Sorry about that, China . . .
"BEIJING (AP) -- Shares in China's banks fell sharply Monday after news reports said its No. 2 lender, Bank of China, might write down holdings of U.S. mortgage securities and two others increased reserves for possible losses.
The reports were the first indication that Chinese lenders, which have so far avoided damage from the U.S. credit crisis, might face problems due to their holdings of subprime securities".
12 comments:
That is going to be the least of their worries if we see a major recession as some have been predicting. The world markets had an awful day today and it looks like there is a great deal of uncertainty worldwide.
Most of the recent economic boom was financed with exceptionally cheap credit. If that has really come to an end it is going to be a nasty withdrawal.
You are right, Leroy, there will be much scrambling and it appears the fallout will spread far and wide...
Feeling Misled on Home Price, Buyers Are Suing Their Agent
http://tinyurl.com/2v7ynj
“Agents have a lot of fiduciary duties, but they don’t make money unless they close the sale,” said Joel Ruben, a real estate lawyer in Manhattan Beach, Calif. “In an inflated market, there are built-in temptations to cut corners.”
In a brief phone interview, Mr. Little called the case “ridiculous,” adding: “The lady’s a nut job. I didn’t do anything wrong.”
Why do you think cheap credit will end? The Fed is cutting rates like crazy and rates are already at near historic lows. Anyone here remember feeling good about 17% on a home loan, or a 24% car loan?
The problem with credit wasn't the interest rates, it was lending standards.
Lenders seemed to forget that there is an element of risk that needs to be priced into a loan based on the likelihood that the borrower will actually repay the money. Huge amounts of money were being loaned to people/companies with a questionable ability to repay the loan.
If a day laborer walked into your car dealership and wanted to finance a 100k Mercedes what would you say? "Hey, interest rates are low, go for it!"
This credit "crunch" we are seeing is nothing more than a return to sanity where lenders are actually asking themselves whether they will ever see the money they loaned out again.
The world markets are aware of how much of the recent boom was funded by basically free credit. Now that that is ending we are quite likely going to see a recession that could be bad. That is why the stock markets are in a state of near panic.
Right but money will still be cheap for those who have good credit.
I'm probably going to refinance soon since my 6.5% 30 year can be had for 5.25% right now and thats before factoring in todays 0.75% Fed rate cut.
doug,
I am not sure that long term rates will fall as much as the short term rates. In fact, they may even go up.
No they will continue to drop just like they have been.
Treasuries will get more and more expensive the longer the recession, thus making mortgage rates cheaper and cheaper.
Doug, do you think that those low rates will pump up housing sales? I do not. Though the low rates could help the broader investment market. I put all my money in Treasuries months ago. I might get back in stocks when they are really low.
No they will help refinance and rate resets which will keep a small percentage of loans from going into foreclosure.
Im guessing 10% of the loans that would have gone bad will be helped out by the rate cuts.
Housing sales are driven by new buyers and right now nobody new wants a home.
Hey TedK - check this out...
http://www.bloomberg.com/apps/news?pid=20601087&sid=aPOgZDTRTapU&refer=home
Told ya so...
Doug,
Thanks for the link. At this point, everyone appears to be more concerned about a recession than the possibility of inflation/stagflation resulting from falling rates and the dollar. So the immediate reaction in rates is understandable. But if stagflation results, one cannot be so sure of long term rates.
Stagflation - I doubt we will have stagnant growth - we will have NEGATIVE growth!
What most people agree will happen is the economy will contract, the Fed will continue to cut rates and treasuries will continue to be a safe haven.
Every time this happens treasury rates follow the Fed benchmark somewhat loosely - why wont this happen again?
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