Housing Bubble Bursting?

[Randolph Kinney]

Well I can live a long long time on just the FLOAT on $1.6 Billion.
Can Indy?

If they have to reserve for more loan losses or if they have actual write downs and that exceeds income, you just subtract that from $1.6 Billion net capital. IndyMac beefed up its credit reserves by $441 million, or 47%, to $1.39 billion in Q3. The latest result also included a $167.2 million pretax loss on the sale of loans and mortgage-backed securities. Charge-offs were $146 million during the quarter. Nonperforming assets, troubled loans that could turn into charge-offs, soared to 2.46% of total assets at Sept. 30 from 0.51% a year earlier.

The question becomes, how much more nonperforming assets will occur going forward?

 

[Riick]

Assets & then there are -- > Level 3 assets

This thread http://appraisersforum.com/showthread.php?p=1486384#post1486384

Originally Posted by George W Dodd
Nov 15th FAS 157 begins and changes FASB to fair value:

In a recent SEC filing, Citigroup said they had $135-billion (U.S.) in Level 3 assets. They have an equity base of $128-billion, so their Level 3 exposure is 105 per cent of equity. Goldman has $72-billion in Level 3, or 185 per cent of their $35-billion in equity.


http://www.timesonline.co.uk/tol/comment/columnists/william_rees_mogg/article2852547.ece

 

[moh malekpour]

What really determines a bank's ability to stay afloat is net capital. Last check, IMB had $1.6 Billion.

The capital world runs on the credit. It doesn't run on net capital.
You can buy a $500,000 home with no capital in your disposal. The home is going to be registered in your name and is going to be your asset. You call it your home and pay property tax for it. You get it because supposedly you have credit to buy it so, part of your asset is your credit and in the business world, you got to rely on the credit. Problem is that people get assets without having credit and that is when things go bad.
What do you think is going to happen to all those wealth, which was created by the housing bubble? Now that the bubble is bursting, where the wealth is going to go. If the money was paid for those homes, where the money is going to go now. In reality, there was no money paid for those homes, they were all bought on credits. Banks credited each others and borrowers
In a casino gambling, some one loses and some one gains. Real money will transfer from the loser to the gainer or to the casino owner but what happens to the loss money from housing foreclosures, banks write downs, Wall Street loss? Who gains from the loss? There is no gain because there was no real money
You get a credit card with $2000 credit. It is as if you have $2000 cash in your pocket. If you are a capitalist, it doesn't make any different if you have your own money in the bank or you have credit, you can make the same profit from that money.

 

[Randolph Kinney]

The froth of 100% financing and first time home buyers

First-time buyers under pressure

LAS VEGAS (MarketWatch) -- The second half of 2006 and the first half of this year weren't so bad for first-time buyers, but tighter lending standards are currently reducing the number of those able to finance their first home, the National Association of Realtors' chief economist said this week.

Between July 2006 and June 2007, 39% of all home purchases were made by first-time buyers, according to the group's annual Profile of Home Buyers and Sellers. That's up from 36% in last year's report.

But consider this: 45% of first-time buyers bought with no money down, and the median down payment of a first-time buyer was 2%. Lending standards tightened considerably with the mortgage crisis in the summer, making no-down-payment financing much more difficult to come by.

Even though home prices are coming down, the inability of many prospective first-time homeowners to acquire 100% financing is greatly hampering their ability to buy, she said.

I guess the real estate market will not come back until the first time home buyer can get 100% financing including closing costs. It truly is the bigger fool theory in action.

 

[moh malekpour]

Goldman Sees Subprime Cutting $2 Trillion in Lending

 

[Randolph Kinney]

Originally Posted by Randolph Kinney
What really determines a bank's ability to stay afloat is net capital. Last check, IMB had $1.6 Billion.

The capital world runs on the credit. It doesn't run on net capital.
You can buy a $500,000 home with no capital in your disposal. The home is going to be registered in your name and is going to be your asset. You call it your home and pay property tax for it. You get it because supposedly you have credit to buy it so, part of your asset is your credit and in the business world, you got to rely on the credit. Problem is that people get assets without having credit and that is when things go bad.
What do you think is going to happen to all those wealth, which was created by the housing bubble? Now that the bubble is bursting, where the wealth is going to go. If the money was paid for those homes, where the money is going to go now. In reality, there was no money paid for those homes, they were all bought on credits. Banks credited each others and borrowers
In a casino gambling, some one loses and some one gains. Real money will transfer from the loser to the gainer or to the casino owner but what happens to the loss money from housing foreclosures, banks write downs, Wall Street loss? Who gains from the loss? There is no gain because there was no real money
You get a credit card with $2000 credit. It is as if you have $2000 cash in your pocket. If you are a capitalist, it doesn't make any different if you have your own money in the bank or you have credit, you can make the same profit from that money.

Moh,

net capital = A firm's net worth, minus deductions taken for any assets that might not easily be converted into cash at their full value.

Mark to market = In accounting and finance, mark to market is the act of assigning a value to a position held in a financial instrument based on the current market price for that instrument or similar instruments.

Any asset that can not be marked to market cannot be counted as part of net capital. In fact, it may even subtract from net capital depending on how much the impairment is judged to be; for example, reserving against a loss for future loan defaults.

 

[moh malekpour]

Originally Posted by Randolph Kinney
What really determines a bank's ability to stay afloat is net capital. Last check, IMB had $1.6 Billion.Moh,

net capital = A firm's net worth, minus deductions taken for any assets that might not easily be converted into cash at their full value.

Mark to market = In accounting and finance, mark to market is the act of assigning a value to a position held in a financial instrument based on the current market price for that instrument or similar instruments.

Any asset that can not be marked to market cannot be counted as part of net capital. In fact, it may even subtract from net capital depending on how much the impairment is judged to be; for example, reserving against a loss for future loan defaults.

I know but as I said, the capital world doesn't run on net capital. It runs on credit and since the creidit is tighten now, everything is almost on hold.

 

[Couch Potato]

Correct.

I know but as I said, the capital world doesn't run on net capital. It runs on credit and since the creidit is tighten now, everything is almost on hold.

It's not about how much you have, it's about how much you can borrow. :new_all_coholic:

 

[Riick]

CASH ≠ Trash

It's not about how much you have, it's about how much you can borrow. :new_all_coholic:

Oh Cr*p.. and here I thought that in a downturn Cash would be King
But wait! What light through yonder window breaks?.. into my frazzled brain?
It is the Moh:

"I know but as I said, the capital world doesn't run on net capital. It runs on credit and since the credit is tighten now, everything is almost on hold."

Lots of Credit available -----> CASH = Trash
Not much Credit available ---> CASH ≠ Trash

 

[Tim The Enchanter]

It's a regular slow motion train wreck. :Eyecrazy:
http://www.economist.com/opinion/displaystory.cfm?story_id=10134118