Regional US banks nurse toxic securities hangover by Michael Mackenzie
The bursting of the US property bubble has left the thousands of small community banks round the US holding real estate assets such as housing developments and shopping malls that have lost value.
Compounding the exposure to ailing real estate is the fact these banks also purchased collateralised debt obligations (CDOs) and other structured securities linked to property values and mortgage loans.
According to SecondMarket, a trading platform that specialises in illquid securities, community banks each have anywhere from $20m to more than $100m in toxic assets. "Not a large number, but when you multiply it by 8,000 it becomes a much bigger figure," says Elton Wells, head of structured products at SecondMarket. He estimates US community banks hold about $600bn of impaired structured assets.
/.../
This has created an opportunity for new trading platforms, such as SecondMarket. The company's online securities auction platform has more than 5,000 participants, including banks, hedge funds, private equity firms, mutual funds, corporations and other institutional investors, and offers an alternative to trades dominated by big Wall Street firms.
In reality, many structured products linked to mortgages are worth only a fraction of their previous face value. Recently, a bank sold CDOs for 1 per cent of their $30m face value via SecondMarket, netting $300,000. Another bank sold a $92m holding in a housing project for $30m.
One community banker in Texas found the best bid for $14m Trust Preferred CDO through SecondMarket was just $11,000, and marked it down to that figure in the hope the market recovers over time.
Mr Wells says quotes for such CDOs range as low as 1 cent, to 10 cents in the dollar, with most in the 2 to 3 cent area.
"SecondMarket helps us understand where to go and [find] opportunities," says the banker...
www.ft.com
Препоруке:
0
0
2
четвртак, 25 фебруар 2010 21:15
Petrushin
The Man Nobody Wanted to Hear
/.../
For years, the regulators of the global money supply ignored the advice of their top experts, probably because it would require them to do something unheard of, namely embark on a fundamental change in direction.
The prevailing model was banal: no inflation, no problem. But White wanted central bankers to take things a step further by preventing the development of bubbles and taking corrective action. He believed that interest rates ought to be raised in good times, even when there is no risk of inflation. This, he argued, counteracts bubbles and makes it possible to lower interest rates in bad times. He also advised the banks to beef up their reserves during a recovery so that they would be in a position to lend money in a downturn.
If White's model had been applied, it might have been possible to avoid the collapse of the financial system -- or at least soften the fall. But there was simply no support for his ideas in the singular, and highly secretive, world of central bankers....
The prevailing model was banal: no inflation, no problem. But White wanted central bankers to take things a step further by preventing the development of bubbles and taking corrective action. He believed that interest rates ought to be raised in good times, even when there is no risk of inflation. This, he argued, counteracts bubbles and makes it possible to lower interest rates in bad times. He also advised the banks to beef up their reserves during a recovery so that they would be in a position to lend money in a downturn.
Zao mi je sto oni koji su prigrabili finansije Srbije i vladaju u ime svojih inostranih mentora MMF, IMF,i ostalih nemaju nameru ovo da citaju. Oni koji ovo razumeju nemaju moci da nesto preduzmu. I tako se vrtimo u krug do potpune propasti.
.jpg)
The bursting of the US property bubble has left the thousands of small community banks round the US holding real estate assets such as housing developments and shopping malls that have lost value.
Compounding the exposure to ailing real estate is the fact these banks also purchased collateralised debt obligations (CDOs) and other structured securities linked to property values and mortgage loans.
According to SecondMarket, a trading platform that specialises in illquid securities, community banks each have anywhere from $20m to more than $100m in toxic assets. "Not a large number, but when you multiply it by 8,000 it becomes a much bigger figure," says Elton Wells, head of structured products at SecondMarket. He estimates US community banks hold about $600bn of impaired structured assets.
/.../
This has created an opportunity for new trading platforms, such as SecondMarket. The company's online securities auction platform has more than 5,000 participants, including banks, hedge funds, private equity firms, mutual funds, corporations and other institutional investors, and offers an alternative to trades dominated by big Wall Street firms.
In reality, many structured products linked to mortgages are worth only a fraction of their previous face value. Recently, a bank sold CDOs for 1 per cent of their $30m face value via SecondMarket, netting $300,000. Another bank sold a $92m holding in a housing project for $30m.
One community banker in Texas found the best bid for $14m Trust Preferred CDO through SecondMarket was just $11,000, and marked it down to that figure in the hope the market recovers over time.
Mr Wells says quotes for such CDOs range as low as 1 cent, to 10 cents in the dollar, with most in the 2 to 3 cent area.
"SecondMarket helps us understand where to go and [find] opportunities," says the banker...
www.ft.com
/.../
For years, the regulators of the global money supply ignored the advice of their top experts, probably because it would require them to do something unheard of, namely embark on a fundamental change in direction.
The prevailing model was banal: no inflation, no problem. But White wanted central bankers to take things a step further by preventing the development of bubbles and taking corrective action. He believed that interest rates ought to be raised in good times, even when there is no risk of inflation. This, he argued, counteracts bubbles and makes it possible to lower interest rates in bad times. He also advised the banks to beef up their reserves during a recovery so that they would be in a position to lend money in a downturn.
If White's model had been applied, it might have been possible to avoid the collapse of the financial system -- or at least soften the fall. But there was simply no support for his ideas in the singular, and highly secretive, world of central bankers....
The prevailing model was banal: no inflation, no problem. But White wanted central bankers to take things a step further by preventing the development of bubbles and taking corrective action. He believed that interest rates ought to be raised in good times, even when there is no risk of inflation. This, he argued, counteracts bubbles and makes it possible to lower interest rates in bad times. He also advised the banks to beef up their reserves during a recovery so that they would be in a position to lend money in a downturn.
http://www.spiegel.de/international/business/0,1518,635051,00.html
White's speech [video] at the FIRC - celebrating 75th birthday of Central Bank of India
http://www.24framesdigital.com/rbi/webcast/120210/session3/william_white.html