Chinese banks admit to subprime exposure

Chinese banks admit to subprime exposure

That is what you get for investing in the US assets.

The Bandaid remedy will not heal the wound. This crisis is too deep. Investors should not be fooled. Better advised to accept the loses and not to loose their shirts & pants by further investing in a Bankrupt economy.

Merrill-Lynch takin' a hit too...
:eek:
Merrill could face its own subprime sting
August 24 2007: Wall Street bank may need to write down its recent $1.3B purchase of subprime lender First Franklin.

]
Profits at Merrill Lynch & Co. Inc. could take a big hit if the U.S. brokerage heavyweight cuts the value on nearly $1 billion in subprime lender assets it bought just eight months ago. Analysts said they would expect Merrill Lynch to write down at least some of the goodwill-related assets from its $1.3 billion purchase of First Franklin Financial Corp, the No. 5 U.S. subprime originator in the first quarter, according to Inside Mortgage Finance.

The possibility of write-downs related to ill-timed acquisitions of mortgage lenders shows that the Wall Street fallout from the subprime mortgage meltdown, which caused two Bear Stearns & Co. hedge funds to collapse and Lehman Brothers to shutter a unit, is far from over. Since the First Franklin deal closed in late December, the decline in loans to home buyers with poor credit histories has accelerated, forcing dozens of U.S. lenders to slash jobs, close or seek bankruptcy. Investors lost their appetite for risky mortgages packaged into securities, undercutting Wall Street’s rationale for buying these lenders in the first place.

“I expect some of those assets to be written down to some extent," said Matthew Albrecht, a brokerage and equities analyst at Standard & Poor’s. “Whether or not they reduce their operations, we’ll see case by case." A hit to Merrill’s goodwill related to misplaced subprime bets may not be the only one among Wall Street firms, analysts said. Morgan Stanley, which last year paid $706 million for subprime lender Saxon Mortgage, also could face a write-down, though on a smaller scale, they said. Merrill Lynch and Morgan Stanley both declined comment.

[url=http://money.cnn.com/2007/08/24/news/companies/merrill_subprime.reut/index.htm?section=money_mostpopular:
MORE[/url]

See also:

Credit Card Users Pay for Mortgage Woes
Aug. 25, 2007 - Fear from the nation’s mortgage problems is leading to higher rates for some.

]
Don’t own a home or plan to buy one anytime soon? Well, listen up because the fallout from the country’s mortgage problems could still affect you. Several credit card companies in recent weeks have started to jack up rates for some customers, and other lenders are tightening standards for auto and personal loans. Banks and lenders, for the most part, are not directly citing the national tightening of credit due to rising mortgage defaults. Most attribute the changes to generally tighter credit for corporations and individuals.

But still, lenders are taking a close look — whether new or not — at people’s credit, and that is pushing costs higher for some consumers. The credit cards tie their rates to those set by the Federal Reserve and factor in the number of delinquencies. Since neither of those have changed, neither have credit card rates, McBride said. Greg McBride, senior financial analyst at Bankrate.com, said that credit card rates have been flat throughout the year. But while overall rates might be flat, it doesn’t mean that they’re not climbing for some.

“If you start falling behind on payments you’re a sitting duck for a higher rate. That’s a normal course of business," McBride said. “Unlike the mortgage business, where everybody just woke to the prospect of risk three weeks ago, credit card issuers live credit risk. Their debt is unsecured so they are constantly in this mode of monitoring risk." McBride said the credit card business has long set different rates based on each individual’s credit-worthiness. And while rates for consumers with good credit might not have changed, it is possible that the companies are shifting more people with less-than-perfect credit over to the more-expensive rates.

More [url:
http://www.abcnews.go.com/Business/LifeStages/story?id=3520885&page=1[/url]

Fearless W gonna fix the subprime problem...
;)
Bush to propose subprime plan
August 31 2007: President will discuss initiatives for helping troubled mortgage holders keep their homes, make call for stronger lending practices.

]
WASHINGTON — President Bush will make a statement Friday morning in the Rose Garden about homeownership financing, a senior administration official said Thursday. The statement is scheduled for 11 a.m. “The president will discuss a number of initiatives and reforms intended to help homeowners with subprime mortgages keep their homes," the official said. “He will also discuss reform efforts to prevent these kinds of problems from arising in the future."

Bush will direct Treasury Secretary Henry Paulson and Housing and Urban Development Secretary Alphonso Jackson to team up to help troubled mortgage holders get the services and products they need to avoid defaulting on their loans, the official said. He will also push Congress to pass Federal Housing Administration legislation that will give the agency more flexibility to assist mortgage holders with subprime loans, the official said.

The need for rigorous enforcement of predatory lending laws and stronger, more transparent lending practices are also on the agenda for the statement, the official said. “He will discuss his willingness to work with Congress in a bipartisan way on legislation to reform the tax code to help troubled borrowers rework their loans," he said.

Risky loans have fueled a rise in foreclosures and forced some lenders to shut down or file for bankruptcy themselves. Foreclosure filings, which include default notices, auction sale notices and bank repossessions, in July were up 9 percent over June - and 93 percent over July 2006.

[url=http://money.cnn.com/2007/08/31/news/economy/bush_subprime/index.htm?section=money_mostpopular:
Source[/url]

See also:

Bernanke: Fed ready to act if turmoil hits economy
Fri Aug 31, 2007- The Federal Reserve will take the necessary steps to shelter the economy from turmoil in financial markets but will not bail out investors who made mistakes, Fed Chairman Ben Bernanke said on Friday.

]
“The committee continues to monitor the situation and will act as needed to limit the adverse effects on the broader economy that may arise from the disruptions in financial markets," Bernanke told a symposium organized by the Kansas City Federal Reserve Bank. Interest rate futures markets are signaling that investors believe the Fed will cut its target for the overnight federal funds rate by a quarter point to 5 percent at its next policy meeting, on September 18, if not sooner.

However, in a clear caution that policy-makers will not rescue Wall Street, Bernanke said the central bank should not shield investors from self-inflicted loss. “It is not the responsibility of the Federal Reserve — nor would it be appropriate — to protect lenders and investors from the consequences of their financial decisions," he said. This was an important reference to the moral hazard policy-makers run if they insulate financial markets from errors, hence encouraging more risk-taking. However, he acknowledged the Fed had wider obligations.

“Developments in financial markets can have broad economic effects felt by many outside the markets, and the Federal Reserve must take those effects into account when determining policy," he said. U.S. Treasury debt prices pared losses, the dollar rose versus the euro and U.S. stocks initially cut gains after the speech, which many saw as showing the Fed parsing economic data closely for signs of a thaw in credit markets and any spillover into areas of the economy such as consumer spending.

[url=http://news.yahoo.com/s/nm/20070831/bs_nm/usa_fed_bernanke_dc:
MORE[/url]

Fed tryin' to cool the subprime meltdown...
:o
FDIC to mortgage servicers: Freeze ARM rates
October 5 2007: Top bank regulator suggests industry cuts losses now to prevent foreclosures.

]
The heat on U.S. mortgage lenders and servicers was turned up a few degrees this week when the country’s chief bank regulator publicly proposed that they permanently freeze interest rates on subprime adjustable-rate mortgages (ARMs) for many homeowners. “Keep it at the starter rate. Convert it into a fixed rate. Make it permanent. And get on with it," Federal Deposit Insurance Corp. Chairman Sheila Bair said in prepared remarks at an investor’s conference.

ARMs often have a low introductory interest rate for two or three years and then reset to much higher levels. Roughly 1.3 million subprime ARMs are due for a rate reset between now and the end of 2008, according to data from First American Loan Performance.

Bair proposed that servicers convert only those ARMs that haven’t reset yet and only for borrowers who are current in their payments and occupy their homes. Loans taken out by speculators who don’t live in the homes they bought would not qualify for the automatic conversion.

[url=http://money.cnn.com/2007/10/05/real_estate/fdic_rate_freeze/index.htm?section=money_mostpopular:
MORE[/url]

See also:


Record-breaking day on Wall Street
October 5 2007: After jobs report, S&P 500 closes at all-time high; Dow hits all-time high during the session, but closes short of its record; Nasdaq hits 6-1/2 year high; bonds slump.

]
Stocks rallied Friday after a strong September jobs report raised bets that the economy will be able to avoid a recession, despite the drag from the housing and mortgage market meltdown. Bond prices slumped, boosting the corresponding yields on bets that if the economy is holding up better than thought, the Fed won’t necessarily need to keep cutting interest rates.

The Dow Jones industrial average gained almost 0.7 percent, briefly hitting a record trading high of 14,123.72 during the session before retreating. The broader S&P 500 index added almost 1 percent and closed at a new all-time high. During the session, the S&P 500 briefly hit a new all-time intraday high of 1561.91 before scaling back a bit.

The tech-heavy Nasdaq composite gained around 1.7 percent, closing at a fresh 2007 record and its highest point since Feb. 2001. The third-quarter earnings reporting period unofficially kicks off next week with a pair of Dow components - Alcoa on Tuesday and General Electric on Friday.

[url=http://money.cnn.com/2007/10/05/markets/markets_0500/index.htm?section=money_mostpopular:
MORE[/url]

Asian markets shaken...
:o
China stocks plummet
November 22 2007: Worries that Beijing will try to rein in economy send Shanghai index lower 4.4%; Tokyo’s Nikkei edges higher.

]
Most Asian markets fell Thursday, with shares in Hong Kong and Shanghai sliding sharply on concerns that Beijing will take steps to cool China’s economy. The region’s biggest bourse in Tokyo ended mixed amid persistent worries over the outlook for the U.S. economy, a vital export market for Asia, after Wall Street dropped again overnight.

“There still is a lot of uncertainties in the U.S. economic outlook, as well as on China’s macro policies, that could dampen buying interest in the near term," said Peter Lai, a director at DBS Vickers in Hong Kong. In Hong Kong, the Hang Seng index sank 613.27 points, or 2.3 percent, to 26,004.92 after earlier rising as much as 1.4 percent. Leading decliners were port operator China Merchants Holdings and rival Cosco Pacific.

Some investors held back because of the U.S. Thanksgiving holiday Thursday. They were were also discouraged by economic data in the U.S. released Wednesday that showed a drop in consumer sentiment, with the Conference Board’s Index of Leading Economic Indicators falling 0.5 percent in October. The Dow Jones industrial average fell 1.62 percent Wednesday to 12,799.94.

Asian markets have been battered in recent weeks. Since reaching record highs in October, benchmark indices in both Hong Kong and Shanghai - two of the world’s best-performing markets this year - have fallen 17 percent. In Japan, the Topix index of all the issues of the Tokyo Stock Exchange’s First Section, has declined nearly 21 percent from its 2007 high in February.

[url=http://money.cnn.com/2007/11/22/news/international/asian_markets.ap/index.htm?section=money_mostpopular:
MORE[/url]

See also:

Report: China wants strong dollar
November 22 2007: Governor of the People’s Bank of China told Treasury Secretary Henry Paulson that China hopes to see the greenback rebound.

]
The head of China’s central bank says Beijing wants a strong U.S. dollar, a government news agency said Thursday. Zhou Xiaochuan, governor of the People’s Bank of China, made the comment to U.S. Treasury Secretary Henry Paulson at a conference in South Africa, the Xinhua News Agency said. “Zhou said he told Paulson China hopes to see a strong dollar," Xinhua reported. It said Zhou was responding to Paulson’s prediction of a long-term recovery of the weakening dollar, which fell to another record low against the euro Thursday. Zhou’s comments put “weight behind the slumping currency," Xinhua said.

The U.S. dollar has been falling against the euro, yen and other major currencies amid fears for the health of the American economy, stoked by the subprime mortgage crisis. Concerns about the United States' huge trade deficit, which leaves more dollars in the hands of foreigners, also is weighing on the currency. On Thursday, the dollar rebounded slightly against the yen, inching back up to 108.70 yen after touching a 2 1/2-year low of 108.25 yen overnight. But the euro continued to rise to new highs, climbing as high as US$1.4873.

China keeps a large share of its US$1.43 trillion in reserves in dollar-denominated assets such as U.S. Treasuries, which means a falling dollar erodes the value of its holdings. Financial markets are watching to see whether Beijing shifts to a stronger currency such as euros. Zhou said that only when the dollar “devalues drastically can it be called weak, the scenario of which is likely to bring uncertainty to the world economy, to the reluctance of all parties concerned," Xinhua reported. Zhou and Paulson were attending a meeting in South Africa of the G20, which groups together the world’s 20 biggest economies.

[url=http://money.cnn.com/2007/11/22/news/international/bc.apfn.as.fin.china.dollar.ap/index.htm?section=money_mostpopular:
Source[/url]

A Sino-American New World Order?
:confused:
Economist: U.S., China should join hands to reform world financial system
November 25, 2007 - The United States and China should join hands in an effort to reform the world financial system, which has currently entered the most deadly crisis in recent centuries, a renowned U.S. economist said Saturday.

]
“The end of the present world monetary-financial system is inevitable, unless the system is replaced by a new world system during a relatively brief, remaining time available," said Lyndon La Rouche at a luncheon at the Forum on U.S.-China Relations and China’s Peaceful Reunification. La Rouche, also a famous political activist, said the present international financial crisis could only be brought under control when major countries like the U.S. and China cooperate.

“Whenever a powerful combination of national governments can arrive at a suitable agreement to change a failed financial-monetary system, a solution for any modern financial crisis can be found," he said. He said that the United States should propose to form an initial sponsoring group made up of the governments of the U.S., China, Russia and India, therefore to rally a majority of nations in order to stabilize the world system.

LaRouche lamented that all evidence has confirmed the current crisis, notably the recent collapse of the U.S. dollar' exchange rates against other major currencies, but nothing visible had been done so far by any government to change the world financial system to solve the problem. The forum, jointly organized by several local Chinese-American, gathered nearly 100 government officials, scholars and activists form the U.S. and China, who were expected to discuss issues on U.S.-China relations and their implications on the Taiwan issue during the two-day event.

[url=http://english.people.com.cn/90001/90778/90858/90864/6308992.html:
MORE[/url]

China got banking problems of their own...
:eek:
China said to find $118B in bank misconduct
January 19 2008: Reports say auditor findings result in 177 bank managers being fired.

]
Auditors found misconduct at Chinese banks involving about 860 billion yuan ($118 billion) last year and 177 bank managers have been fired, news reports said Saturday. A total of 445 cases of irregularities were found, down 58.4 percent from 2006, the Xinhua News Agency and the Shanghai Daily newspaper reported, citing the China Banking Regulatory Commission. They gave no details or and did not say whether anyone would be prosecuted.

Auditors have stepped up oversight of Chinese state-owned banks in recent years as they try to become more competitive and as some sell shares to foreign investors. Last year 12,687 people were fined or received other punishment for bank misconduct, the banking commission said on its Web site. It was not immediately clear what offenses those fired or fined in the latest reported round had committed. In the past, bank misconduct has included embezzlement and taking bribes to grant improper loans.

The government has also been cracking down on violations of curbs on lending for real estate speculation. The news reports cited the commission as the source of details on the total amount of money involved in misconduct cases. The statement on the commission Web site gave no financial details.

[url=http://money.cnn.com/2008/01/19/news/international/bc.apfn.as.fin.china.bank.ap/index.htm?section=money_news_international:
Source[/url]