Headlines...

NEW -> Contingent Buyer Assistance Program
<a name="McCain comes to OC and speaks out against a mortgage bailout" href="http://www.nytimes.com/2008/03/25/us/politics/25cnd-mccain.html?ex=1364184000&en=27e8bb2cf52e2dc1&ei=5088&partner=rssnyt&emc=rss">McCain comes to OC and speaks out against a mortgage bailout</a>
 
<p><a href="http://www.washingtonpost.com/wp-dyn/content/article/2008/03/24/AR2008032400265.html">This article</a> from the Washington Post is interesting. What caught my eye:</p>

<p><em>As part of the new Bear Stearns deal [of $10 per share], the Fed's role was also renegotiated. The central bank originally had agreed to put public dollars on the line to guarantee $30 billion of risky mortgages owned by Bear Stearns. In the reworked deal, J.P. Morgan agreed to cover the first $1 billion in losses if the value of those securities falls, </em><u><em>with the Fed responsible for any losses beyond that.</em> </u></p>

<p>Emphasis mine. As I read it (and who is to say that the reporter correctly summarized), John and Jane Q. Public used to have an exposure limit of $30B, but now have an unlimited exposure. Is that correct? </p>

<p>Oh wait, maybe not. Later in the story:</p>

<p><em>The Fed worked out an agreement that would allow it to keep all the profit if it sells Bear's risky assets for more than $30 billion. And the concession by J.P. Morgan to take on the first $1 billion in losses significantly reduces the risk that the central bank will take a loss because Fed leaders expect the portfolio's ultimate sale to be within a few billion dollars of the $30 billion estimate.</em> </p>

<p>So, yes, the JQ Publics are probably on the hook for some of this.</p>
 
<p>Deutsche may take more hits on $55.7 bln leveraged loan book </p>

<p>By Steve Goldstein</p>

<p>Last update: 3:44 a.m. EDT March 26, 2008</p>

<p>LONDON (MarketWatch) -- Deutsche Bank disclosed in its 20-F filing key exposures as of the end of the year. Its leveraged finance exposure was 36.21 billion euros ($55.74 billion) at the end of the year after net write-offs of 759 million euros, and the bank said "it is likely that our leverage lending commitments will require further write-downs if market conditions fail to improve." It had a total net subprime CDO exposure of 1.19 billion euros, another 53 million euros of subprime ABS CDOs held available for sale, other U.S. mortgage exposure of 3.01 billion euros and monoline exposure of 1.1 billion euros. Deutsche Bank also said that CEO Josef Ackermann received 13.98 million euros last year, up from 13.21 million euros.</p>
 
The ECB is is giving a major speech right now, and the € is shooting up big, and the $ is taking a shit.





Oh, the futures are not liking this.





<a href="http://bigpicture.typepad.com/comments/2008/03/the-economist-o.html">Hat tip Barry for the latest Economist mag links</a>...





<img src="http://bigpicture.typepad.com/comments/images/2008/03/25/20080322issuecovus400.jpg" alt="" />


<p>Here's the list of related stories:</p>



<a href="http://www.economist.com/finance/displaystory.cfm?story_id=10880496">Comparing banking crises past and present </a>


Mar 19th 2008

<a href="http://www.economist.com/finance/displaystory.cfm?story_id=10881032">Central banks diverge</a> (A dangerous divergence)


Mar 19th 2008

<a href="http://www.economist.com/finance/displaystory.cfm?story_id=10881318">Where finance went wrong </a>


Mar 19th 2008

<a href="http://www.economist.com/finance/displaystory.cfm?story_id=10881361">How to invest in a panic </a>


Mar 19th 2008

<a href="http://www.economist.com/finance/displaystory.cfm?story_id=10881558">Caveat counterparty </a>


Mar 19th 2008

<a href="http://www.economist.com/finance/displaystory.cfm?story_id=10881453">A lifeline of sorts to Wall Street </a>


Mar 19th 2008

<a href="http://www.economist.com/finance/displaystory.cfm?story_id=10881462">Flipside of the falling dollar </a>


Mar 19th 2008

<a href="http://www.economist.com/finance/displaystory.cfm?story_id=10881471">China's stockmarket swoons </a>


Mar 19th 2008

<a href="http://www.economist.com/finance/displaystory.cfm?story_id=10881525"> The fallout at Bear Stearns </a>


Mar 19th 2008

<a href="http://www.economist.com/finance/displaystory.cfm?story_id=10881385">A wobble in commodities </a>


Mar 19th 2008

<a href="http://www.economist.com/finance/displaystory.cfm?story_id=10881453">The $2 bail-out</a>; <a href="http://bigpicture.typepad.com/comments/2008/03/*%20%20http://www.economist.com/finance/displaystory.cfm?story_id=10881525">Sore heads</a>


Mar 19th 2008

<a href="http://www.economist.com/finance/displaystory.cfm?story_id=10881361">Apocalypse now?</a> (Investment havens in a time of panic)


Mar 19th 2008

>
 
<p>New-Home Sales in U.S. Fall to Lowest in 13 Years (Correct)


<a href="http://www.bloomberg.com/apps/news?pid=20601068&sid=aQHCmi.HntEw&refer=home">http://www.bloomberg.com/apps/news?pid=20601068&sid=aQHCmi.HntEw&refer=home</a></p>
 
<p><strong>Remarks by Secretary Henry M. Paulson, Jr


on Current Financial and Housing Markets


at the US Chamber of Commerce</strong></p>

<p><a href="http://www.treas.gov/press/releases/hp887.htm">http://www.treas.gov/press/releases/hp887.htm</a></p>

<p><strong> Housing and Mortgage Markets </strong>The housing downturn and the surrounding uncertainty are significantly impacting our financial institutions and capital markets. However, we should not lose sight of the fact that this downturn was precipitated by unsustainable home price appreciation which was particularly pronounced in a relatively few regions. A correction was inevitable and the sooner we work through it, with a minimum of disorder, the sooner we will see home values stabilize, more buyers return to the housing market, and housing will again contribute to economic growth. Having stability in housing markets will in turn contribute to better conditions in credit markets for mortgage-backed securities.</p>

<p> </p>

<p>Data releases every month create headlines about declining housing sales, starts and prices. Yet, declines are exactly what we should expect during a correction. It takes time to work through the excess inventory – and we are. The question many are asking is how deep the correction will be and how long it will last. The Case-Shiller index of home prices in 10 major metropolitan areas showed an 11.4 percent decline in home prices over the 12 months ending in January, and the futures market is predicting that the index will decline another 13 percent in 2008. But we do not have a national housing market; housing markets are regional – and there is considerable variation in adjustment, with prices changing the most in areas that had the greatest overbuilding.</p>

<p>Amid this correction, there are many calls to "do something about housing." When people say this, they are urging any number of possible things – minimize foreclosures, make affordable mortgages more available, improve the secondary market and liquidity for mortgages, improve the mortgage origination process, prosecute fraud, reduce the inventory of homes for sale, or help communities hardest hit by foreclosures. </p>

<p>The `to do' list tends to get conflated. We must sort through each of these shared and desired outcomes, carefully choosing policies that minimize the impact of – but do not slow – the housing correction.</p>
 
<p>I was surprised to see the Economist (in the "Wall Street's crisis" article of the above edition - not linked) say that to shock the markets out of their mistrust, the government ought to use <em>public money</em> to create a floor to the market, either in housing or in asset-backed securities.</p>

<p>In other words, since capitalism isn't working right now (or at least the way <em>they</em> would like to see it working), let's use socialism to get it working again.</p>

<p>I think Adam Smith would argue the markets <em>are</em> working and to leave them alone!</p>
 
<i>"I think Adam Smith would argue the markets are working and to leave them alone!"</i><p>

Adam Smith is correct of course, but it seems the way to make money in these markets is not to be correct, but rather to be right about what you know the fed will do.
 
<img height="230" alt="Home Prices and Sales" width="450" src="http://graphics8.nytimes.com/images/2008/03/26/business/0326-biz-LEONHARDT.jpg" />
 
<p>Equity Loans as Next Round in Credit Crisis </p>

<p>http://www.nytimes.com/2008/03/27/business/27loan.html?_r=2&adxnnl=1&ref=business&pagewanted=1&adxnnlx=1206640817-cyeHXFo6U0ovj1Cx0zdrnQ</p>

<p><img alt="" src="http://graphics8.nytimes.com/images/2008/03/27/business/20080327_LOAN_GRAPHIC.jpg" /></p>
 
<a href="http://www.irvinehousingblog.com/wp-content/uploads/2008/03/the-mortgage-and-housing-outlook-march-2008.pdf">The Mortgage and Housing Outlook - March 2008</a>





There are some great charts and graphs in the linked PDF.
 
Some of my favorite charts from IR's chartpr0n extravaganza...





<img src="http://img110.mytextgraphics.com/photolava/2008/03/29/cmbsspread-4a01vjcim.jpeg" alt="" />





Frank must be reading Calculated Risk, because this looks very familiar...





<img src="http://img701.mytextgraphics.com/photolava/2008/03/29/housingstarts-4a01wk5vl.jpeg" alt="" />





<img src="http://img702.mytextgraphics.com/photolava/2008/03/29/bleedingstates-4a01xgkia.jpeg" alt="" />





Delinquency rates have jumped in markets with flat or falling house values...





<img src="http://img110.mytextgraphics.com/photolava/2008/03/29/deliquencies-4a01z126s.jpeg" alt="" />





<img src="http://img702.mytextgraphics.com/photolava/2008/03/29/subprimerecession-4a02000x7.jpeg" alt="" />





<img src="http://img701.mytextgraphics.com/photolava/2008/03/29/foreclosuresstarted-4a020uhn9.jpeg" alt="" />





ROFLMAO... it is not contained any more, er I mean ever was contained...





<img src="http://img702.mytextgraphics.com/photolava/2008/03/29/autos-4a021okqc.jpeg" alt="" />
 
<p>Lovely chartporn.</p>

<p>Umm, IR there is an article over on Caculated Risk about how some big homebuilder just got rid of a bunch of partly finished lots in the Inland Empire for 15 Cents on the dollar, and some interesting comments.</p>

<p> </p>
 
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