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My Commentary: The lead story today is about UBS and it.s $5.1 billion in writedowns and what this means for the financial system going forward. When one combines the downbeat assessment by UBS management regarding Q3 and Q4 with the Housing Wire story on Alt-A in the US, it says more losses are to [...]

A credit writedown is a reduction in the value of an asset as it is carried on a company’s balance sheet. As these losses must also be reflected on the income statement, credit writedowns result in massive losses.

This chart from the New York Times demonstrates visually what happens when the Fed lowers interest rates too much: it skews simple economic decisions like what type of mortgage product to use, often with unintended consequences.

Similarly low rates on adjustable rate mortgages enticed buyers into the housing bubble.

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After the credit and housing bubble created by Greenspan’s Fed caused people to turn away from fixed rate mortgages, a return to sanity has heralded its return to prominence. A full 70% of mortgages taken out in the first half of 2008 were fixed rate versus merely 53% a year ago.
The return of [...]

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Hank Paulson, the U.S. Treasury Secretary has decided that the German Covered Bond is a solution to many of the woes of the U.S. housing market meltdown. He is backed by four large U.S. banks: Bank of America, Citigroup, JP Morgan Chase & Co., and Wells Fargo. In addressing covered bonds, Bloomberg quotes Paulson.

“Covered [...]

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Ron Paul sounds off on the housing bill that was just passed. This bill has more problems associated with it than any bill we have seen enacted to counteract the economic downturn. The moral hazard, the lack of congressional oversight, and the lack of transparency are all breathtaking. Congress has abdicated its responsibility [...]

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Consumer credit quality is weakening across the US, especially in the former housing boom states. While over $450 billion in credit writedowns have already been taken by the global financial sector, most of these losses ave been concentrated in the sub-prime area. This looks set to change.
Not surprisingly, it’s the former boom states [...]

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“Prime looks terrible.” Those are the words of Jaime Dimon, CEO of JP Morgan Chase regarding the future of prime mortgage loans. Wall Street analysts were ecstatic at the largely positive news in JP Morgan’s earnings report even though earnings were down by more than half compared to a year ago. Yet, Dimon [...]

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Back in June, I wrote about financial investors in bank shares having lost $10 billion. Then, I predicted that losses would mount and bank shares will fall. It seems that one part of that equation is true already as bank shares have fallen precipitously in the last several days on the heels of [...]

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Martinsa-Fadesa, a large real estate company in Spain has gone to the wall. As is usual, bankruptcy came in the form of a liquidity crisis, not as a technical bankruptcy. Below is a report from El País in Spain, followed by a report from Bloomberg from before the company filed for protection from its creditors.
This [...]