the panic, for a week or so, then it will be back to the races (to the bottom).

This rate cut WILL NOT be felt by the American public, (except in slightly lower interest rates on bank deposits\CD's).

Will the mortgage rates decline?
No, they will rise.

Will The auto loan rates decline?
No, they will rise.

Will the Credit Cards slash interest to even their best customers?
No, they will be/have been rising.

Make no mistake about it. This cut was for the "equity" needed to cover the selling by the hedge funds!!!
It was NOT for the poor families being foreclosed upon.
It was not to get the economy back on it's feet.

It is to prevent a break down in the financial system as we know it.
What caused this bump?
The investment stopped coming to this country.
When we were told that America needed 2.5 BILLION dollars a day from foreign investors, JUST TO MAINTAIN our standard of living, I guess most people didn't listen, or just didn't care. Well that money is now gone, and the FED needs to find ways to replace that inflow of money (which turns to credit for you and me). That's what they are doing now, trying to figure it out, and buy some time.

The biggest issue within the hedge funds?
Marking to model.
Overstating the "model" numbers, then leveraging the false worth ten to twenty times with margin.
It would not be so bad if they did not leverage, but they did.
NOW, they are being forced to mark to market (due to massive selling within the fund) and cannot find buyers at ANY price.
Well, this is a huge problem! It causes HUGE margin calls due to the sudden, massive drop in worth.
Publicity causes investor selling that begets more selling, which expose the hedge funds for the fraud they are.

I know, I write too much.

I will shut up now...

It will NOT stop the damage that is coming, but it might help the biggies (ultra rich) escape easier.

Anonymous said...

Perhaps the 1/2 points been priced in alrady.

http://home.businesswire.com/
portal/site/google/
index.jsp?ndmViewId=
news_view&newsId=
20070918006353&newsLang=en

Fitch has downgraded 46 tranches of 11 collateralized debt obligations (CDOs), representing approximately $1.2 billion of rated notes and preference shares, due to exposure to trust preferred securities (TruPS) and senior and subordinated debt issued by real estate investment trusts (REITs), homebuilders and financial institutions specializing in mortgage lending. Fitch has also affirmed $6.8 billion of rated notes including more senior tranches of the aforementioned 11 CDOs, as well as two additional CDOs in their entirety.

Fitch's rating actions follow a formal sector review of 13 CDOs characterized as being backed primarily by REIT TruPS (REIT TruPS CDOs) or REIT, bank and insurance TruPS (hybrid TruPS CDOs). In aggregate, negative rating actions affect notes initially rated between 'A' and 'BB', and represent approximately 7.9% of Fitch rated REIT TruPS CDOs and hybrid TruPS CDOs. Fitch has also removed six of the REIT TruPS CDOs included in this review from Rating Watch Negative, where they were originally placed on Aug. 2 and Aug. 14. A complete list of rating actions is at the conclusion of this rating action commentary.

Anonymous said...

Gives us another 1/2 rate cut Uncle Benny.

http://money.cnn.com/2007/09/19/
real_estate/subprime_layoffs/
index.htm?postversion=2007091910

If the banking industry, with its load of worries caused by the subprime meltdown, has another month like it did in August, it will be in record territory for job losses.

Last month, banks with ties to the subprime mortgage industry laid off more than 26,000 employees, the most of any month since global outplacement consultancy Challenger, Gray & Christmas began keeping such records in 1993.

Overall, that brought the total layoff damage to 107,758 in the financial industry this year. Another month that even remotely resembles recent trends will send the layoff total soaring past the 116,515 mark set during the recession of 2001.

And that could spread to other sectors too. "We'll now start to see how it impacts as the effects ripple into the other areas," said Challenger, Gray & Christmas CEO John Challenger.

Anonymous said...

Hong Kong Dollar remains peg to US Dollar, and Hang Seng Index closed at 25,554.64, up 977.79 points

http://www.nasdaq.com/aspxcontent/
NewsStory.aspx?cpath=
20070919%5cACQRTT200709192152
RTTRADERUSEQUITY_1375.htm&

After hitting the 25,000-point mark for the first time, analysts wonder if 26,000 can be too far off for Hong Kong's Hang Seng Index.

Shares closed sharply higher Wednesday after the Hong Kong Monetary Authority cut the base rate to match the Federal Reserve's rate cut overnight.

Anonymous said...

The crisis at Absolute Capital Management Holdings Ltd. deepened, as the U.K.-listed hedge-fund manager revealed that as much as a quarter of its $2.1 billion equity funds under management are tied up in illiquid assets and froze redemptions after investors tried to pull out more than $100 million.

http://online.wsj.com/article/
SB119023724304932904.html?mod=
googlenews_wsj

Anonymous said...

Lower mortgage rates would add to the number of home buyers able to afford to make purchases, increasing demand for properties and buoying home prices. Buyers generally care less about the actual purchase price than they do about the size of their payments. If rates drop, so will monthly debt obligations.
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The real problem is that the Greedy Sellers will become emboldened and RAISE their prices. The standoff will continue.

Anonymous said...

"The liquidity problem hasn't changed," Gumbinger said. "The primary issue is trust between buyers and holders of debt." Investors holding worthless or heavily discounted paper are not eager to buy more.
-----------

It think this is the keystone to the whole mess!

CFC, WaMu, et al gladly handed out liar loans and other junk bec they knew they would not hold on to it. They packaged it up and with the collusion of the rating agencies, sold it to investers at A+ rates!

CFC announcing that they will not take anymore subprime is basically an admission of guilt.

FlyingMonkeyWarrior said...

The problem is not liquidity, but solvency, according to Mogumbo, but i but he is not the angriest guy in economics anymore.

Anonymous said...

Long term Treasury rates (e.g., the 10-year Note) are actually edging up as a result of increased inflation expectations, making fixed rate mortgages more expensive. This decreases the amount that prospective homedebting sheeple can borrow, unless of course they want to roll the dice with an ARM. The downward spiral in housing prices will continue and accelerate.