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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: TobagoJack who wrote (15332)	3/14/2007 4:28:55 AM
From: elmatador	Read Replies (1) \| Respond to of 217883

When S&L went belly up in the 80’s the capital being imported into the US saved the day. By then developing countries were exporting capital as a result of the debts being paid. It became so hard that the US companies were asking for help. They said for every $1billion of capital exported to the US by developing countries, then, 70.000 workers were unemployed since those firms were not exporting. Those BMWs, the Yuppies the yellow ties, someone was paying for that. Today everyone is clamoring for a capital flight to go save the day. But there won’t be a capital flight into “quality’ This is decoupling happening in front of our eyes. The ones that can do more, will cry less. The ones that can do less will cry more. I’m a bit biblical this morning

To: TobagoJack who wrote (15332)	3/14/2007 4:36:10 AM
From: elmatador	Read Replies (1) \| Respond to of 217883

Fallout The damage to S&L operations led Congress to act, passing a bill in September 1981 allowing S&Ls to sell their mortgage loans and use the cash generated to seek better returns; the losses created by the sales were to be amortised over the life of the loan and any losses could also be offset against taxes paid over the preceding ten years. This all made S&Ls eager to sell their loans. The buyers - major Wall Street firms - were quick to take advantage of the S&Ls lack of expertise, buying at 60-90% of value and then transforming the loans by bundling them as, effectively, government backed bonds (by virtue of GNMA, FHLMC, or FNMA guarantees). S&Ls were one group buying these bonds, holding $150bn by 1986, and being charged substantial fees for the transactions. A large number of S&L customer's defaults and bankruptcies ensued, and the S&Ls that had overextended themselves were forced into insolvency proceedings themselves. In 1980 there were 4002 S&Ls trading, by 1983 962 of them had collapsed For example, in March 1985, it came to public knowledge that the large Cincinnati, Ohio-based Home State Savings Bank was about to collapse. Ohio Gov. Richard F. Celeste declared a bank holiday in the state as Home State depositors lined up in a "run" on the bank's branches in order to withdraw their deposits. Celeste ordered the closure of all the state's S&Ls. Only those that were able to qualify for membership in the FDIC were allowed to reopen. Claims by Ohio S&L depositors drained the state's deposit insurance funds. A similar event also took place in Maryland. The U.S. government agency Federal Savings and Loan Insurance Corporation, which at the time insured S&L accounts in the same way the Federal Deposit Insurance Corporation insures commercial bank accounts, then had to repay all the depositors whose money was lost. The Federal Home Loan Bank Board reported in 1988 that fraud and insider abuse were the worst aggravating factors in the wave of S&L failures. The most notorious figure in the S&L crisis was probably Charles Keating, who headed Lincoln Savings of Irvine, California. Keating was convicted of fraud, racketeering, and conspiracy in 1993, and spent four and one-half years in prison before his convictions were overturned. In a subsequent plea agreement, Keating admitted committing bankruptcy fraud by extracting $1 million from the parent corporation of Lincoln Savings while he knew the corporation would collapse within weeks. Keating's attempts to escape regulatory sanctions led to the Keating five political scandal, in which five U.S. senators were implicated in an influence-peddling scheme to assist Keating. Three of those senators — Alan Cranston, Don Riegle, and Dennis DeConcini — found their political careers cut short as a result. Two others — John Glenn and John McCain — were exonerated of all charges and escaped relatively unscathed. Neil Bush, brother of President George W. Bush and son of former President George H. W. Bush, was director of Silverado Savings and Loan when the institution collapsed in 1988, costing taxpayers $1.6 billion.[1] Neil Bush was accused of giving himself a loan from Silverado with the cooperation of Ken Good, of Good International, although Bush stated it was not a conflict of interest.[2] In 1989 congress passed the Financial Institutions Reform Recovery and Enforcement Act of 1989 (FIRREA) and set up the Resolution Trust Corporation to liquidate assets of failed Savings and Loans. en.wikipedia.org

To: TobagoJack who wrote (15332)	3/14/2007 10:54:44 AM
From: Moominoid	Read Replies (1) \| Respond to of 217883

I'm seeing a drop to SPX 1260 as likely. Technicals suggest a bounce there is likely. Question is what happens on the next dip after the bounce. That's a few weeks out at this point I think.

To: TobagoJack who wrote (15332)	3/14/2007 6:36:37 PM
From: TobagoJack	Read Replies (2) \| Respond to of 217883

E-mail conference continued ... my 2 cents: ~US$1.3trln in sub-prime mortgages written...assume 50% go bad (a heroic assumption in my view)= US$650bn. so how will this affect credit markets? Remember, the banks got rid of the mortgages (both prime and subprime) as fast they could write them, so it won't affect them much. the guys hit will be the CDO holders, that is to say, HF, pension funds, some wealthy individual guys and MFs....so spread nicely around the table=likey little impact to financial system. I believe the entire CDO market is about 400bn and that the riskiest loans are contained within that, the other loans were packaged off in different MBS type instruments. The financial guys getting hit now are the subprime lenders (such as New Century) which were undercapitalized to begin with and wrote shoddy mortgages and engaged in questionable practices and quite frankly deserve to go under, in my opinion. Also, bicoastal real estate market is still hot, stuff in the middle is cr*pping out, even in Cali....but who cares? That segment of the market is the mid/low end anyway and the people that buy them don't amount to all that much consumption....last figs I remember is that subprime=4% of all homeowners and those account for 8% of total consumption. Alt-A probably a similar amount in terms of consumption, although I'm guessing. I remember the S&L crisis (which, btw, was bigger proportionally as a % of the economy that went bust then, ~14-15%, than the subprime loan mkt would now even if you assume a 50% default rate) and that didn't cause a recession, it was high oil prices that spiked in the wake of Saddam's invasion of Kuwait. If we assume even US$1trn in defaults, that is still less than the S&L crisis in terms of % of GDP. Moreover, employment growth remains strong across all sectors (less real estate) and that is the KEY for maintaining housing stability. Will the economy slow down? of course, but this is the 6th year of expansion, we are due for a slowdown. Is this a major disaster? I may be wrong but I highly doubt it. I think the US muddles through this w 2%-2.5% gr. What it is bad for, is Asia, esp export dependent China, becuase less widgets will be sold this side of the pond. Lastly check out the chart below, it clearly tells you that sub-prime defaults are highly correlated with fed funds....last time I checked, ir were not going up, so we're probably seeing the worst of it as we speak.....