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Strategies & Market Trends : Can you beat 50% per month? -- Ignore unavailable to you. Want to Upgrade?

To: Smiling Bob who wrote (11762)	9/12/2007 2:53:47 PM
From: Smiling Bob	Respond to of 19256

Capital One CEO worries of recession via mortgages Wed Sep 12, 2007 12:30PM EDT NEW YORK, Sept 12 (Reuters) - The difficulties that many Americans face in making mortgage payments are unlikely to spread to credit cards, but could help push the economy into recession, Capital One Financial Corp (COF.N: Quote, Profile, Research) Chief Executive Richard Fairbank said on Wednesday. Fairbank made his comments less than a month after the largest independent U.S. MasterCard and Visa card issuer said it would close the GreenPoint Mortgage Inc unit it bought less than a year earlier, resulting in the loss of 1,900 jobs. "I don't think there's going to be a lot of direct spillover from mortgage to credit card," Fairbank said at a Lehman Brothers Inc financial services conference. "The thing we worry about is the direct effect of the mortgage crisis causing a recession." Fairbank said Capital One is in a good position to weather further deterioration in the credit environment. Its shares were up 93 cents at $65.01 in midday trading. (Reporting by Jonathan Stempel) © Reuters 2006. All rights reserved. Republication or redistribution of Reuters content, including by caching, framing or similar means, is expressly prohibited without the prior written consent of Reuters. Reuters and the Reuters sphere logo are registered trademarks and trademarks of the Reuters group of companies around the world. -- Capital One: What's in Its Wallet? Capital One is increasing its risk as it is not able to securitize its recievables as it once was and taking on the debt itself. Mr Practical Sep 12, 2007 2:01 pm Capital One's (COF) CEO is saying at a Lehman (LEH) conference that the turmoil in the credit markets is not adversely affecting his business. This is essentially true. But like always, let's ask why. I explained yesterday that there has been a significant decrease in non-revolving debt (securitized debt like mortgages) and an increase in revolving debt (unsecured credit card debt). This is temporarily good for companies like COF. COF gets its liquidity from several sources. It securitizes its receivables and sells them. This source is slowing, but right now investors are still buying this higher yielding debt. This will reverse as the credit crunch continues. Second, it gets it from the fees it charges. This is very good right now as higher quality consumers, even, are having to use credit cards for their liquidity. Third, COF gets it from the debt it issues privately. These spreads have risen so it does cost it some more to get this. So COF is currently somewhat benefiting from the fact that other sources of lending, lower margin and higher quality lending, are deteriorating. Essentially, COF is increasing its risk as it is not able to securitize its recievables as it once was and taking on the debt itself. This is what the CEO sees as opportunity. Only time will tell. Position in COF.