[Tanada]

I don't know how big the bailout will be for one reason, I don't know if the economy will be able to support a bailout and unless China is willing to pay for it defecit spending will soon be a thing of the past.

[Pfish]

One question I have had for quite some time is: "Who owns the subprime bonds?" Question answered by Gary North. Very good article on what might be happening.....

http://www.lewrockwell.com/north/north561.html


"Who owns these mortgages? I asked my former partner John Mauldin if he had any figures, since he had just written a report on it. He sent me Chart 44 from A. Gary Schilling’s Insight for January, 2007. The chart is for "Mortgage-Related Securities Holdings by Investor Type." The numbers are in trillions of dollars. The total was $5.4 trillion in 2006. Here is the breakdown.

* 18%: FDIC-insured banks
* 4.5%: thrifts
* 1.3%: Federal credit unions
* 21.7%: FNMA ("Fannie Mae") and FHLMC ("Freddie Mac")
* 15.5%: foreign investors
* 7.8%: mutual funds
* 6.8%: personal sector
* 5.5%: insurance companies
* 3.5%: public pension funds
* 3.1%: private pension funds
* 2.7%: real estate investment trusts
* 2.4%: Federal home loan banks
* 1.8%: securities brokers
* 6.9%: miscellaneous"

[setag]

Interesting article, thanks.

"* 6.9%: miscellaneous"

I am wondering, who or what falls in the misc. category?

[Cloud9]

What's 3.5% of $5.4 trillion? Does anyone know how much of Florida's pension fund is exposed in this mess?

[burtonridr]

$this->bbcode_second_pass_quote('Cloud9', 'W')hat's 3.5% of $5.4 trillion? Does anyone know how much of Florida's pension fund is exposed in this mess?

[mmasters]

It's interesting when you look at it:

Fannie and Freddie, the banks and foreign investors ownership accounts for about half of the pool, or around 3 trillion in bonds approaching junk grade - they will get largely bailed out though (at the expense of everyone due to inflation).

It's the other 50% ownership of around 3 trillion that will get little to no bailing out, including pension funds (around 500 billion), mutual funds, REITs, individuals, etc... Of course these holdings mostly fall in the general public's domain.

So if you look at the deflation of the general public's holdings vs. the inflation of the bank/ government/ corporate holdings it essentially amounts to the general public getting robbed out of their share and all that value being transferred into the bank's/ government's/ corporate's hands.

[billp]

$this->bbcode_second_pass_quote('', 'O')ne question I have had for quite some time is: "Who owns the subprime bonds?" Question answered by Gary North. Very good article on what might be happening.....

Gary North, Y2K, and Hidden Agendas

[TreebeardsUncle]

mmasters said:

So if you look at the deflation of the general public's holdings vs. the inflation of the bank/ government/ corporate holdings it essentially amounts to the general public getting robbed out of their share and all that value being transferred into the bank's/ government's/ corporate's hands.

Yes, that is exactly what will happen. Also that is what the tax structure does too, take money from people's salaries, expenditures, and holdings and give them to such corporations as defense contractors, oil and auto companies etc.

G

[Cloud9]

Sorry if mine seemed to be a stupid question. It was more a musing than anything else. I can’t wrap my mind around a trillion dollars. How much money is that? Is it a box car full of hundred dollar bills? Is it even real or does it live on somebody’s hard drive in the middle of a bank in Beverly Hills? It is simply more money than I can fathom. The other part of the question was really rather serious. I have 33 years in the in the Florida Retirement System. I haven’t retired yet. One option is to take the money and run. I really do wonder what our level of exposure is to this unwinding mess. Some public pension funds are cutting their benefits. It is pretty rough to have paid into a system for a third of a century and then find the money you were expecting to live on in your old age went up in smoke.

[setag]

"One trillion dollars would stretch nearly from the earth to the sun. It would take a military jet flying at the speed of sound, reeling out a roll of dollar bills behind it, 14 years before it reeled out one trillion dollar bills."

I wonder if anyone knows the " level of exposure is to this unwinding mess".

I would be quite concerned about any public pension fund. The opinion of the economy falls into three of the following camps:
1.) Everything is okay and the economy is in good shape - invest.
2.) There is a crisis and and the whole system is about to fall - take the money and run.
3.) The necessary adjustments will take care of it all - Wait and do nothing.

I don't know your situation and there are far more knowledgeable people to advise you, but if it were me, I would take the money and run and perhaps invest a small amount in silver and gold.

Good luck.

[Pfish]

One of my beliefs is, people will always find material to support their own views. I find Gary North interesting, but I read his material with a grain of salt. This is the first time I have ever seen a list of who supposedly bought the bonds. I was under the impression the bonds were sold to the Asian countries. Hmmmmm……

One piece of news that I did not put in this thread is in the middle of August the secondary market for securitized RE Loans (read junk) has ceased to exist! A friend who is in the industry said this might only last for about 90 days. But only 20% of all loans are being funded with somewhere between 20%-30% needed for the down. Now, it has to be good enough for the banks to hold instead of packaging as a bond to the secondary market. (Insert sarcasm!)

Do you have any idea what this is going to do to the RE market?

The bond market saw this coming a year ago with an inverted yield curve.

The stock market picked up on it August.

It will finally hit home with the public about the same time we are cutting turkey up on the table and watching football.

For all you RE doomsayers and contrarians, it would seem your wish will come true.

Personally, I knew RE was headed into the dumps while on a bachelor party in Las Vegas, I received lectures by a taxi driver and a waitress on the same day on “How to flip homes for a profit.”

The shizit is not going to hit the fan and destroy mankind. We have been through this before. But it is going to dent the lifestyles of the rich and famous who have made small fortunes on leveraged money.

[Euric]

German Economy Unaffected by Subprime Crisis

http://www.bloomberg.com/apps/news?pid= ... er=germany

By Rainer Buergin

Aug. 15 (Bloomberg) -- Germany's economy remains unaffected by the subprime mortgage crisis in the U.S., Finance Minister Peer Steinbrueck told the Cabinet today, the second minister in as many days to play down the effects of market turbulence.

``The minister made it clear that he views the industrial economy, the real economy, as robust, and that he views economic development in Germany as sustainable and solid,'' government spokesman Ulrich Wilhelm told a news conference in Berlin today. ``At the moment there are no signs of a spillover'' of financial-market turbulence into the real economy.

Economy Minister Michael Glos said in a statement yesterday the U.S. subprime mortgage crisis will have ``no negative impact on the very robust real economic growth in Germany,'' adding he expects the economy to rebound again from a slowdown in the second quarter.

Central banks injected $290 billion into money markets last week as concern that U.S. subprime mortgage losses will curtail lending drove up short-term borrowing costs. The Bank of Japan and U.S. Federal Reserve have since resumed regular refinancing operations. European Central Bank President Jean-Claude Trichet said yesterday financial markets are ``going back to normal.''

Steinbrueck, chairman of finance ministers from the Group of Eight leading industrialized nations this year, has expressed worry about lack of transparency in hedge funds triggering a ``systemic crisis'' in financial markets. He has called for more disclosure and a voluntary code of conduct for the pools of capital.

The minister ``made it clear that the focus of the German G8 presidency, to closely examine the systemic financial market risks and call for more transparency, has once again been vindicated,'' said Wilhelm. The government will ``continue its efforts,'' irrespective of opposition, Wilhelm said.

The German economy, Europe's biggest, will expand 0.4 percent in the third quarter, faster than the 0.3 percent growth in the second three-month period, the Berlin-based DIW economic institute said today. There's ``no reason to assume'' that there may be ``serious dangers'' for the German economy from the subprime mortgage crisis, it said.

To contact the reporter on this story: Rainer Buergin in Berlin at rbuergin1@bloomberg.net .

Last Updated: August 15, 2007 11:10 EDT

[Ferretlover]

The 280bn question: Where are the rest of the subprime bodies? by Gillian Tett 11 Feb 2008
When finance ministers from the Group of Seven nations gathered in Tokyo last weekend, the mood was distinctly gloomy. With credit stresses spreading, policymakers agreed that the financial outlook looked distinctly "uncertain."
One of the biggest-and most practical-concerns now revolves around a seemingly simple question: who is about to be hit next with subprime pain? ...
However, at the weekend meeting in Tokyo, Peer Steinbruck, German finance minister, revealed that the G&7 now thought subprime losses could reach $400bn, markedly more gloomy than anything that has emanted from official quarters.
But if that is striking, what is doubly thought provoking is that Western investment banks have hitherto confessed to "only" $120bn-odd losses. The question worrying G& leaders is where the remaining $280bn of problems may lie? Or as one senior policymaker confessed: "What evreyone is trying to work out is where the rest of the bodies are." ...
Financial Times Online

[MrBill]

Exactly! This is what I have been saying all along. Where are the losses on the risks that were securitized and sold to investors because banks did not want them on their own balance sheets?

They are sitting in the insurance companies, pension funds, regional and local banks, foreign banks, hedge funds and anywhere else that private investors or non-bank financial institutions do not have to mark to market those securities and can keep those undeclared losses on their balance sheets at their purchase price.

Some of those losses will have to come out as public companies reveal their latest financial results, especially if their auditors will not sign-off on their year end results until they do so. But the rest will be hidden from view a la Japan in the 1990s from which it will act as a drag on future earnings from many years to come. Not to mention any losses can be brought forward thereby reducing corporation's future tax liabilities. That cannot be good for government revenue projections either!

[MOCKBA]

http://docs.google.com/TeamPresent?doci ... pauth=true

[DrBang]

cute

[pedalling_faster]

"Based on estimates by Goldman Sachs $200 billion of losses in the financial system lead to a contraction of credit of $2 trillion given that institutions hold about $10 of assets per dollar of capital. The recapitalization of banks sovereign wealth funds - about $80 billion so far - will be unable to stop this credit disintermediation - (the move from off balance sheet to on balance sheet and moves of assets and liabilities from the shadow banking system to the formal banking system) and the ensuing contraction in credit as the mounting losses will dominate by a large margin any bank recapitalization from SWFs."

and when they talk about "swf's", they're not talking about Flash files.

i was one of the many listeners who begged John Mauldin at Investor's Insights to explain hedge funds & derivatives. for a long time he's been one of those bullish investment fund managers who didn't dwell on the subject of economic downturns.

well, he's gone into great detail recently on mortgage-backed securities, SIV's, and the other acronyms associated with hedge funds & derivatives.

http://www.investorsinsight.com/otb.aspx

it works better if you subscribe to the newsletter, then it comes as a big text file; if you look at the file on his website, it doesn't make as good reading (or listening), it's broken up into about 4 pages and has ads cluttering it up.

suffice it to say, $250 billion in losses brought back onto the balance sheets of the major banks, correlates to approx. a $2.5 Trillion reduction in their lending capacity. i think.

in the hall of mirrors which is today's economy, we don't know if the losses are $250 billion, $400 billion - or more.

plus you have people like me looking at, for example, Washington Mutual, a large bank, with a current stock market value of about $15 billion.
http://quote.yahoo.com/q?s=wm

current assets of $22 billion, current liabilities of $274 billion. long term investments of $300 billion +.

something doesn't look right at WaMu. a big bank with a market cap of $15 billion ? that's like Ford or GM, both financially beleaguered.

[pup55]

$this->bbcode_second_pass_quote('', 'S')ome of those losses will have to come out

[MrBill]

Sad, but true! ; - )