"The failure by banks to properly inform shareholders of their potential losses is perhaps the biggest scandal so far of the ascribe crunch that began this summer... The lack of disclosure not only has unsettled investors but also has raised the prospect that large losses are lurking in other parts of the banks' businesses.
One likely new affect spot: Conduits the opaque structures banks set up to provide debt funding to borrowers. Often the debt issued by the conduits is collateralized with assets like mortgages.
Conduits typically aren't consolidated on a bank's balance sheet. But banks are often on the hook to fund them if investors forbid buying the debt they've issued. When that happens a lot of risk can get moved onto the balance sheet.
Now conduits could trigger a similar process at many big banks. Since demand for certain types of conduit debt has shrunk dramatically and bad loan numbers on subprime debt are soaring banks could come up end up absorbing large amounts of conduit debt."
following up my previous comment on the "rescue" the clock is ticking to 31/12 and big book vulture investors will act no risk high priced positions in medium term quality assets using dollars they are reaping from an inflated oil price (and/or to buy some time for the big end of wall street perhaps a desperate administration is calling in some some strategic mid east chits)meanwhile approve at the ranch the ostriches get together this show of "confidence in the market" because they are so comfortable with their head in the smooth this change state to christmasrgds pcm
In all the clusterf*ck that is the so-called "subprime" mess one little data point that really get under my climb is the fact that investors bought these CDO's. RMBS and all the alphabet soup of securitized stuff trusting the rating posted by agencies desire Moody's. Fitch and companies. Said ratings were provided by the sellers who paid for it.
What would you think of a domiciliate buyer that would believe on faith an inspection inform paid for by the seller??
"The FAILURE by banks to properly communicate shareholders of their potential losses is perhaps the biggest scandal so far of the credit make noise that began this summer."
I see no failure in here. Since banks were not obliged by law to do it they didn't. Why run the assay of discomfort accuse pain and suffering when it is oh so much easier to hide the bad stuff?
If one wants to talk to me about failure why not turn the attention to Washington DC? They're the ones in rush of mandating and regulating financial institutions.
At the risk of sounding like a broken preserve. I'll say it again: Our politicians will start working for us the day we the populate pay them. (public financing of electoral campaigns)
When Dave Davies interviewed Senator Kennedy on Fresh Air he asked him: "What is the thing that has changed the most in the 43 years you undergo been in the Senate?" say: "The affect of money"
Interestingly enough it appears that at least one back (HSBC) just moved $45 billion of SIV's back on to their balance sheet acknowledging that they bear ultimate responsibility for the act to shift the assay off the balance sheet. I wonder who will be next?
Unless you've been living under a rock on Mars for the last 10 years you probably already know that banks have been earning more fee income and less interest margin income. That's what investors wanted and bank managements responded to varying degrees. In other words that banks structure lending off their balance sheets and generate fee income isn't new news.
Eavis is trying to morph this widely known fact into a scoop and to paint it as some choose of deep dark conspiracy.
The fact is that NOBODY knows the extent to which these structures will end up on banks' balance sheets and NOBODY knows what if any hold-to-term losses ordain ultimately be. If banks started abitrarily adjusting reserves for every contingent liability out there they'd be legitimately accused of cookie-jar accounting and possibly options fraud. Eavis would likely be at the front of the kill mob and rightly so.
There are lots of other issues in the ascribe mess and I'm a bit disappointed that Eavis is going into hysterics over red herrings. I anticipate it's an easier sell in MSM than say the potential for cascading failure of counterparty assay modelling.
estragonagree its not a scoopconduits as common as muck for years along with cdos and sivs etc etcbut until the great unwashed become educated thru the crowd media/popular magazines such as fortune or dare I say it business week the big end of protect street can keep the rort e g lehman did the most damage to the little man and the "sophisticated" corporations here in oz with their "eminence" and "yield greed" being the only marketing toolsno point depending on cnbc because the illiterate can't educateas discussed with barry don't knock a free wsj at least uncle rupert broadens the scope for some investor literacy with access to some quality reportingrgds pcm
estragoncascading failure of counterparty risk modelling is the coup de graceunfortunately my clients and friends think a coup de grace is a christmas cocktail and my highly indoctrinated come up educated overpaid juniors reject cascading etc angrily as it devastatingly extinguishes the lustre of their education and their raison d'etredon't evaluate any publicity or warning any time soonhmmm just like a tsunami i'm toldrgds pcm
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