Subprime Problems » Markets

Subprime Still Strong: Hits Fannie and Freddie

Hansen — Fri, 11 Jul 2008 22:58:54 +0000

Subprime mortgage problems still have some significant legs as the share price of Fannie Mae and Freddie Mac showed today. At one point today, shares dropped as much as 50% on the NYSE. It does seem as if the companies will be protected from failure and completely insolvency by the US government. However, it is unclear whether or not the shareholders will be carried along for the bailout or left with nothing.

Wilbur Ross Acquiring Option One

Hansen — Tue, 18 Mar 2008 17:29:56 +0000

H&R Block (NYSE: HRB) has finally offloaded its Option One subprime mortgage unit. The daredevil acquirer? WL Ross & Co, run by famed investor Wilbur Ross. The deal went through at about $1.1 billion. Cerberus, the last suitor to Option One, pulled out after it saw the subprime and housing crisis come tumbling down. Ross has a history of restructuring distressed companies and if successful could make a fortune on Option One. In fact, Ross’ mortgage play goes beyond Option One, as he also has purchased rights to mortgages held by American Home Mortgage.

FBI Subprime Investigations

Hansen — Wed, 30 Jan 2008 00:12:30 +0000

The US Federal Bureau of Investigation (FBI) has commenced investigations against 14 corporations. The fraud investigation includes probes into insider trading and accounting fraud. The FBI is working together with the Securities and Exchange Commission. It is unclear who the targets of the FBI investigation are, but the SEC has probed MBIA (NYSE: MBI), UBS (NYSE: UBS), Bear Sterns (NYSE: BSC), Merrill Lynch (NYSE: MER), and Morgan Stanley (NYSE: MS)

Goldman Reminds Markets About Subprime

Hansen — Thu, 27 Dec 2007 18:24:09 +0000

Goldman Sachs’ analyst William Tanona reminded investors on Thursday about the lingering effects of subprime and the very real potential for future write downs from large US banks. The list included Citigroup (NYSE: C), JP Morgan (NYSE: JPM), and Merrill Lynch (NYSE: MER). Tanona singled out Citigroup and noted that they will probably be cutting their dividend by 40%, despite recent comments by their new CEO. Tanona wrote that we may have two more quarters of pain before the markets have “fully digested” the subprime drama.

It’s Not Going To Be Pretty: Mortgage Resets

Hansen — Sun, 25 Nov 2007 18:31:43 +0000

The Big Picture blog is reporting on a story in the Wall St. Journal stating: “A boatload of 2/28 APR mortgages are about to reset next year, and its not going to pretty.” This has been pretty widely known, I believe. The question is whether or not the market has priced any of this in already? It seems like the markets have hammered the banking stocks some to this fear, but I fear that further downside is to come if the Fed does not cut rates. The market is predicting an 80% chance that the Fed will cut, so if that does not happen before the turn of the years, credit markets could further be strained.

Royal Bank of Canada Subprime Loss Exceeds $350 million

Hansen — Wed, 14 Nov 2007 03:04:40 +0000

Royal Bank of Canada (RBC) announced that RBC subprime write-downs will be around $360 million. Because of the realization of some of its work with Visa, RBC subprime will probably result in only a marginal effect on its bottom line. RBC was up over 2 percent on the Toronto Stock Exchange. The Royal Bank of Canada subprime loss will be felt for some time.

Bank of America (NYSE: BAC) $3 billion writedown – yay!

Hansen — Wed, 14 Nov 2007 03:00:34 +0000

Bank of America announced that it would write-down $3 billion in assets related to its losses in subprime and related debt. The market, just happy to see something firm, cheered the news sending to stock over 5 percent higher. The bank, however, did warn that future losses may be possible, if not imminent. It is expected that subprime losses will exceed $40 billion worldwide.

Deutsche Bank Says Global Subprime Losses Are Steep

Hansen — Mon, 12 Nov 2007 13:11:32 +0000

Deutsche Bank (NYSE: DB) issued a statement saying that global subprime losses could reach $400 billion. It also said that it expects $130 billion of write downs due to the crisis. The financial ETF (AMEX: XLF) is down 16% in the past month and 5.34% last week in response to the subprime problems that have yet to go away.

Thanks Subprime: Nomura reports 1st loss in 18 quarters

Hansen — Sun, 28 Oct 2007 18:38:05 +0000

Japan’s largest securities firm reported its first loss in 18 quarters, or 4.5 years, thanks, in part to the problems in the US subprime mortgage market. Their net loss was $92 million compared to income of nearly $400 million a year ago. Nomura is already down some 18 percent this year underperforming the Topix significantly. Nomura is currently focusing its investment strategy in Asia.

Bank of England Warns: We’re Still Vulnerable to New Shocks

Hansen — Fri, 26 Oct 2007 16:54:40 +0000

The Bank of England recently stated that developed countries are still vulnerable to new “shocks” related to the subprime market problems plaguing the US housing market. At this point, commercial real estate lending could become vulnerable as demand is decreasing and a glut of new buildings are scheduled to open. Continued declines in home values, especially those above $400,000 could further erode any sense of stability the financial markets have earned back.