February 29, 2008

Ruh-roh: Right on schedule, the Alt-A "Liar's Loan" CDOs start tumbling. The big problem? $1 Trillion of Alt-A, vs. only $650 billion of subprime


Man, if the financial world just read the bubble blogs, they wouldn't have all these little "surprises"

Gee, what a shock! The liar's loans ain't gettin' paid back! Who knew! Oh my!

Unreal.

They called them "Liar's Loans" for a reason. One more time - they called them "Liar's Loans" for a reason.

Not only will Liar's Loan King IndyMac go out of business eventually, after getting sued to the moon by the bagholders who bought their garbage, but I hope to see their mortgage-fraud-enabling stock-pumping CEO Michael Perry frog-marched at the FBI's earliest convenience.

Alt-A Mortgage Securities Tumble, Signaling Losses

Securities backed by Alt-A mortgages and other home loans to borrowers with better-than-subprime credit tumbled this month, causing investment funds to unwind or meet margin calls and signaling larger losses for Wall Street.

About $950 billion of Alt-A mortgage securities are outstanding, compared with about $650 billion of subprime securities and $500 billion of prime-jumbo securities

19 comments:

Anonymous said...

dunno the future, but the implications of all this sure do make the Great Depression look like a cakewalk. Let's just hope the US stays a relative democracy in the near future...

eric in vegas said...

When everything is over and the losses are tallied, trillions will have been lost.

Max said...

And to think about, we are not done with the subprime yet, by a long shot.

keith said...

Trillion here trillion there soon you're talking real money

I just wonder when the MSM will stop talking about the "subprime" problem, and start calling it what it is

It's housing panic of course

Ed said...

bA few days ago in order to avoid some gnarly traffic on the interstate I took some short cuts. One of the areas I drove through was Mansionville. And I don't mean McMansionville. I mean full on, private gate, 2 acres + lot with tennis courts Mansionville. As I was driving through, I was surprised to see lots of for sale signs. Maybe every 6th or 7th house on this one particular road was for sale. Houses like that take years to sell in a good market, I can only imagine how long it will take in this environment.

I'm thinking these are probably "owned" by the well off lawyer/doctor/small bidness owner. Good income, but not THAT good to afford a house like that, unless they lie about their income and get a no doc ALT-A type of loan which SURPRISE! they can't keep up with.

It all scales up. The $40K a year sales rep shlub bought a $400K house and is now in trouble. The $100K a year engineer bought a $800K house and is now in trouble. And the $500K a year surgeon bought a $5M house and is now in trouble too.

It never was about subprime. It was always about people buying too much house, regardless of income, race, political leanings or any of the other factors the MSM (and HPers) try to come up with.

tangelo mozilo said...

I too have been wondering when the MSM will stop talking about the "subprime problem."

It was about a year ago (last April) that the MSM first recognized there was a problem with subprime CDOs, and ever since then they have been painting the entire housing crash with the subprime brush.

It was never about subprime to begin with. Not really. Subprime is a symptom, not the disease.

The disease is valuation.

However, the MSM will NEVER recognize the housing crisis as a valuation crisis because too many Americans were too heavily vested in the 1995-2005 valuation scheme. The MSM sees that valuation archetype as an ideal economic paradigm that brought America unprecedented wealth with little or no effort or risk involved. They will never recognize that the wealth was not real, and that the distortions caused by the fake wealth were disasterous.

I suspect that the MSM will eventually concede that "the subprime problem has spilled over into the broader market," but will have no idea about what they are actually saying, nor any inkling of the economic mechanics that might underly their theoretical "spilling over." At that point, they will stop referring to it as a subprime problem, and will start referring to it as a "housing problem." However, they will never acknowledge the valuation problem, and when discussing the origins of the housing problem, the talking heads will cast their minds back to 2007 and fondly recall that the general housing problem sprung from the original subprime mess.

Of course, such metaphysical assertions are absurd, and an ephemeral reference to "spilling over" contains no explanitory power. We at HP will know better, and are not fooled by the empty bromides vomited up by the MSM.

satan is a republican said...

Why worry? The problem is "contained". To Planet Earth.

Anonymous said...

"I just wonder when the MSM will stop talking about the "subprime" problem, and start calling it what it is

It's housing panic of course"

Sort of.... It is a credit panic. It was a credit bubble chasing real estate. If suddenly bankers starting granting loans to speculators so that they could buy gold on margin, you'd have "GoldPANIC". If it were eggs, you'd have "EggPANIC". If it were prophylactics, you'd have "TrojanPANIC". It is a credit bubble.

Smug Bastard

Anonymous said...


When everything is over and the losses are tallied, trillions will have been lost.



Those trillions were never really there. It was all fraudulently created paper wealth that the morons spent on SUV's, vacations and boats.

Anonymous said...

Friday, the bad news will come out after the martket today - sell while you can!!!!

Lady Di said...

We are a subprime nation. The Alt A meltdown will be the nail in the U.S.'s coffin. Prepare yourself accordingly. It is going to get very ugly...

Frank@Scottsdale-Sucks.com said...

Ha, I've been waiting for this!

Can't wait to see how Scottsdale turns out ... Scottsdale was fueled by liar's loans.

You have to remember, everyone in Scottsdale has (had?) stellar credit because they live on credit and require it. Scottsdale people need credit like normal people need air. So these people weren't subprime ... no ... what they did was LIE about their incomes to "buy" the $800k house on $50k/year.

Gonna be ugly in Arizona.

Anonymous said...

Why worry? The problem is "contained". To Planet Earth.

___________________________________

If the astronauts' homes-mortgages are upside down, then it's contained within near-Earth orbit.

Anonymous said...

Dear Keith,

You blog has continually improved as far as the content you research and present. You have turned yourself into a very good economic commentator.

Anonymous said...

About $950 billion of Alt-A mortgage securities are outstanding, compared with about $650 billion of subprime securities and $500 billion of prime-jumbo securities
---------------------------

I thought that I read somewhere that there is $47 trillion worth of derivatives floating around.

When do those get liquidated?

Anonymous said...


I thought that I read somewhere that there is $47 trillion worth of derivatives floating around.

When do those get liquidated?


Those are fine until one of the couterparties fails. Buying derivatives OTC is like buying your home and auto insurance from the guy standing on the street corner. You have no idea if he even has a penny in his pocket to pay you.

Anonymous said...

We are a subprime nation.

We are not a subprime nation. We will be after this housing crash and recession ruins the credit of half the country. I keep wondering why foreigners keep lending us money at such low rates. If I was lending money to American government, business, or individuals, I would be charging 20% and require collateral due to risk and inflation.

Anonymous said...

"It never was about subprime. It was always about people buying too much house, regardless of income, race, political leanings or any of the other factors the MSM (and HPers) try to come up with."

----

Soon we will be hearing about problems with the prime lending market.

Lost Cause said...

The problems have been chronic for GM for going on 2 years, the Midwest has been evacuated, and they are still denying that there will be a recession? The plutocrats couldn't be more out of touch. Do you think they will even notice the unwinding derivatives and hedge funds?