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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum

GLD 393.24

+1.1%

Dec 11 4:00 PM EST

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To: carranza2 who wrote (26058)	12/5/2007 10:04:33 PM
From: Metacomet	Read Replies (1) of 218436

It does benefit the lenders. The worst possible outcome for a lender is to have to take a home back. It becomes an REO, a scheduled asset, which impairs their balance sheet to the extent of the outstanding loan. That impairment causes downward leverage because it is a carried credit against their reserves. It plays hell with their ability to create new loans against fractional reserves. Since they are already having trouble with liquidity, repos are bombs to their balance sheets. Since they are unable to efficiently dispose of homes in this environment, the spector of more thousands of stupid loans coming back to haunt them is a real concern. This is the threat to the finance industry. Doubt if it will work though. There will be no relief until every asset in this daisy chain is marked to market, whatever that might be. It will only deteriorate with each added element of time.

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