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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: ild who wrote (30297)4/8/2005 10:23:47 PM
From: russwinter  Read Replies (1) of 110194
 
Doug Noland excerpt on the Bermuda quadtriangle (GM, AIG, FNM, and MBI) says it all:

Taking a step back for a moment and contemplating the financial world, one is left with a sense that “contemporary finance,” as we have come to know it, has commenced a radical shakeout. The scope of the problem is staggering. There is Fannie and Freddie, with their combined books of business of $3.8 Trillion backed (hopefully) by a little sliver of shareholder’s equity. Troubled GM and Ford have total liabilities of $740 billion with equity stated at $45 billion and absolutely dismal prospects. AIG has total liabilities of almost $700 billion (SH Equity of $83bn). Combined, these five companies’ exposure of almost $5.3 Trillion is in the neighborhood of 30 times reported equity. In the best of times, there was no room for error or chicanery. These may be the worst. And one does not want to forget MBIA. This troubled risk guarantor has written insurance – “Net Debt Service Outstanding” - of $890 billion, with shareholder’s equity of $6.6 billion. To witness such a massive and pervasive Credit system problem at this pinnacle stage of system excess and asset inflation portends a devastating down cycle.
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