http://market-ticker.denninger.net/Well well well.
From my 2009 Prediction Ticker:
Mortgages are not done. The story last year was "Subprime." This year's will be "ALT-A", "Option ARMs" and so-called "Prime". The Fed and Treasury know this, which is why they are playing games with "agency" debt in a desperate attempt to clear this market before the ticking nuclear devices go off. The amount of debt involved in these "bad deals" is vastly higher than that in the "subprime" space and if they fail to contain it (a near certainty) Round #2 of severe bank instability gets served up on us in the second half of 2009.
No really?
Guess what the WSJ said this weekend?
NEW YORK (Dow Jones)--For the third straight month, option adjustable-rate mortgages are generating proportionally more delinquencies and foreclosures than subprime mortgages, the scourge of the housing crisis.
A further acceleration of troubles among the loans could mean higher-than-expected losses for Wells Fargo & Co. (WFC) and JPMorgan Chase & Co. (JPM), as well as the Federal Deposit Insurance Corp.'s own insurance fund.
Yep. Bank-o-rama is not over. And by the way, this is what I said to Dick Bove on this subject well over a year ago:
Also note that we STILL haven't gotten entirely back to sound lending principles, which are 20% down payments, 36% DTI and a 30 year fixed mortgage. Until we do and prices adjust at that level we are not at a housing bottom.
There is much more, of course, if you care to review that article. Its actually pretty good.
Then there's this ditty that I wrote before (shortly before) WaMu blew up:
The Truth is that OTS should have demanded that these clowns eliminate the dividend back in April of 2007 and disgorge this paper, no matter the mark. I wrote about it back then and said they were toast, and now, with the stock trading at just over $2, it looks like their day is coming.
.....
Anyone who didn't recognize in April of 2007 that these OptionARM loans in California were underwater then and would only go FURTHER underwater, and as such this "capitalized interest" would never be paid, is absolutely unqualified to run a frapping lemonade stand, say much less a Federal Regulatory Agency.
Of course our fine government apparatus, instead of shutting these clowns down, played "shotgun marriage" with both them and Wachovia - exactly what it did with Fannie, Freddie and AIG. As such all that happened is that the ticking bomb got moved somewhere else instead of being put out in the desert where it wouldn't hurt "innocent bystanders" - oh no, instead, let's put it in the middle of a big city so that we can then shower taxpayer money on it in an attempt to keep it from blowing sky high!
That obviously didn't work as you can now see, and we're not talking small potatoes either.
Wells "acquired" $115 billion of these things when they "bought" Wachovia. They claim they're worth $93 billion. Oh really? A bunch of loans that were mostly at or near 100% Loan-to-value (that is, near zero equity) when originally written, in markets where prices have declined by half? Oh, and in May, the firm said that 51% of the balances out were being paid only on the minimum - that is, they are still negatively-amortizing even as house prices fall! Talk about double-screwed!
JP Morgan, for its part, has nearly $90 billion in exposure through both its "acquisition" of WaMu and a pretty set of off-balance sheet "vehicles" (which of course are being shielded from having to be accounted for, and who knows how well those are performing!)
