Caveat Emptor Part II
Refer to, CAVEAT EMPTOR for a primer on FASB #157 reporting of subjective Level 3 income.
And please refer to Can't Fix Stupid for a primer on Enron like accounting conduits.
FASB 157 aside, many corporations, much like Enron did, hold structured credit assets in a special accounting entity called a conduit to hide large losses on their books.
Now we have full fledged financial entities called SIV's which are structured much like a conduit, getting hit with debt rating downgrade's...
SIVs (structured investment vehicles) aim to make money by borrowing in the commercial paper markets and investing in longer dated bonds, usually asset backed securities.
Solent Capital Partners LLP and Avendis Group, two European mortgage backed securities funds, had their credit ratings slashed to junk from AAA by S&P after investors denied them short term financing.
Golden Key's commercial paper rating was cut to B, one step below investment grade, from the highest level of A-1+.
Ratings on parts of Mainsail II fell by 16 steps to CCC+ from the highest grade, and its commercial paper rating dropped three steps to A- 3, the lowest short term investment grade ranking.
S&P downgraded $3.2 billion of debt issued by the two funds and said their ratings may be cut further.
Ratings on similar funds operated by London-based Cairn Capital Ltd. and Sachsen LB Europe, may also be cut, S&P said.
Already tapped out? The four largest U.S. banks JPMorgan Chase; BofA; Wachovia and Citigroup each tapped $500 million from the Federal Reserve's discount window to fund clients.
Discus Throw? Capital Fund Management, a hedge-fund manager, said its Discus Master Fund could lose as much as 27% of its assets, or $407 million, after the bankruptcy of cash management firm Sentinel Management Group.
Running low? FDIC's Chairman said that the subprime mortgage market remains a "major concern" and that delinquent loans and leases grew for the 5th straight quarter.
Largest quarterly increase since 1990... U.S. banks and thrifts suffered the biggest increase in late loan payments in 17 years as loans more than 90 days past due rose 10.6% to $66.9 billion.
YOY Loans more than 90 days past due grew 36.2% from $49.1 billion in Q2 a year ago, the largest 12 month increase since 1991.
Residential mortgage loans 90 days delinquent increased 12.6%to $27.5 billion in Q2 from $24.4 billion in Q1.
Lenders write off for bad loans grew 51.2% to $9.16 billion in Q2.
Insured banks and thrifts reported $36.7 billion in net income for the quarter, a decline of 3.4% from $38 billion a year ago.
Lenders set aside $11.4 billion for potential loan losses in Q2, up 75% from a year earlier.
What will they do if $550 Billion of maturing ABCP doesn't sell in the next 90 to 120 days? And what of the $400 Billion already trapped in the pipeline?
Making $1 Trillion in ABCP on the books or being sold at discount? Which will cause failures.
And what will the FDIC; insurer of $11 Trillion+ in thrift, loan & banking assets do as the failures mount?
And please refer to Can't Fix Stupid for a primer on Enron like accounting conduits.
FASB 157 aside, many corporations, much like Enron did, hold structured credit assets in a special accounting entity called a conduit to hide large losses on their books.
Now we have full fledged financial entities called SIV's which are structured much like a conduit, getting hit with debt rating downgrade's...
SIVs (structured investment vehicles) aim to make money by borrowing in the commercial paper markets and investing in longer dated bonds, usually asset backed securities.
Solent Capital Partners LLP and Avendis Group, two European mortgage backed securities funds, had their credit ratings slashed to junk from AAA by S&P after investors denied them short term financing.
Golden Key's commercial paper rating was cut to B, one step below investment grade, from the highest level of A-1+.
Ratings on parts of Mainsail II fell by 16 steps to CCC+ from the highest grade, and its commercial paper rating dropped three steps to A- 3, the lowest short term investment grade ranking.
S&P downgraded $3.2 billion of debt issued by the two funds and said their ratings may be cut further.
Ratings on similar funds operated by London-based Cairn Capital Ltd. and Sachsen LB Europe, may also be cut, S&P said.
Already tapped out? The four largest U.S. banks JPMorgan Chase; BofA; Wachovia and Citigroup each tapped $500 million from the Federal Reserve's discount window to fund clients.
Discus Throw? Capital Fund Management, a hedge-fund manager, said its Discus Master Fund could lose as much as 27% of its assets, or $407 million, after the bankruptcy of cash management firm Sentinel Management Group.
Running low? FDIC's Chairman said that the subprime mortgage market remains a "major concern" and that delinquent loans and leases grew for the 5th straight quarter.
Largest quarterly increase since 1990... U.S. banks and thrifts suffered the biggest increase in late loan payments in 17 years as loans more than 90 days past due rose 10.6% to $66.9 billion.
YOY Loans more than 90 days past due grew 36.2% from $49.1 billion in Q2 a year ago, the largest 12 month increase since 1991.
Residential mortgage loans 90 days delinquent increased 12.6%to $27.5 billion in Q2 from $24.4 billion in Q1.
Lenders write off for bad loans grew 51.2% to $9.16 billion in Q2.
Insured banks and thrifts reported $36.7 billion in net income for the quarter, a decline of 3.4% from $38 billion a year ago.
Lenders set aside $11.4 billion for potential loan losses in Q2, up 75% from a year earlier.
What will they do if $550 Billion of maturing ABCP doesn't sell in the next 90 to 120 days? And what of the $400 Billion already trapped in the pipeline?
Making $1 Trillion in ABCP on the books or being sold at discount? Which will cause failures.
And what will the FDIC; insurer of $11 Trillion+ in thrift, loan & banking assets do as the failures mount?
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