MetaFilter posts tagged with subprime

Minority bounty

hayvac — Mon, 08 Jun 2009 10:32:22 -0800

Bank Accused of Pushing Mortgage Deals on Blacks: "They referred to subprime loans made in minority communities as ghetto loans and minority customers as 'those people have bad credit', 'those people don't pay their bills' and 'mud people,' " [a Wells Fargo subprime loan officer] said in his affidavit, filed in the NAACP's lawsuit (pdf) against 13 mortgage lenders. "The company put 'bounties' on minority borrowers. By this I mean that loan officers received cash incentives to aggressively market subprime loans in minority communities."

UK and USA might lose AAA rating

memebake — Tue, 26 May 2009 15:11:41 -0800

Standard & Poor’s changed the UK's credit outlook from stable to negative a few days ago, and warned that there is a chance the UK could lose its AAA rating. Meanwhile, Moodys, another of the big 3 rating agencies, has warned that the US might also eventually lose its AAA rating. The UK announcement caused sterling to drop by 1% and the FTSE by 2%. However, many blame the same rating agencies for their part in triggering the subprime crisis. The irony of this is not lost on the Wall Street Journal, who note that "After all, those governments are jacking up spending, in part, to bail out the financial firms who gobbled up those 'AAA' asset backed securities duly blessed by the credit ratings firms." How did the CDO's get AAA rated in the first place? There are reports that it may have been a bug in the rating software, although Greenspan says its because the ratings were based on only the last two decades, giving a too-optimistic outlook. This reseach paper by Vasiliki Skreta and Laura Veldkamp looks through some of the options. Incidentally, all the ratings given by the rating agencies come with a disclaimer: S&P says in small print: "Any user of the information contained herein should not rely on any credit rating or other opinion contained herein in making any investment decision". Joseph Mason, a former economist at the US Treasury Department, points out that "The ratings giveth and the disclaimer takes it away."

Michael Osinski wrote the software that turned mortgages into bonds

blasdelf — Mon, 30 Mar 2009 14:09:01 -0800

My Manhattan Project: How I helped build the bomb that blew up Wall Street. [print version]

Prescient Economist: Housing Crash Result of Government Incentives

shivohum — Wed, 11 Feb 2009 21:37:24 -0800

Peter Wallison, an economist who arguably predicted the housing crash and bailout in 1999 explains his current views on the crash: "Other players...played a part" but "...government policy over many years--particularly the use of the Community Reinvestment Act and Fannie Mae and Freddie Mac to distort the housing credit system-- underlies the current crisis."

AAA?

Gyan — Mon, 24 Nov 2008 06:47:35 -0800

Anatomy of a Meltdown - Ben Bernanke and the financial crisis (in one page)

Liar's Poker was not intended as a how-to manual.

bitmage — Tue, 11 Nov 2008 13:08:07 -0800

The End of the Wall Street Era. “We always asked the same question,” says Eisman. “Where are the rating agencies in all of this? And I’d always get the same reaction. It was a smirk.” He called Standard & Poor’s and asked what would happen to default rates if real estate prices fell. The man at S&P couldn’t say; its model for home prices had no ability to accept a negative number.

The author of Liar's Poker on the collapse of the subprime industry.

Andrew Lahde's goodbye letter

finite — Fri, 17 Oct 2008 15:44:01 -0800

Retiring hedge fund manager Andrew Lahde: "All of this behavior supporting the Aristocracy, only ended up making it easier for me to find people stupid enough to take the other side of my trades. God bless America."

Credit Crunchy Granola Sweet

bystander — Sun, 12 Oct 2008 05:19:21 -0800

How will the financial mess affect you? Will you still have a job? Will your mortgage go up or down? Will your bank account pay more or less? What if you want to buy a house? Or a car? Or have a child? College? Insurance? What if you are dying?What about Religion? And what if you want to get a credit card? First time things get hard? If it is tough, there is always bartering. So, who is winning? On the bright side, there are some signs things are getting better. And the are always bargains. Of course, we can always learn some lessons from last time. At least there is some gallows (sorry - Daily Mail) humour.

Well there goes Reykjavik

blahblah — Tue, 07 Oct 2008 20:29:06 -0800

More subprime collateral damage. Iceland's now getting a $5B bailout from Russia. What does Russia want in return? Access to shipping lanes? The old US base? via

It's the end of the world as we know it... lalala

blahblah — Sat, 16 Aug 2008 23:23:38 -0800

Upclose and personal on the man, Nouriel Roubini, who predicted the subprime crisis. Apparently we're in for a long long haul out of this mess. Oh, and it may be the end of America (reg req'd) as we know it. His blog.

The Giant Pool of Money

empath — Sun, 11 May 2008 22:20:37 -0800

The Giant Pool of Money. This American Life teams up with NPR News to explain the Housing Crisis. (I know everybody here already knows about TAL, but this is an exceptionally well done episode, and worth checking out even if you don't get the podcast.)

The financial turmoil of 2007-?

Kwantsar — Wed, 23 Apr 2008 15:31:00 -0800

The financial turmoil of 2007-?: a preliminary assessment and some policy considerations (pdf) "All episodes of financial distress of a systemic nature, with potentially significant implications for the real economy, arguably have at their root an overextension in risk-taking and in balance sheets in good times, masked by the veneer of a vibrant economy. This overextension generates financial vulnerabilities that are clearly revealed only once the economic environment becomes less benign, in turn contributing to its further deterioration." A scholarly, sane, relatively brief, accessible-to-the-layperson, and mostly apolitical look at the current turmoil.

America's Captains of Industry!

uaudio — Thu, 20 Mar 2008 16:02:50 -0800

As is the custom these days, GMAC Bank is suing mortgage broker HTFC for selling them improperly secured loans. The deposition of HTFC's CEO Aron Wider reads like a Joe Pesci role with 73 creative uses of the f-word over twelve hours of testimony. A federal judge fined Mr. Wider and his attorney $29K for Mr. Wider's constant use of bad language, insults, refusals to answer questions, and his lawyer's failure to control his client.

The Invisible Fist of the Free Market

ryoshu — Mon, 18 Feb 2008 16:32:00 -0800

What market has grown from $900 billion in 2000 to more than $45.5 trillion and is completely unregulated? Welcome to the world of Credit Default Swaps. Speculative derivatives have been described as "financial weapons of mass destruction" by some guy named Warren Buffet. Some people wonder how you can have "$1 trillion in swaps bet on the success or failure of GM when the entire market cap of GM is a mere $15 billion." Credit Default Swaps are being triggered from Northern Rock in the UK to ANZ Bank down under as the "subprime" crisis unravels. AIG's CDS loss portfolio has already climbed to $5 billion from a previsouly estimated $1 billion. Previously on MeFi.

Subprime Artistry

afx114 — Sun, 17 Feb 2008 11:00:14 -0800

The Subprime Primer. [via] An entertaining, lo-fi, comic-book style explanation of the complex Subprime Mortgage mess.

The You Generation

wallstreet1929 — Tue, 29 Jan 2008 12:47:46 -0800

Is foreclosure right for you? Walking, a click away.

Tough times for bond insurers.

clevershark — Wed, 23 Jan 2008 16:17:44 -0800

This is definitely not a good time to be in the bond insurance business. With large-scale insurers Ambac and MBIA -- and with smaller players faring no better -- one could well think that in the end the lending crisis has brought to light considerable flaws at the very basis of the American -- and indeed global -- financial sector. (all links above except the first lead to 6-month stock charts) The past week has been particularly difficult for all players in the bond insurance game, not just in terms of stock but in terms of core business losses. Ambac alone reported quarterly losses of $3.3B, and as past research has shown the subprime lending crisis seems likely to loom over the economy until well into the fall, which presumably means more large losses for bond insurers in the coming quarters. Today however saw good news as New York State insurance regulator Eric Dinallo met with the heads of financial institutions and came up with a bank-funded bailout plan which greatly diminishes the insurers' costs of doing business. Thus in one week two immediate financial crises have been not so much averted as put off for a while. The American consumer, in the short term, will not be able to keep consuming if his access to credit is reduced. And bond insurers will likely continue to see subprime-related losses well into the fall. Will 2008 be the year of bailouts?

Newsfiltered: A Big National Story That's A Lot of Big Local Stories

wendell — Fri, 04 Jan 2008 16:53:02 -0800

Yes, the Subprime Mortgage Crisis was 2007's top national business news story for the second year in a row (and odds on favorite to Threepeat), #2 news story overall (TIME put Pakistan at #1, for AP, it was the Virginia State Massacre). But then I saw that it was the #1 local news story in my town. We know it hit some areas harder than others, like Bend, Oregon, Trenton, New Jersey and Jerusalem?!? If local newspapers notice it more, it may be because it's hurting local newspapers. In Ohio and Michigan, they didn't need the Subprime Loan problems to have a crisis. And it's so bad in Stockton, California, that the BBC took notice. But London is having its own troubles.
But the most interesting local story of all involves tracing the crisis to its source: Orange County, California

quonsar — Sun, 18 Nov 2007 19:01:46 -0800

You have to make sure that St. Joseph is facing your house, if you face it out, the neighbor's house across the street will sell instead. "We buried our little gem under the for sale sign just like we were supposed to do. On October 4th, yes the 4th, just 24 hours after we buried him, we had a showing and after several counter-offers back and fourth, we finally signed a contract on October 19th!!!!! 7 months after the house was sitting and not getting any bites at all and after 1 day, its sold!!! I have complete and utter faith." America's desperate homesellers and realtors are turning to St. Joseph, Your Underground Real Estate Agent.

Cui bono?

Pastabagel — Thu, 20 Sep 2007 09:41:30 -0800

On Tuesday, the Federal Reserve cut interest rates by 0.5%. Wall Street aggressively demanded the cut to stop the sub-prime mortgage contagion from triggering a credit crisis among large US and foreign investment banks and the collapse of their over-leveraged hedge funds, which ultimately threatened to drag the US economy into recession. The market rallied this week in response to the Fed's move. But there is no free lunch. Oil rallied also, to an all-time high of $81/bbl. The rate cut shattered the dollar, sending it to new lows against the Euro and to parity with the Canadian dollar. The falling dollar puts pressure on China, whose dollar-pegged currency has attracted the ire of many US politicians, causing China to threaten the US with the "nuclear option" of diversifying its foreign currency reserves away from the dollar. Meanwhile, Saudi Arabia refuses to cut its interest rates in lockstep with the US for the first time ever, signaling that it may break its long standing dollar peg as well. In other words, foreign investors who currently own roughly 50% of the publicly-owned portion of the US national debt may flee the US bond markets. Result? We'll probably slide into recession anyway. But there is a silver lining: it turns out that many of those large investment banks and hedge funds were making far more money than anyone thought all along. Confused? Some background: Currency carry trade - how currencies are related to one another How interest rates, inflation, exchange rates, and trade deficits are interrelated How interest rates and bonds are related Peviously 1 2 3 4

A severe case of the runs

pharm — Mon, 17 Sep 2007 12:21:48 -0800

A run on the bank: Ever since the Bank of England announced that they were offering Northern Rock an emergency line of credit, people have been queueing to withdraw to withdraw their money in the first bank run in the UK for decades. The government has been forced to announce that it will guarantee the deposits of Northern Rock customers, in the hope that this will stem the crisis. Unfortunately, rumours about other UK banks being in similar difficulties are already causing their share prices to fall precipitously. Given that this is only day one of Crunch week, things could get even worse!

This is what happens when you lend money to poor people.

GrammarMoses — Sat, 08 Sep 2007 06:22:31 -0800

"I had no idea how my open-handedness could be made to look, after the fact. At the time I bought the subprime portfolio I thought: This is sort of like my way of giving something back. I didn't expect a profile in Philanthropy Today or anything like that. I mean, I bought at a discount. But I thought people would admire the Wall Street big shot who found a way to help the little guy. Sort of like a money doctor helping a sick person. Then the little guy wheels around and gives me this financial enema. And I'm the one who gets crap in the papers!" -- Michael Lewis on the subprime meltdown

Minsky Meltdown ahead?

umop-apisdn — Wed, 29 Aug 2007 08:56:28 -0800

Minsky Meltdown ahead? Named after Hyman Minsky, an economist who was known for his research concerning financial crises, specifically asset bubbles based on credit cycles. [much more inside]

Subprime contagion

wallstreet1929 — Sat, 11 Aug 2007 22:24:34 -0800

This isn't 1998. There's no model for what's happening now in the housing and mortgage industries. 116 mortgage lenders have imploded since 2006. 11 hedge funds have imploded in just the last couple months. Time to warm up the helicopters?

A world of Casey Serins

Asparagirl — Wed, 11 Jul 2007 17:13:46 -0800

What's the link between:
1) the quickly-growing number of American homeowners becoming unable to pay their mortgages after their ARM's reset (a trend nicknamed "ARMageddon" -- applicable in the UK too), which is translating into soaring foreclosure rates, and in turn forcing at least 60 US semi-shady mortgage brokers to go belly-up in the past year (i.e. the "subprime meltdown"), and...
2) the recent implosion and impending financial bailout -- which may become the biggest since the Long Term Capital Management fiasco of 1998 -- of two Bear Stearns hedge funds which dealt in mortgage securities? [more inside]