Next leg of banking collapse underway

Really2

mbga9pgf wrote: »

And the writedowns are not set to stop until 2011. Hence why I firmly believe this is going to be long and drawn out.

Where did you get that date from? I would have thought with any accounting policy they would review rightdowns quarterly not say, we are going to do them untill 2011.
It could be over or still going on by then!

posh*spice

Really2 wrote: »

Hi Carol you are right.

People do not realise a write down is for "potential" bad debt.
So banks are putting billions aside "just in case" these debts go bad.
These are not actual losses yet just accounted for potential losses.
Some debts may never go bad that money will be transfer back during the next "happy days"

Altough Writedowns cause problems to the P&L. They are seen as prudent accounting.

If by "people" you meant me, then I did know that as I am an Accoutant :rotfl:

So when do you see the market coming back for the wriiten down mortgage backed securities?

chucky

posh*spice wrote: »

If by "people" you meant me, then I did know that as I am an Accoutant :rotfl:

So when do you see the market coming back for the wriiten down mortgage backed securities?

when the ABS and ABX markets start to pick up again??

purch

People do not realise a write down is for "potential" bad debt

I think they are struggling to keep up, as the potential bad debts are becoming actual bad debts quicker than they can be written down. :eek:

chucky

carolt wrote: »

Which one?

well there is one that is getting hit big time at the moment...

it would be very dangerous telling you Carol. you and your friend Bobby Peston would start a run on them like you did last time

Really2

posh*spice wrote: »

If by "people" you meant me, then I did know that as I am an Accoutant :rotfl:

So when do you see the market coming back for the wriiten down mortgage backed securities?

No I was stating that the media portrayed writedowns to the general public as a loss that had happened.
Not having a go at you at all.

Pass on securitys thats not my bag. Good business models and costings are.;)

PS by the :rotfl: I presume I offended you in some way? I was just making a general statement.

IveSeenTheLight

Bank of America will receive $20bn (£13.4bn) in fresh US government aid and $118bn worth of guarantees against bad assets.

http://news.bbc.co.uk/2/hi/business/7832484.stm

mbga9pgf

Really, heres my reason why. Although it is partially correct to 'blame' the US for our downturn, its not the whole truth. The UK economy hasnt been paying for itself since 2002. If you dont believe me, have a look at gdp figures stripped of government spending and expansion of consumer debt (not used for investment). By this measure, we would technically have been in recession since 2002 (negative GDP). The contry as a whole has become reliant on debt to grow, an unsustainable model, I think you will agree. Whilst I think few can have issue with debt for investment, I dont see how using debt to pay our way can be a good thing. Ever. Unfortunately, its going to have to be a fairly nasty correction to redress the balance. For example, Mortgage equity withdrawl (yes, I know its not all bad, add an extention and all that) could, if used for purely retail sales, inflate GDP around 5-7% per annum. That, all of a sudden, has gone. Until prices start to rise and people get on top of their equity, banks will not lend.

Back to the US. http://mrmortgage.ml-implode.com/

This guy, although a bit enthusiastic in a not-so-good american way, did a fantastic job pre-Sept 2007 of predicting how serious the crisis would get. Check out a few of his youtube vids.

Now, here to the nasty part.



This graph effectively charts out how far through we are.

As home prices fall throughout the country, many borrowers facing higher monthly mortgage payments (thanks to a reset) will not be able to refinance into another loan, and, thus, another low-interest, affordable, introductory rate. That's because banks won't refinance your loan if your home's value has fallen to or below the amount you owe on your current mortgage.
So if those borrowers cannot make the higher, reset payment... foreclosure, here they come. That's why the number of resets correlates with the number of foreclosures.
The chart shows that the much-hyped "subprime" mortgage problem all but ends this year. Look for analysts to call a bottom to the real estate market when the number of subprime foreclosures falls later this year. Real estate salespeople will urge everyone to jump in and buy since, they will say, the worst will be over.
They will be wrong. The chart shows that resets among prime borrowers will surge next spring, glutting the market in more expensive, desirable communities and forcing down prices there. Then, the pain builds in 2010, leading to a peak in foreclosures in 2011.

there is no reason to disagree with this assessment. The UK has already taken a large hit on Subprime, we have alt-a still to peak, much of which RMBS assets were bought as good, AA and AAA Rated assets at the hight of the boom by british banks.Reset rates are still much higher in the US than people can cope with hence why further, capital destroying resets will still occur.Many of these assets currently, not future predicted, have repo rates nearing 50%

The reason I think our banks wont recover goes along this line of logic. They are already cash-poor, having put money aside for previous writedowns that are effectively turning previously AAA and AA rated securities and yeilding less than 22 cents to the dollar. Whichever way you look at it, those ARE losses! That is what those assets are NOW worth. You cannot just pretend that everything will fix itself and those assets will mysteriously become worth 100 cents again, becuase if they did, every man and his dog would be buying them. 22 cents is what they are worth today, that money has gone, vanished, not there any more! They simply cannot afford to write down the full amount yet as they simply dont have the cash.. They will go bust. Instead, they are trickling out the writedowns stage by stage as they occur, sucking in more state backing as they go. As we see from the above graph, its set to continue till 2011, with further house price falls in the US compounding the issue. This is before we consider writedowns due to UK debt which could be just as significant.

Until 2011, banks have no reason to lend to each other. They dont know what slice of the above resets and bad assets other banks hold, thus they dont know if the banks they are lending to will go bust when the peak of alt-a occurs in 2011. I still think it will be a good 18 months AFTER the end of the US credit crisis before UK normal lending resumes, it took 18 months after the US to enter the crisis, no reason to suggest why we should enjoy a recovery any sooner in our cycle. Oh, when I mention normal lending, I am talking about min 10% deposits and max 4X salary multiples.

Really2

look we have differing views if I had the time I am sure I could dig somthing out to counter argument.
Nothing we think is going to swey what happens and non of us going predict corectly either (lets not do the other days argument;) )

Graphs at the moment do not folat my boat as they are usualy done to sway opinion. (banks have gone from free lending nutters to squirrels in 18 months).
So i think the true picture is no where to be seen, just make your deciaion stick with it (unless you can see an obvious change) and fingures crossed you may be right.

But I agree on normal lending perhaps even 5% deposit on a sensible multiple.

mbga9pgf

Sorry about the arguments, I would prefer to stick to civilized debate. For now, have to agree to disagree!