Comments on: Should the Fed have a dual mandate? http://www.creditwritedowns.com/2008/11/should-fed-have-dual-mandate.html Finance, Economics and Markets Fri, 10 Feb 2012 00:37:00 +0000 hourly 1 By: Edward Harrison http://www.creditwritedowns.com/2008/11/should-fed-have-dual-mandate.html#comment-569 Edward Harrison Wed, 05 Nov 2008 20:51:00 +0000 http://www.creditwritedowns.com/2008/11/should-the-fed-have-a-dual-mandate.html#comment-569 Nike,<br/><br/>Thanks for signing up. You ask some questions we are all asking. If you look at the <a HREF="http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aSlW.imTKzY8" REL="nofollow">Bloomberg figures</a> on writedowns, you see about $590 billion as of a month ago. Interestingly, Bloomberg has now taken to calling these writedowns "credit crisis" related instead of subprime as they have upped the total to nearly $700 billion in writedowns.<br/><br/>Up until about a month ago, 90% of the writedowns were subprime U.S. related I would say. Starting with Lehman Brothers' earnings call in September we started to see more Alt-A stuff coming on line. But, most of this stuff has not been written down.<br/><br/>The figures have been concentrated in money center banks because of FAS 157 and marking to market but a lot of local and regional have hidden losses on their balance sheets.<br/><br/>Going forward, I see a lot more losses coming from the Option ARM and ALT-A segment of things as the losses move to more prime categories in the US. I also see credit cards becoming a problem because they have been securtized and again FAS 157 will be a problem.<br/><br/>Eventually, the Feds will suspend or amend FAS 157 because the problem will get a lot larger. When you talk about pension funds and the like, none of these losses are surfacing in the mainstream news. These are not included in the figures I am referencing.<br/><br/>I think the severity of the problem is larger than many people realize because there are all sorts of interdependecies in markets that create a downward spiral (like bonds being downgraded to junk and being dumped by mutual funds).<br/><br/>For now, we seem to be in semi-rally mode. Some catalyst will cause people to realize that the workout phase here will take a while. Nike,

Thanks for signing up. You ask some questions we are all asking. If you look at the Bloomberg figures on writedowns, you see about $590 billion as of a month ago. Interestingly, Bloomberg has now taken to calling these writedowns “credit crisis” related instead of subprime as they have upped the total to nearly $700 billion in writedowns.

Up until about a month ago, 90% of the writedowns were subprime U.S. related I would say. Starting with Lehman Brothers’ earnings call in September we started to see more Alt-A stuff coming on line. But, most of this stuff has not been written down.

The figures have been concentrated in money center banks because of FAS 157 and marking to market but a lot of local and regional have hidden losses on their balance sheets.

Going forward, I see a lot more losses coming from the Option ARM and ALT-A segment of things as the losses move to more prime categories in the US. I also see credit cards becoming a problem because they have been securtized and again FAS 157 will be a problem.

Eventually, the Feds will suspend or amend FAS 157 because the problem will get a lot larger. When you talk about pension funds and the like, none of these losses are surfacing in the mainstream news. These are not included in the figures I am referencing.

I think the severity of the problem is larger than many people realize because there are all sorts of interdependecies in markets that create a downward spiral (like bonds being downgraded to junk and being dumped by mutual funds).

For now, we seem to be in semi-rally mode. Some catalyst will cause people to realize that the workout phase here will take a while.

]]> By: Anonymous http://www.creditwritedowns.com/2008/11/should-fed-have-dual-mandate.html#comment-567 Anonymous Wed, 05 Nov 2008 20:35:00 +0000 http://www.creditwritedowns.com/2008/11/should-the-fed-have-a-dual-mandate.html#comment-567 Ed, I just signed up. This is a great site for getting real details about how far we have come to date with announced bank loss data.<br/><br/>Question. Do you have a sense of how far we still have to go with more US banking write downs. I saw the subprime totals, but aren't the ALT-A, option ARM, prime ARM outstanding mortgage totals much larger than sub-prime? Are these losses even being recognized yet, when resets are just beginning?<br/><br/>I assume when you look at the losses spread through the banking, investment, insurance,pension systems, unrealized and yet to be marked to market losses have to be in the trillions; do you agree?<br/><br/>Thanks Mike Ed, I just signed up. This is a great site for getting real details about how far we have come to date with announced bank loss data.

Question. Do you have a sense of how far we still have to go with more US banking write downs. I saw the subprime totals, but aren’t the ALT-A, option ARM, prime ARM outstanding mortgage totals much larger than sub-prime? Are these losses even being recognized yet, when resets are just beginning?

I assume when you look at the losses spread through the banking, investment, insurance,pension systems, unrealized and yet to be marked to market losses have to be in the trillions; do you agree?

Thanks Mike

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