While these days big international players boast about the extraordinary health of international finances and about the record-profit margins made by hedge funds and private banks, the first mortgage lenders file for bankruptcy.

Beyond the confidential OWNIT bankruptcy (#11 on a list of US largest subprime mortgage firms) (1) between Christmas and New Year’s Eve, the entire US mortgage industry is directly or indirectly at risk. Indeed Ownit was apparently neither a marginal nor a suspect player.

The list of the top-ten subprime mortgage originators shows that big names such as Wells Fargo, HSBC Finance, Ameriquest or Option One run risks of bankruptcy or colossal losses at any time, just like Ownit, #11 on this list. But it is also the case of major investment banks, as shown by the bond rating agency Moody’s concern about Lehman Brothers’ subprime mortgage bonds (2). And it is of course also the case of many financial organisations of lesser international fame, as illustrated at the beginning of January 2007 by the closing of Mortgage Lenders USA’s main unit due to excessive losses on subprime mortgages (3). Ownit too started by freezing its processes and ended up filing for bankruptcy three months later.

--------
Notes:

(1) « Subprime mortgage » is a loan offered by lending agencies to their good borrowers with interest rates higher than the basic « prime » rates. « Subprime mortgage » is offered to the “riskiest » borrowers but with a greater profit for the lender as interest rates are higher. However this type of credit is extremely sensitive to economic conditions (rise in interest rates, drop in asset-liabilities,…) as borrowers are hardly solvent. This type of loan backed on housing, combined with the burst of the real estate bubble, is directly the cause of Ownit’s bankruptcy, and threatens directly or indirectly the whole of the US credit industry.

(2) Source : Bloomberg, 27/12/2006

(3) Source : Boston Globe, 02/01/2007

Samedi 21 Juillet 2007

LEAP/E2020

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GEAB N°65 - Contents

- Published on May 16, 2012 -

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Whilst waiting for Euroland to equip itself, by the end of 2012, with a medium to long term common political, economic and social project, especially following the election of the new French president François Hollande, anticipated many months ago by LEAP/E2020, players will remain prisoners of the short-term reflexes related to the sudden Greek political tremors, the uncertainties over Euroland governance and to the risks in public debts… (page 2)
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Strategic and operational recommendations
. Currencies-Gold: Stay on course
. Pensions: Preserving one’s capital
. Stock Exchanges: Last exit before chaos
. Banks: Maximum distrust
. Government bonds: The trap is closing (page 21)
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The majority of respondents believing that their country’s major banks could go bankrupt by the end of 2012 has risen to 66% this month (versus 61% last month)… (page 23)
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