Housing Bubble Bursting?

[Randolph Kinney]

Who's going to the FED's discount window?

Citi taps on Fed's discount window

SAN FRANCISCO (MarketWatch) -- Citi said Wednesday its Citibank unit, on behalf of clients, has accessed $500 million in 30-day term financing under the discount window program announced on Friday by the Federal Reserve Bank of New York. "Citibank stands ready to continue to access the discount window as client needs and market conditions warrant," the New York-based financial services giant said in a statement. "Citi is pleased to inject liquidity into the financial system during times of market stress and to support creditworthy clients." Shares of Citi fell 9 cents to $47.97 in Wednesday afternoon trading.

 

[Randolph Kinney]

More banks tap the FED discount window

J.P. Morgan, B of A, Wachovia tap Fed discount window

 

[Randolph Kinney]

FDIC says bulk of subprime problem in front of us

Bank earnings suffer in second quarter

WASHINGTON (MarketWatch) -- Bank earnings dropped by 3.4% in the second quarter of the year as troubled loans for real estate continued to pile up and net interest margins narrowed, the Federal Deposit Insurance Corp. reported Wednesday.

"Banks continue to face two key challenges," said FDIC Chairman Sheila Bair, "a difficult interest rate environment and ongoing weakness in residential mortgage lending."

But regulators are still worried about the turmoil in the subprime mortgage market, Bair said, calling it a "major concern."

She painted a grim picture of that market, saying many borrowers are facing "resets" -- a change in their loan payments -- in the third and fourth quarter and early next year.

"If we're talking about subprime resets," she told reporters at a press briefing, "the bulk of that problem is ahead of us."

 

[Randolph Kinney]

Lehman Brothers to shut subprime unit, lay off 1,200

 

[Randolph Kinney]

Fed accepts mortgages as collateral in lending $7 billion to banks via 14-day repo

 

[Randolph Kinney]

[FONT=times new roman,times, sans serif][SIZE=-1]Assurances on Buybacks Cost a Lender

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The possibility that Countrywide may have to buy back mortgages that it sold comes on the heels of its announcement last week that the tightening credit markets had forced it to draw on its $11.5 billion line of credit from a consortium of banks, a move that sent the market plummeting.

The repurchase obligations are discussed in Countrywide’s prospectuses and pooling and servicing agreements that cover about $122 billion worth of mortgages packaged and sold to investors from early 2004 to April 1 of this year.

 

[Dee Dee]

RE: BOA injecting $2 Billion into Countrywide

Here's one blogger's take on that move:

http://messages.finance.yahoo.com/S...tm&bn=3223&tid=128776&mid=128776&tof=98&frt=2

Ok idiots, listen carefully here.

I'm Mozillo. I'm about to go broke. I can't sell CP, I can't go to the discount window, I just tapped my $11b credit line and there is no more.

So here comes my "Savior", BAC. They "give" me $2 billion in money in exchange for convertable preferred. I agree to pay them 7.25% and they get rights on roughly 111 million shares of stock ($18 by the 2 billion)

Sounds like a good deal, right?

Wrong.

Here's why.

The day after I do this, BAC shorts 111 million shares of my stock! This nets them $2.8 billion dollars RIGHT NOW. They get interest on the $2.8 billion on top of it. So now if I'm BAC I just made $800 million bucks.

If the stock runs I have an $18 cover. But if I can short the stock to ZERO, I pocket the entire $2.8 billion PLUS I have preference picking over the bones PLUS I got my coupon until they die.

 

[Randolph Kinney]

Credit crisis continues

Commercial paper plunges for second straight week

WASHINGTON (MarketWatch) -- The level of outstanding commercial paper plunged for a second week in a row, evidence of the severe credit crisis that has shaken Wall Street.

Seasonally adjusted outstanding commercial paper fell $90.2 billion to $2.04 trillion in the week ended Wednesday after falling $91.1 billion in the previous week, the Federal Reserve reported Thursday. Most of the decline came in asset-backed paper.

So far in August, commercial paper has fallen $144.4 billion from the level at the end of July, on track for a record monthly withdrawal in August. The previous record was $78 billion in January 2001.

"It is expected that the commercial paper market could shrink as much as $300 billion, roughly the amount of commercial paper backed by mortgage loans," Crescenzi wrote in note to clients. "The shrinkage of the commercial paper market will force companies to obtain money elsewhere. This will absolutely have a negative effect on the economy, arguably in need of offset via new liquidity from the Federal Reserve."

 

[Lloyd Bonafide]

Accredited - 84 cents on the dollar?

http://www.brokeruniverse.com/grapevine/thread/?thread=446918

Yesterday we tested the market again to see what bids are being thrown out for pools. Remember many companies aren’t even getting bids on their loans. Our 660 FICO, FULL DOC, 80% LTV pool just received a bid of 84 cents on the dollar. Both you and I know how completely ridiculous that offer is, but it is the state of the industry, and no one is immune to that. Buyers of loans are considering anything below 660 subprime right now. These are good loans that we refuse to sell at a discount and would go out of business if we did.

 

[Randolph Kinney]

Mortgage industry job cuts surpass 40,000

It’s an employment collapse that threatens to rival the massive layoffs in the airline industry that followed the Sept. 11, 2001, terrorist attacks, when some 100,000 employees lost their jobs.