CowTools writes:
I wonder what the total value of all mortgages originated during the time they rated these is? anyone?
CowTools | 01.30.08 - 5:14 pm | #

Johnny Z writes:
$534B here, $534B there. Sooner or later we'll start talking real money.
Johnny Z | 01.30.08 - 5:15 pm | #

JimK writes:
an appetizer ahead of the monoline downgrades and it isn't even Friday afternoon!
JimK | 01.30.08 - 5:15 pm | #

Kirk Spencer writes:
ummm...

It's dandelion time in Bloom County.
Kirk Spencer | 01.30.08 - 5:17 pm | #

NSA writes:
Good thing we have a MBA Preznit.
NSA | 01.30.08 - 5:17 pm | #

HARM writes:
Damn! Johnny Z beat me to it!
HARM | Homepage | 01.30.08 - 5:18 pm | #

Gary writes:
President Bush is so proud of being a C student, he thought it would be great if all debt was rated that way, too.
Gary | Homepage | 01.30.08 - 5:19 pm | #

Neal writes:
BOOOOM!!

The sound of an economy collapsing.

Anybody still questioning why rates were lowered again today?
Neal | 01.30.08 - 5:19 pm | #

sdtfs writes:
It wasn't that long ago we were blaming everything on the good weather or bad weather. Can we work it around to cover this stuff?
sdtfs | 01.30.08 - 5:19 pm | #

fatbear writes:
Will someone explain to me how in the face of FGIC and this S&P cut how the ABX numbers keep going up and the CMBX numbers keep going down? Is it that those markets have already discounted the bad news or is it that those dealers are dreaming? No comedy guys on this please....
fatbear | 01.30.08 - 5:19 pm | #

NSA writes:
It's just a bunch of zeros, anyway.
NSA | 01.30.08 - 5:20 pm | #

HARM writes:
It wasn't that long ago we were blaming everything on the good weather or bad weather. Can we work it around to cover this stuff?

Market's coming back right after the Superbowl.
HARM | Homepage | 01.30.08 - 5:20 pm | #

ndk writes:
How much? Say what? I'm awestruck. Why would they pick now to begin to actually rate securities?

I'm happy to see this news, as I think it's another step on the road toward recovery. I just happen to think this particular step is right onto a landmine.
ndk | 01.30.08 - 5:20 pm | #

CalculatedRisk writes:
All: Just received this: S&P says total losses from RMBS, CDOS for financial institutions will eventually reach more than $265 Billion.

Best to all.
CalculatedRisk | Homepage | 01.30.08 - 5:21 pm | #

fatbear writes:
And another question: how AMBAC is up ~10% after hours?
fatbear | 01.30.08 - 5:21 pm | #

jg writes:
A nuke was just dropped.

We need something like the LBJ 'Daisy' commercial for this.
jg | 01.30.08 - 5:21 pm | #

F. Frederson writes:
lowered or may cut ratings

Rather weird language. Is this two separate actions, or a report about half-finished analysis, or what?
F. Frederson | 01.30.08 - 5:22 pm | #

Misean writes:
Mortgage bond downgrades...

I wonder who was snacking on those tasty snacks.

Fatbear,

I can't think of anything funny about it. Can't explain it either. Bear markets do weird things.

Cheers,
Misean | 01.30.08 - 5:23 pm | #

fatbear writes:
Well, might be answering one of my own questions - AMBAC dropped ~9% of that 10% after S&P cut....
fatbear | 01.30.08 - 5:23 pm | #

Duceswild writes:
OT question for CR(and perhaps with an obvious answer), but I'll ask it anyway. A certain contributor on the RM site (Tony C) keeps referring to the current mortgage refinance boom. Is there really a refi boom currently playing out?? I know I've come to the right place for a thoughtful answer. Thanks
Duceswild | 01.30.08 - 5:23 pm | #

Speed writes:
Joe Isuzu is dead.
Speed | 01.30.08 - 5:23 pm | #

RayOnTheFarm writes:
It's dandelion time in Bloom County.

We have met the enemy, and he is us - Pogo
RayOnTheFarm | 01.30.08 - 5:24 pm | #

MAB writes:
Neal,

I'm questioning why rates were lowered to 1% for two years by Greenspan. And why the Fed was derelict in the bank oversight duties.

Our banking system (and economy) is now a roach motel. You can go in, but you can't get out.
MAB | 01.30.08 - 5:24 pm | #

Eric writes:
CR, re: $265Bn

I wonder what home price declines that factors in. I wonder if it reflects the fact that home price declines are accelerating. How do you model an accelerating decline?!?
Eric | 01.30.08 - 5:24 pm | #

ShortCourage writes:
OT, from Marketwatch...The market is no longer taking any and all news as good news...Amazon.com down 7% in after-hours trading:

Amazon.com reported Wednesday its earnings more than doubled in the fourth quarter thanks to strong holiday sales, but the online retail giant issued a forecast for operating income that was below Wall Street's expectations.
The shares dropped more than 7% in after-hours trading after closing the regular session up 26 cents at $74.21. The stock has already lost nearly 23% of its value since New Year's.

http://www.marketwatch.com/news/...7D& siteid=yhoof
ShortCourage | 01.30.08 - 5:26 pm | #

RayOnTheFarm writes:
It's just a bunch of zeros, anyway.

Does this imply that Treasury might bring back the $500 and $1,000 bills ? Might need em to fill-up the RV with gas next summer.
RayOnTheFarm | 01.30.08 - 5:26 pm | #

Misean writes:
jg,

How about this,

http://www.youtube.com/watch? v=S...feature=related

Cheers,
Misean | 01.30.08 - 5:27 pm | #

CalculatedRisk writes:
Eric, I'm not exactly sure what declines they were using (my guess is 15% or so - at least that is what many of the WS firms were using). That now appears too low. I wish they would release their assumptions.

Best Wishes.
CalculatedRisk | Homepage | 01.30.08 - 5:30 pm | #

Eric writes:
Never mind. I see the $265Bn was losses (presumably due to mark-to-market write downs?) at banks, not losses on mortgage defaults.
Eric | 01.30.08 - 5:30 pm | #

ndk writes:
To answer my own question, I'm sure this was timed along with the SOTU and the Fed cuts, but this is absolutely not the way I would've orchestrated things. At this point, after 1.25% of rate cuts and a $160B stimulus package, the entire cavalry has already shot its wad. There is no savior in the wings at this point.

I would've announced this before the Fed cut and SOTU to get absorbed in the soft, warm cushion of hope rather than checking out the floor of the elevator of reality.
ndk | 01.30.08 - 5:30 pm | #

get sum writes:
Could someone provide a little commentary on how the S&P downgrades are related (or not) to the FGIC downgrade, and more generally how the S&P downgrades are related (or not) to the insurer downgrades. So much toxic waste is being downgraded it's a little hard to keep it all straight!

Thanks.
get sum | 01.30.08 - 5:30 pm | #

Neal writes:
Well, this time it was supposed to be different

From Reuters, today

It wasn't just Wall Street that believed the yield curve's years of service as a recession indicator were due for a forced retirement. Both Federal Reserve Chairmen Ben Bernanke and his predecessor Alan Greenspan embraced the idea.

"I would not interpret the currently very flat yield curve as indicating a significant economic slowdown to come," Bernanke said in his first speech to Wall Street as head of the Fed in March 2006.

He was essentially repeating the Greenspan mantra, captured in what was perhaps the last of the Chairman's many famous catch phrases: the conundrum. In this view, unusually high savings in Asia and concomitant purchases of Treasury debt by overseas central banks, not the prospect of recession, was behind the anomaly in yields....

Yet around 18 months after a consistently inverted yield trend emerged, just the sort of time lag typically seen between a full-blown inversion and recession, the yield curve is showing its predictive powers are not to be messed with.

"The whole thing is surreal. In the last four weeks the whole world realized we were going into a recession," said Richard Gilhooly, senior bond strategist at BNP Paribas. "Our economists have been talking about it for a year and a half."

(end quote)

It was the "global savings glut", it was "dark matter", it was a "new paradigm". Risk was abolished, right?
Neal | 01.30.08 - 5:31 pm | #

RayOnTheFarm writes:
Bloomberg updated the text of the S&P announcement..

The downgrades may increase losses at European, Asian and U.S. regional banks, credit unions and the 12 Federal Home Loan Banks, S&P said. Many of those banks haven't written down their subprime holdings and S&P said it will start reviewing their ratings.

The FHLBs are now in danger of being downgraded. CFC borrowed money from one of the FHLBs.. Atlanta perhaps ?
RayOnTheFarm | 01.30.08 - 5:33 pm | #

Eric writes:
Surreal indeed. This whole little project is picking up speed. Ever feel like you are riding a go-cart? Built by your six year old? At the beginning of what now appears to be a very long and steep hill?
Eric | 01.30.08 - 5:33 pm | #

Paul writes:
It seems like the ratings agencies are going to have their revenge for being lied to. Hopefully these lessons will be well learned.
Paul | 01.30.08 - 5:35 pm | #

jg writes:
Good one, Misean!
jg | 01.30.08 - 5:35 pm | #

bigchubasco writes:
Is there really a refi boom currently playing out?? I know I've come to the right place for a thoughtful answer. Thanks

According to the MBA applications are increasing. Hard to believe that all those applications are funded.
bigchubasco | 01.30.08 - 5:36 pm | #

unirealist writes:
Denninger at Market Ticker says that an Australian brokerage today could not settle its trades because 60% of its margin calls weren't met.

Those of you who are still playing with fire in equities might consider this, if it is true. In a true systemic collapse, if you don't have real money in your hands, you don't have any money at all.
unirealist | 01.30.08 - 5:36 pm | #

Marcus Aurelius writes:
Okay. I'm officially coining a term. Here goes:

Peak Incompetence.
Marcus Aurelius | 01.30.08 - 5:37 pm | #

FFDIC writes:
This is going to cause a new war somewhere especially if Big Mac wins the election. Maybe in our own backyards. I'm glad China hasn't built up its miltary machine yet or has it?
FFDIC | 01.30.08 - 5:37 pm | #

MAB writes:
Marcus A.

I'm coining a new phrase too:

I'm FED (pun intended) up.
MAB | 01.30.08 - 5:38 pm | #

Cobradriver writes:
unirealist | 01.30.08 - 5:36 pm |

Thats what has been worrying me about the downgrades. I have heard from someone I trust that margin/capital calls could be between 250-1000B,with a capital b.

Chris
Cobradriver | 01.30.08 - 5:39 pm | #

Misean writes:
Marcus,

Peak Incompetence. Sorry we can only peak in something that is scarce.

:)

FFDIC,

If John Insane wins, I'm getting out of town.

Cheers,
Misean | 01.30.08 - 5:40 pm | #

Liar'sPoker writes:
hey, thanks for the link...
i signed up as Jose Cuervo...

even got a new ss#... I was told i could pick the amount of my ceck... so i said 65000/ month...

I've already been pre-approved on a loan for a foreclosure in laguna niguel...
stoppin by the porsch dealer this afternoon also...
think i;ll get some smirks when i tell them my name...
Liar'sPoker | 01.30.08 - 5:44 pm | #

Gabor writes:
This downgrades only affect the already masquareded balance sheets.
Balance sheets of banks are no longer telling of any information, think of Societe General, they just blinked and missed 7 billion euro actual loss on their books!
Most of these downgrades are just projecting future losses, they are not actual losses.
What really matters now is the daily cash flow situation at banks, which might be deteriorating fast judging fro mthe falling nonborrowed reserves.
Thats what might be driving the FED, the markets and the economic activity.
Gabor | 01.30.08 - 5:45 pm | #

Neal writes:
..."I would not interpret the currently very flat yield curve as indicating a significant economic slowdown to come," Bernanke said in his first speech to Wall Street as head of the Fed in March 2006....

Another fine example of this administration where belief in an idea, regardless of facts, was sufficient to make the idea correct.
Neal | 01.30.08 - 5:47 pm | #

NJDave writes:
You know, S&P has a web page with all their public information about subprime at http://www.spviews.com/ .

No-one really has to guess and speculate about what they say. Although it might be more fun.
NJDave | 01.30.08 - 5:47 pm | #

Mancipatio writes:
Here are some assumptions S&P is operating under, from S&P's PDF here:

http://tinyurl.com/37ovgq


Furthermore, we expect losses to continue increasing, with borrowers experiencing rising loan payments as the terms of adjustable-rate loans originated in early 2006 reset and principal amortization occurs after the interest-only period ends for both adjustable and fixed-rate loans.

An estimated $342 billion of mortgages is expected to reset during 2008. However, we expect many of the affected borrowers will find relief through loan modifications that will hold initial interest rates constant for several years.

We expect available credit enhancement to decrease as a result of the loan modifications.

Although property values have decreased approximately 6% to date, we expect additional declines. David Wyss, Standard & Poor's chief economist, has adjusted his projection, forecasting that by the end of 2008 property values will have declined by as much as 13% on average since 2006, and the market will bottom out early in 2009.

While this is an aggregate view, it is important to note that certain markets have already suffered declines greater than this forecast.

According to the S&P/Case-Shiller Tiered Price Indices, cities such as San Diego and San Francisco have experienced price declines of 12.0% and 6.5%, respectively, and lower-priced homes in those areas have experienced declines of 18.5% and 17.5%, respectively.

These lower-priced homes, which carry an average loan balance of around $213,000, generally secure subprime mortgages.

Similarly, for Tampa, the aggregate decline since 2006 averages approximately 12%, and this is consistent across price tiers.

In many cases, the actual losses experienced to date reflect larger declines in value than those forecasted.

It is possible, therefore, that further price declines may not have as great an effect on losses as one might expect.

NOTE: Paragraphs have been introduced for the ease of the reader and to facilitate further commenting.

----------------------------
Mancipatio | 01.30.08 - 5:47 pm | #

rich writes:
>Will someone explain to me how in the face of FGIC and this S&P cut how the ABX numbers keep going up and the CMBX numbers keep going down? Is it that those markets have already discounted the bad news or is it that those dealers are dreaming?


Neither. It's the same reason homebuilders went up for a week. There's two parties to those leveraged trades, and the leverage was unwinding. They're just more lights going out.

What I don't get is why the Conjure Clock is so stuck. At least 10 seconds should have ticked off this week already.
rich | 01.30.08 - 5:50 pm | #

Barley writes:
unirealist - unpaid margin calls in Australia caused a cascade of problems any one know the damage? Is 'bout 375M about right?:

Tricom in more hot water

Local stocks were also affected following an ASX investigation into Tricom Equities, according to The Australian.

The ASX has asked Tricom to report its capital and liquidity position on a daily basis and allow regulators to monitor its operations to help meet settlement obligations.

After being caught in a deluge of margin calls, Tricom failed to settle tens of millions of dollars worth of share trades, prompting the ASX clampdown.

Tricom is thought to be under pressure to pay down loans to ANZ Banking Group, which financed the significant expansion of the company's $2.7 billion margin loan book.

The ANZ has given the beleaguered securities dealer just days to reduce its book by hundreds of millions of dollars to satisfy loan covenants, The Australian said.

Last week's 5 per cent share market drop hit Tricom's 29,000 clients with a large number of margin loans called against equities in MFS Ltd, and Allco Finance Group, the newspaper said.

and

LEADING stockbroker Tricom Equities was last night fending off speculation it was in financial trouble after it failed to come up with the money to settle its trades with the Australian Securities Exchange.

Tricom confirmed it had failed to settle its trades, leaving it at risk of being suspended from the exchange.

It is understood to be the first time in many years a major broker has been unable to settle at the required time.

The news whipped around the market yesterday, helping to shatter an already fragile confidence among investors, who drove stock prices down another 2.5 per cent with the S&P/ASX200 down 143.8 points to 5716.5.

Tricom managing director Lance Rosenberg told The Australian in an email that the company was experiencing "administrative issues''
Barley | 01.30.08 - 5:54 pm | #

ShortCourage writes:
Ooooo...a new catch-phrase. We're just experiencing some "administrative issues", that's all.
ShortCourage | 01.30.08 - 5:57 pm | #

Mancipatio writes:
NJ Dave: Your comment with link arrived as I was formatting my last comment. My link is to the PDF linked from the SPViews page.

CowTools - not exactly what you ask, but from the S&P announcement this does provide some frame of reference:

"$270.1 billion, or approximately 46.6% of the par amount of U.S. RMBS backed by first-lien subprime mortgage loans rated by Standard & Poor's during 2006 and the first half of 2007.

The CDO of ABS and CDO of CDO classes with ratings placed on CreditWatch negative represent an issuance amount of approximately $263.9 billion, which is about 35.2% of Standard & Poor's rated CDO of ABS and CDO of CDO issuance worldwide."

NOTE: Again, my paragraphing.

-------------------------------
Mancipatio | 01.30.08 - 5:59 pm | #

Barley writes:
ShortCourage - good one!
Barley | 01.30.08 - 6:03 pm | #

Misean writes:
ShortCourage,

Good pull.

MortageServicer: Sir, you're 30 days late with payment.

Me: I'm having administrative issues. I'll get back to you on that.

Cheers,
Misean | 01.30.08 - 6:08 pm | #

Eric writes:
Mancipatio thanks for the info. Sounds to me like the S&P numbers are not exactly conservative!
Eric | 01.30.08 - 6:15 pm | #

Sol writes:
FFDIC - stop now! (visions of Keating 5 dance through my head) I can't handle the though of a never ending nightmare.
Sol | 01.30.08 - 6:21 pm | #

Canadaman writes:
Tricom managing director Lance Rosenberg told The Australian in an email that the company was experiencing "administrative issues''

Does that sound like shades of REFCO to anyone else?
Canadaman | 01.30.08 - 6:22 pm | #

ugh writes:
All,

IIRC, Conjure's clock is at 11:59:30

It changed when the borrowed reserves came to light.

MP said that would be the last update.

Maybe they're now in the bunker?
ugh | 01.30.08 - 6:22 pm | #

energyecon writes:
ugh,

That was the last report from mp by my recollection as well, though he and Conjure were headed to New York...hope he has a LOT of Macanudos stocked up if they have bunkered...
energyecon | 01.30.08 - 6:27 pm | #

Cobradriver writes:
"Similarly, for Tampa, the aggregate decline since 2006 averages approximately 12%, and this is consistent across price tiers."

The problem with SW Fl currently beside the pricing issue is the complete lack of sales. This may be the next shoe to drop. Nobody buying and only a few with the best credit to buy. Can months to clear go to infinity ???

Chris
Cobradriver | 01.30.08 - 6:29 pm | #

cmhappyrenter writes:
Question, with the downgrades from S&P (and others soon) of MBS / CDO's / CDS and other financial weapons of mass distruction, was the US the only ones originating these?

With speculative booms in Europe, Americas, parts of Asia, are there other instruments ready to blow up as well not counted in the estimates? Is this a US only generated number?
cmhappyrenter | 01.30.08 - 6:33 pm | #

kristos writes:
Black hole NOT roach motel
kristos | 01.30.08 - 6:37 pm | #

Polonius writes:
Denninger at Market Ticker says that an Australian brokerage today could not settle its trades because 60% of its margin calls weren't met.

Yup. Right here. It's Tricom.
Broker can't pay but says it's OK
http://www.theaustralian.news.co...1- 20142,00.html
and here
Banks put squeeze on Tricom
http://www.theaustralian.news.co...9- 20142,00.html
Polonius | 01.30.08 - 6:38 pm | #

trail writes:
If I remember correctly the Conjure Clock is stopped on the basis that everyone here knows what time it is anyway...
trail | 01.30.08 - 6:52 pm | #

NegAm Recaste writes:
So I guess SRS is going to pay out tomorrow?
NegAm Recaste | 01.30.08 - 7:18 pm | #

Tom Stone writes:
As far as refi applications in sonoma county,I am telling some people to not bother unless they have $ to bring to the table.Also many lenders are requiring appraisal reviews or 2 appraisals,which slows the process.Our median price dropped 6% in december and has been averaging 1.5% a month since the peak.A lot of brokers will submit to more than 1 lender in hopes that they will get an approval before "value" drops too far.In some good areas the best indicators of value are expired listings...
Tom Stone | 01.30.08 - 7:28 pm | #

itsMe writes:
Tanta, CR, anyone, help me understand here the impact of these rate cuts.

Cramer and other financial talking heads are saying that the cuts will end the housing madness, spur sales, increase housing prices again and allow those in trouble to refi.

What magic if any at all does a 30 year mortgage at 5% or lower do? Will the problems disappear?
itsMe | 01.30.08 - 7:31 pm | #

unirealist writes:
Barley and Polonius, thanks for the details on Triacom.

Rich, the metaphor of lights winking out all over the globe is superb.

Fake money disappearing. Suddenly, gold at 900/oz doesn't look all that expensive.
unirealist | 01.30.08 - 7:38 pm | #

Lawyerliz writes:
It will probably do the reverse of all those things.

Plenty of re-fi apps are being taken, but I don't think this this will result in many mtges being made.

In certain mkts, anybody who bought after 2005, or even mid 2004, and who didn't put over 20% down are underwater. And sinking fast.

The tension is killing me. I wish the mkt would just the heck crash and get it over with, so we can start anew.
Lawyerliz | 01.30.08 - 7:42 pm | #

Paul writes:
Question:

I've been looking at the Dow and S&P historical charts and see that volume went up tremendously, beginning in the early 1980s. This increase coincides with the emerging 401k as retirement vehicle. Is that what I'm seeing?
Paul | 01.30.08 - 7:48 pm | #

DCRogers writes:
Re: Conjure clock

As I was walking down the street one day
A man came up to me and asked me what the time was that was on my watch, yeah
And I said

Does anybody really know what time it is
Does anybody really care
If so I cant imagine why
Weve all got time enough to cry

And I was walking down the street one day
A pretty lady looked at me and said her diamond watch had stopped cold dead
And I said

Does anybody really know what time it is
Does anybody really care
If so I cant imagine why
Weve all got time enough to cry

And I was walking down the street one day
Being pushed and shoved by people trying to beat the clock, oh, no I just dont know
I dont know
And I said, yes I said

Background:
People runnin everywhere
Dont know where to go
Dont know where I am
Cant see past the next step
Dont have time to think past the last mile
Have no time to look around
Just run around, run around and think why

Does anybody really know what time it is
Does anybody really care
If so I cant imagine why
Weve all got time enough to die
DCRogers | 01.30.08 - 8:16 pm | #

awgee writes:
No worries. Ben still has 300 points to play with.
awgee | 01.30.08 - 10:40 pm | #

Quincy k writes:
"In a true systemic collapse, if you don't have real money in your hands, you don't have any money at all."

Unirealist-

If a true systemic oollapse were to occur, that money in your hands would probably also be worthless. Buffet has mentioned this numerous times regarding the derivatives and the leverage. Since no one is truly regulating or quantifying what the outcome of infinite margin calls would bring, I guess we are all just hoping that we will never find out.
Quincy k | 01.30.08 - 11:52 pm | #

Troy writes:
I wonder what the total value of all mortgages originated during the time they rated these is? anyone?

$856B in 2003
$954B in 2004
$985B in 2005
$997B in 2006

from the most recent Federal Flow of Funds report
Troy | 01.31.08 - 1:05 am | #

Bennett writes:
Not a Wall Street person. Just a lawyer doing personal bankruptcies. Ever night when I say my prays I thank god Angelo and his cronies would lend 100% of the price of a house to someone with a 620 FICO score and says they make $15,000 a month. The only other group to benefit as much as me are the classified ad people at the local newspaper. Who says newspapers are dead. In the recent Washington Post more than half of the classifieds were for foreclosures.
Bennett | 01.31.08 - 2:53 am | #

Romero writes:
Does this include the commercial backed mortgage stuff?
A possibly dumb question, what percentage of these derivatives are held 'neat' and how much are in some leveraged fund?
I'm trying to understand what a market price of say 30c on the $ would mean in practice
Surely if a lot of them are leveraged up even 90c on the dollar would crush some people?
Romero | 01.31.08 - 5:22 am | #

borkafatty writes:
You know when you read stories like this...do you really blame people for stiffing the bank.
borkafatty | 01.31.08 - 8:12 am | #