Asset Backed Commercial Paper Market Crash Continues
Last week, the market for asset-backed commercial paper, IOUs secured by home and consumer loans,
shrank $6.2 billion to $796 billion, according to the Federal Reserve.
This week, the market shrank the most in eight weeks as U.S. asset-backed commercial paper
fell $11.7 billion, or 1.5%, to a seasonally adjusted $784.3 billion for the week ended Feb. 20.
The market slumped for a fourth straight week as Standard Chartered's Whistlejacket Capital Ltd. was poised to default
and two conduits of Kohlberg Kravis Roberts & Co. delayed repaying asset-backed commercial paper.
Dresdner Bank AG, Germany's third-largest bank, agreed to rescue its $18.8 billion K2 structured investment vehicle.
The ABCP asset backed commercial paper market is shrinking after snapping a five-month slump in early January.
The increases in asset-backed paper last month followed a 37% crash over 20 straight weeks from a $1.2 trillion peak.
Losses from subprime mortgages led investors to shun all but the safest debt.
SIVs, which sold record amounts of the debt through last June, were suddenly unable to issue commercial paper...
trapping the financial institutions which issued the debt in a death spiral of short term debt musical chairs and book keeping chicanery.
As a result, the muni auction bond market is now in collapse,
skyrocketing borrowing costs from 5% to 15% for a wide range of city, county and state municipalities.
Read our muni market debacle comments here, here and here. Your taxes will be going up...
With future ratings downgrades and write downs imminent, along with guarantor bankruptcy (due to lack of business and insufficient assets to pay claims)...
it is estimated that the global financial community (which is already technically financially insolvent)...
(Yes, the reserves on hand are mostly borrowed from the central banks, with dubious and worthless collateral no less...)
still has $1 to $2 Trillion in SIV's declining in value and "unmarked" to market, and still needing to be marked and put on the books.
So, the House of Finance will have to raise 10% to 25% ($200 to $500 billion) of its existing capital base ($2 Trillion)
to stay "afloat" according to BASEL bank reserve limits.
With declining earnings and increased risk premiums, how will they
pull this rabbit out of their collective asses to keep their central bank sponsored ponzi scheme going?
Are those printing presses and helicopters I hear? Or perhaps a suspension of the BASEL requirements? Or is that the odor of wholesale book cooking?
Hattip to Bloomberg.
shrank $6.2 billion to $796 billion, according to the Federal Reserve.
This week, the market shrank the most in eight weeks as U.S. asset-backed commercial paper
fell $11.7 billion, or 1.5%, to a seasonally adjusted $784.3 billion for the week ended Feb. 20.
The market slumped for a fourth straight week as Standard Chartered's Whistlejacket Capital Ltd. was poised to default
and two conduits of Kohlberg Kravis Roberts & Co. delayed repaying asset-backed commercial paper.
Dresdner Bank AG, Germany's third-largest bank, agreed to rescue its $18.8 billion K2 structured investment vehicle.
The ABCP asset backed commercial paper market is shrinking after snapping a five-month slump in early January.
The increases in asset-backed paper last month followed a 37% crash over 20 straight weeks from a $1.2 trillion peak.
Losses from subprime mortgages led investors to shun all but the safest debt.
SIVs, which sold record amounts of the debt through last June, were suddenly unable to issue commercial paper...
trapping the financial institutions which issued the debt in a death spiral of short term debt musical chairs and book keeping chicanery.
As a result, the muni auction bond market is now in collapse,
skyrocketing borrowing costs from 5% to 15% for a wide range of city, county and state municipalities.
Read our muni market debacle comments here, here and here. Your taxes will be going up...
With future ratings downgrades and write downs imminent, along with guarantor bankruptcy (due to lack of business and insufficient assets to pay claims)...
it is estimated that the global financial community (which is already technically financially insolvent)...
(Yes, the reserves on hand are mostly borrowed from the central banks, with dubious and worthless collateral no less...)
still has $1 to $2 Trillion in SIV's declining in value and "unmarked" to market, and still needing to be marked and put on the books.
So, the House of Finance will have to raise 10% to 25% ($200 to $500 billion) of its existing capital base ($2 Trillion)
to stay "afloat" according to BASEL bank reserve limits.
With declining earnings and increased risk premiums, how will they
pull this rabbit out of their collective asses to keep their central bank sponsored ponzi scheme going?
Are those printing presses and helicopters I hear? Or perhaps a suspension of the BASEL requirements? Or is that the odor of wholesale book cooking?
Hattip to Bloomberg.
Comments