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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory

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To: SeaViewer who wrote (81123)	4/24/2007 10:25:35 PM
From: orkrious	Read Replies (2) of 110194

Tales from the front lines in Detroit. I played golf today with a friend in the subprime mortgage business. Heretofore, my friend has been considered the richest within my circle of friends. He did RE backed commercial loans. He found people who needed money, had no liens against their property, and were willing to pay rates in the teens plus eight or so points. He would never loan more than 30-40% of a property's distressed value. This friend made more than a million dollars a year for several years through 2005. His main line of credit, $7.0 mil, was with a local, multi-state regional bank. He met with his loan officer last week. Despite only having $900k outstanding, they shut him down. The bank no longer wants any subprime exposure. He has lines with other banks, but there's no way the other banks will take up the slack. My friend is cooked. Next, he told me his brother-in-law filed bankruptcy papers last week. He owned a 40 year-old food distributor. He lost over a million dollars last year and the bank pulled his LOC. He owns a big house, expensive cars, and appeared to be living the American dream. He's done. He then told me about another friend of his who owns a 50 year old contractor supply business. The business lost money last year and is about to file for bankruptcy. He's in the same boat as the last guy. He appeared prosperous but is now hosed. My friend still has a lot of equity in his business. The bank may shut him down and he will be hurting for a while, but he'll be okay. The other two guys are typical Americans. They owned businesses but are leveraged over their heads and they are screwed. This is happening all over Detroit. It's heading to your city soon.

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