Remember these words from Manias, Panics and Crashes.
"This is 'distress', which generates unexpected failures, followed by 'revulsion' or 'discredit'."
And then right on schedule, this headline from today, and a plethora of words that seemingly were ripped out of Manias, Panics and Crashes and plopped right into this story of what's going on:
Credit markets leave banks saddled with £250bn of debt
Leading investment banks on both sides of the Atlantic are saddled with almost $500 billion (£246 billion) in agreed leveraged loans that they are unable to parcel out to other investors.
New figures from Dealogic reveal that in Europe the banks are struggling to clear a backlog of $208 billion worth of leveraged loans that they would normally have sold on through syndication.
In the United States, the figures also show that investment banks are stuck with $269 billion of agreed loans that they are unable to syndicate.
News of the glut of debt on the banks’ balance sheets comes as the shake-out in credit markets produced new casualties as global markets were racked by further volatility.
Leading investment banks on both sides of the Atlantic are saddled with almost $500 billion (£246 billion) in agreed leveraged loans that they are unable to parcel out to other investors.
New figures from Dealogic reveal that in Europe the banks are struggling to clear a backlog of $208 billion worth of leveraged loans that they would normally have sold on through syndication.
In the United States, the figures also show that investment banks are stuck with $269 billion of agreed loans that they are unable to syndicate.
News of the glut of debt on the banks’ balance sheets comes as the shake-out in credit markets produced new casualties as global markets were racked by further volatility.
Guess what folks - when the banks are stuck with massive LBO and CDO on their books and they can't sell it off to the next sucker down the line, what do they do? They damn well don't issue more debt.
Welcome to "Discredit". And welcome to a severe contraction in the ability to take out a new loan to buy or refinance a house.
We have way too many houses, way to few able buyers, and it's just gonna get worse.
