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Politics : Formerly About Advanced Micro Devices
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From: bentway12/15/2007 5:53:06 PM
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What Bankers Fear

A fresh portrait of this stressed system appeared last week in the latest quarterly report by the Bank of International Settlements. The report noted that net issuance of certain mortgage-backed securities fell to $3 billion in September, compared with $30 billion or more a month in 2005 and 2006. Borrowing in general declined sharply, with the net issuance of bonds and notes in the third quarter less than half that of the previous quarter.

What does this market feel like for players at ground zero? I asked the head of one of the leading hedge funds how he had traded his portfolio Wednesday, the day the joint rescue package was announced. He answered that he had stayed out of the market because he wasn't sure what to do. Trades that looked sensible at 10 a.m. would have turned out to be mistakes by noon.

"If someone would take me out of all my positions, long and short, I'd do it," he said. This is the financial market equivalent of saying you want to start over. Six months into the credit crunch, that's the way many exhausted players are feeling. The markets will have to sink a good deal more, alas, before the vultures arrive to carry off the debris and the process of rebuilding can start.

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washingtonpost.com.
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