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Banned
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Ustwo, you're funny...where do you get this "stuff"? It would be soooo much easier for me to post here if I could just say anything, without anything to back it up.....like you do!
All of the following information, from a wide variety of sources, including from economist Roubini, who has correctly predicted the unfolding economic conditions, meshes. Each article reinforces the other articles.... each opinion reinforces the other opinions....all except one.
We'll revisit this post one year from today....count on it!
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Originally Posted by Ustwo
Never mind we live in the greatest prosperity EVER in the history of mankind, its swirls down the toliet as you say because we have an approaching recession, something we have NEVER seen before!
I think you need a dose of perspective.
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http://money.cnn.com/news/newsfeeds/...3-24037412.htm
Paulson says 'premature' to give brokers permanent Fed loan access UPDATE
March 26, 2008: 12:00 PM EST
WASHINGTON, Mar. 26, 2008 (Thomson Financial delivered by Newstex) -- The Federal Reserve deserves praise for its creativity in the face of unprecedented financial market problems, Treasury Secretary Henry Paulson said today, but the kind of expanded lending the Fed has been doing to investment companies needs to be limited to emergency conditions only.
'It would be premature to jump to the conclusion that all broker-dealers or other potentially important financial firms in our system today should have permanent access to the Fed's liquidity facility,' he said.
But it is not premature, he said, to think about new or different regulations. We must all 'think more broadly about the regulatory and supervisory framework that is consistent with the promotion and maintenance of financial stability.'
Paulson told a US Chamber of Commerce capital markets conference that the credit markets' current problems are an exceptional circumstance, and 'at this time, the Federal Reserve's recent action should be viewed as a precedent only for unusual periods of turmoil.'
Besides putting up 29 bln usd to help to finance the JP Morgan Chase takeover of Bear Stearns (NYSE:BSC) -- a deal in which the Treasury Secretary was himself involved -- <h3>the Fed has also opened its discount window to non-banks for the first time since the Depression and greatly expanded its lending of Treasury securities to broker-dealers.</h3>
The rapid extension of hundreds of billions of dollars in Fed support to non-banks has inevitably raised a question which Paulson pointed out: 'The trade-off for this subsidized funding (for banks) is regulation tailored to protect the taxpayers from moral hazard this insurance creates.'
But Wall Street firms have faced nothing like the detailed rules and detailed examination of their finances that are mandated for banks. Unsurprisingly, there are now calls in Congress to more heavily regulate the brokerage firms.....
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http://www.investmentnews.com/apps/p.../REG/767507756
By Janet Morrissey
March 24, 2008
Nouriel Roubini, one of the biggest bears on Wall Street, wasn't surprised by the fire sale at The Bear Stearns Cos Inc. of New York. He said it just reinforces his 12-point gloom-and-doom outlook, which he unleashed on Wall Street in February, and he now thinks that total financial losses in the credit debacle may top the $1 trillion he previously projected.
Mr. Roubini, 49, a professor at New York University's Stern School of Business and founder of RGE Monitor, a New York-based economic research firm, was met by skepticism when he first predicted a downturn in a July 2006 report, "A Coming Recession in the U.S. Economy." <h3>Today, few doubt his early insight.</h3>
.....Q. The Fed agreed to provide financing of up to $30 billion to cover the Bear assets that were less attractive to JPMorgan Chase & Co., and this marked the first time the Fed has offered a bailout to a non-regulated bank since the Great Depression. Are you concerned?
A. It's the beginning of a radical change in monetary policy. It's not just the $30 billion that the Fed confirmed to Bear Stearns via JPMorgan — there were two other major options that went in the same direction. One was the decision [two weeks ago] to provide $200 billion so that all primary dealers, including non-bank financial institutions, would be able to swap their illiquid and toxic MBS [paper] for safe Treasuries. The other was the Fed giving any primary dealer, including non-banks, access to the Fed discount window on the same terms as banking institutions. This is a radical change; we haven't seen anything like this since the Great Depression.
These are financial institutions that are not regulated or supervised by the Fed. The Fed has no idea of whether they are just illiquid or insolvent, which creates a massive moral hazard problem. It's a radical shift in the way the Fed operates — and a dangerous way, I would argue.
Q. Dangerous in what way?
A. You're telling people that even if they have made reckless lending and investment decisions, mismanaged risk or continue to do stupid things, the government will bail them out. We are in a systemic financial crisis.
Q. In your 12-step prediction, you estimated total financial losses from subprime lending, credit cards and auto loans at $1 trillion. Has your view changed after Bear Stearns?
<h3>A. The losses that we're facing at this point — $1 trillion — is the floor, not the ceiling. Losses might be much bigger than that.</h3> Even if you believe subprime losses might be in the order of $300 billion to $400 billion, more losses are going to be derived from commercial real estate, credit cards, auto loans, student loans and leverage loans, as well as from corporate defaults and losses from city assets.
Eventually the monolines will be downgraded, which means we'll see another round of write-downs on the things that they insured.
Q. Where are home prices going?
A. Two years ago, I predicted home prices would fall cumulatively 20%, but now I believe it will be at least 30%.
With a 20% fall in home prices, about 16 million households are under water. They have negative equity, which means the value of their homes is below the value of their mortgages. With a 30% drop in prices, you have 21 million households that are in negative equity. And since the mortgages are no-recourse loans, essentially they can walk away.
Even if only half of the 16 million households were to walk away, that alone could lead to losses for the financial system of $1 trillion. Even a 20% drop in home values may imply losses of $1 trillion that are not priced into the market today. So that's the floor. Again, it could be higher — as much as $2 trillion — if prices fall 30% and more people walk.
Q. You are predicting problems in commercial real estate, which we haven't seen yet. When do you expect the crisis to hit?
A. The same kind of reckless lending practices that occurred in subprime also occurred in commercial real estate — things like really high loan-to-value ratios and inflated estimations of how much rent would increase. If you look at the CMBX index (which tracks bonds backed by real estate loans), the spreads imply a huge number of defaults on existing commercial real estate loans. More important, the market for new commercial real estate loans is totally frozen, like the one for subprime new originations.
Q. But when will this happen?
A. That shoe has not dropped yet. But I expect the severe recession in residential housing will lead to a severe recession in commercial real estate. The reason is simple: If you go west, you have entire ghost towns outside of Phoenix, Las Vegas and throughout California. Who is going to be building new shopping centers, shopping malls, offices and stores where you have ghost towns? Also, there has been a lot of commercial real estate activity in the last couple of years, including a huge increase in retail capacity at a time of consumer-led recession. So, I expect [a commercial real estate] collapse will occur in the next few quarters.
<h3>Q. How bad will things get?
A. I would argue this is the worst financial crisis the U.S. has had since the Great Depression. We haven't seen this type of real financial turmoil for the last 70 years. Of course, it's not going to be as bad as the Great Depression. But this isn't your typical run-of-the-mill recession that in the last two episodes lasted only eight months with a minor contraction in output.</h3> This is going to last at least 12 months and more likely 18 months, which is something we haven't seen in decades.
Q. So you expect the economy to start turning around in mid-2009?
A. The real economic activity, yes. But some parts of the system are going to be in a severe contraction for much longer; home prices are going to keep falling for another three years, in my view. And the financial mess is going to take years to clean up.
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http://www.reuters.com/articlePrint?...39260820080326
Goldman sees credit losses totaling $1.2 trillion
Wed Mar 26, 2008 1:01am EDT
NEW YORK (Reuters) - <h3>Goldman Sachs forecasts global credit losses stemming from the current market turmoil will reach $1.2 trillion, with Wall Street accounting for nearly 40 percent of the losses.</h3>
U.S. leveraged institutions, which include banks, brokers-dealers, hedge funds and government-sponsored enterprises, will suffer roughly $460 billion in credit losses after loan loss provisions, Goldman Sachs economists wrote in a research note released late on Monday.
Losses from this group of players are crucial because they have led to a dramatic pullback in credit availability as they have pared lending to shore up their capital and preserve their capital requirements, they said.
Goldman estimated $120 billion in write-offs have been reported by these leveraged institutions since the credit crunch began last summer.
"U.S. leveraged institutions have written off less than half of the losses associated with the bursting of the credit bubble," they said. "There is light at the end of the tunnel, but it is still rather dim."
Of the cumulative losses expected by these leveraged players, bad residential home loans will represent about half, while poor-performing commercial mortgages will represent 15 percent to 20 percent.
The rest of the losses will come from credit card loans, car loans, commercial and industrial lending and non-financial corporate bonds, Goldman economists said.
Facing more credit losses, leveraged institutions have raised about $100 billion in new capital from domestic and foreign investors and reduced dividend payouts. This amount is more than three-quarters of the write-offs to date, the report said....
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http://www.financialweek.com/apps/pb.../REG/736472226
Corporate liquidity begins to dry up
By Megan Johnston
March 24, 2008
The credit crunch is taking a toll on corporate liquidity, as the soaring cost of debt—for both commercial paper and private placements—pinches the balance sheets of all but the most highly rated non-financial companies.
Cash and short-term investments of non-financial companies dropped by $250 billion in the second half of 2007, the first decline in the nine years that consultancy Treasury Strategies has been tracking the data.
Corporate liquidity had risen steadily, from $3.9 trillion in 1999 to $5.5 trillion in June 2007. But at the end of last year, it had fallen to $5.25 trillion, a 5% drop.
The findings are part of a survey of 135 corporate treasurers conducted by Treasury Strategies between July 1, 2007, and Jan. 1, 2008. Treasury Strategies then adjusted that data with findings from its annual survey of 600 corporate treasurers.
Anthony J. Carfang, a co-founder of Treasury Strategies, attributes much of the drop to a decline in commercial paper issuance. Many companies issue commercial paper not just to finance operations but to bolster the cash on their balance sheet. “As companies have tightened up, they’re shrinking balance sheets just a little bit by borrowing less,” Mr. Carfang said. “A lot of companies had been directly issuing commercial paper because it was easy to do, and keeping a little cash cushion as a result.”
But when the credit crunch began, it became expensive for all but the most highly rated companies to issue paper. As a result, he said, cash balances dropped.....
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Last edited by host; 03-26-2008 at 11:16 PM..
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