Money Market Fund Bailout & Swallowing Horsepills
Money Market Mutual Fund Bailout... Something we've nattered about previously...
Commercial Money Market Mutual Funds with total assets of $300 billion have invested in securities related to mortgages.
Bank of America, Legg Mason and at least two other companies are propping up their money market funds...
to cushion them against possible losses on debt issued by SIV structured investment vehicles.
Whats is your local government's fund? ... Florida rules, much like other public entities and private insurance companies...
require that investments only be top rated, liquid securities, so taxpayer or investor funds aren't placed at risk.
However, state investment pools like Florida's are exempt from the SEC's rules and reporting requirements for money market mutual funds.
The Florida State Board of Administration manages about $50 billion of short term investments for the state, school districts and local governments.
$2.2 billion or 4% of that debt has recently been downgraded to junk, or below investment grade.
Some $3.6 billion, or 7.3%, of additional securities may be downgraded by credit rating companies.
Below investment grade, or junk, debt is rated lower than Baa3 by Moody's Investors Service and below BBB- by S&P and Fitch.
Fitch Ratings said King County in Washington State, may have its rating lowered on $1.5 billion of bonds, because of debt investments plagued by rising defaults on U.S. home mortgages.
A Connecticut fund that invests cash for more than 300 state agencies and municipalities was holding $100 million of defaulted debt sold by a SIV structured investment vehicle.
Setting up a run on the bank?... nearly 1,000 school districts, cities and counties have invested in the Florida state fund...
Having been informed of its downgraded debt, they may be tempted to pull money out. After all, most of the money is invested for public employee pension plans.
Unlike B of A, Florida and other states may not be in a position to bail out their funds,
given how the construction slowdown is affecting revenue and in the case of Florida, it has no income tax.
Swallowing a Household Horse Pill... HSBC, Europe's biggest bank by market value, paid $15.5 billion for Household International in 2003.
HSBC reported U.S. mortgage losses as early as 2006. It took $10.6 billion in loan losses last year, pulling down 2006 net income to $15.8 billion.
Today, the bank set aside $3.4 billion in the quarter to cover U.S. defaults, $1.4 billion more than it forecast in July.
Bad loans at the U.S. unit represented about 60% of default provisions.
HSBC posted $925 million in Q3 writedowns on credit related trades including securities backed by U.S. subprime mortgages...
and also has $2 billion in subprime residential mortgages still to be securitized.
HSBC Finance the bank's subprime consumer banking unit, posted a Q3 loss of $1.3 billion...
more than double the estimated $492 million loss and vs $878 million of pretax profit last year. Q3 bad debts more than doubled to $3.2 billion from $1.38 billion.
Simon Willis, an analyst at NCB Group: "The U.S. is pretty grim and losses are going to remain high for some time." Hattip to Bloomberg.
Commercial Money Market Mutual Funds with total assets of $300 billion have invested in securities related to mortgages.
Bank of America, Legg Mason and at least two other companies are propping up their money market funds...
to cushion them against possible losses on debt issued by SIV structured investment vehicles.
Whats is your local government's fund? ... Florida rules, much like other public entities and private insurance companies...
require that investments only be top rated, liquid securities, so taxpayer or investor funds aren't placed at risk.
However, state investment pools like Florida's are exempt from the SEC's rules and reporting requirements for money market mutual funds.
The Florida State Board of Administration manages about $50 billion of short term investments for the state, school districts and local governments.
$2.2 billion or 4% of that debt has recently been downgraded to junk, or below investment grade.
Some $3.6 billion, or 7.3%, of additional securities may be downgraded by credit rating companies.
Below investment grade, or junk, debt is rated lower than Baa3 by Moody's Investors Service and below BBB- by S&P and Fitch.
Fitch Ratings said King County in Washington State, may have its rating lowered on $1.5 billion of bonds, because of debt investments plagued by rising defaults on U.S. home mortgages.
A Connecticut fund that invests cash for more than 300 state agencies and municipalities was holding $100 million of defaulted debt sold by a SIV structured investment vehicle.
Setting up a run on the bank?... nearly 1,000 school districts, cities and counties have invested in the Florida state fund...
Having been informed of its downgraded debt, they may be tempted to pull money out. After all, most of the money is invested for public employee pension plans.
Unlike B of A, Florida and other states may not be in a position to bail out their funds,
given how the construction slowdown is affecting revenue and in the case of Florida, it has no income tax.
Swallowing a Household Horse Pill... HSBC, Europe's biggest bank by market value, paid $15.5 billion for Household International in 2003.
HSBC reported U.S. mortgage losses as early as 2006. It took $10.6 billion in loan losses last year, pulling down 2006 net income to $15.8 billion.
Today, the bank set aside $3.4 billion in the quarter to cover U.S. defaults, $1.4 billion more than it forecast in July.
Bad loans at the U.S. unit represented about 60% of default provisions.
HSBC posted $925 million in Q3 writedowns on credit related trades including securities backed by U.S. subprime mortgages...
and also has $2 billion in subprime residential mortgages still to be securitized.
HSBC Finance the bank's subprime consumer banking unit, posted a Q3 loss of $1.3 billion...
more than double the estimated $492 million loss and vs $878 million of pretax profit last year. Q3 bad debts more than doubled to $3.2 billion from $1.38 billion.
Simon Willis, an analyst at NCB Group: "The U.S. is pretty grim and losses are going to remain high for some time." Hattip to Bloomberg.
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