Godlike Productions - Conspiracy Forum
Users Online Now: 2,325 (Who's On?)Visitors Today: 1,286,790
Pageviews Today: 1,924,050Threads Today: 528Posts Today: 9,667
06:03 PM


Rate this Thread

Absolute BS Crap Reasonable Nice Amazing
 

We are clearly in the beginning phase of a classic credit crunch

 
Maui Boor
User ID: 277442
United Kingdom
08/08/2007 04:37 AM
Report Abusive Post
Report Copyright Violation
We are clearly in the beginning phase of a classic credit crunch
The German bank IKB has been the recipient of an $11 billion bailout. $64 billion of leveraged buyout financings have been withdrawn in the last month. Standard and Poors have talked of down-rating Bear Stearns, two of whose funds have collapsed. We are clearly in the beginning phase of a classic credit crunch, and it’s therefore worth looking at how these have played out in the past, and where and how holes in the fabric of the world’s financial system are most likely to appear.



Credit crunches are relatively rare, rarer than stock market downturns. There was no credit crunch in 2000-02, though the stock market downturn was substantial. In 1989-92 there was a mild credit crunch in junk bonds and New England real estate, but relatively little spillover to other areas of the credit market. In 1982, there was a credit crunch in emerging market debt, which was eventually solved by a mass debt forgiveness and bailout of the New York banks which were most heavily exposed. Even during that period, there was no great credit crunch in the domestic U.S. market.



The last true credit crunch was thus that of 1973-74, which was particularly severe in Britain but spread throughout the international debt markets. That’s before the working lifetime of most market participants today. Sam Molinaro, chief financial officer of Bear Stearns said Friday that conditions in the fixed income market were “as bad as I have seen in 22 years” – since he is 49 he was presumably referring to his period of participation in the market rather than some hitherto obscure crisis in 1985, from memory a placid and bullish year. One can pause for a moment to mourn the length of institutional memory of 1950s London, where Morgan Grenfell’s chairman Lord Bicester served until his death in office at 89, thus being able to give his junior colleagues a first hand account not only of the 1929 crash but of its predecessors in 1890 and 1907.



It’s worth looking at how the credit crunch of 1973-4 developed.



Like the last few years, the early 1970s was a period in both Britain and the United States of rapidly rising money supply and asset prices, but with stocks still mostly below the level of a record-setting bull market a few years earlier. In the U.S., Federal Reserve Chairman Arthur Burns inflated the money supply by over 10% per annum during the years 1971-73, in order to lift the United States from recession and allegedly assist President Richard Nixon’s 1972 re-election.



In Britain, the Bank of England in 1971 ended quantitative credit controls and moved to a free market system, while prime minister Edward Heath abandoned control of both the money supply and public expenditure and embarked on a “dash for growth.” This quickly produced a real estate bubble, both in housing but particularly in office property, the supply of which was still somewhat restricted by the aftermath of World War II and the lengthy period of building restrictions that followed. Since the period was one of worldwide economic boom, commodity prices also soared, in many cases reaching levels they were not to touch again until after 2000; the first oil crisis, in which oil prices rose from $2 to $10 a barrel, occurred in October 1973.



The main difference between 1973 and now was inflation, which ran in the US at 6.2% and in Britain at 9.2% in that year. That reflected the worldwide increase in commodity prices, which was not offset by worldwide deflation through outsourcing. Interest rates in nominal terms were correspondingly higher than today and Britain in particular was running a tighter monetary policy, with Minimum Lending Rate rising from 11.5% to 13% as the crisis began in October 1973. However longer term rates were around zero in real terms, as today.



The credit crunch appeared through the London secondary banks, fairly similar institutions to today’s sub-prime mortgage lenders, albeit with their portfolios concentrated on commercial rather than residential loans. Rumblings appeared from this sector in the spring of 1973, and international bond market conditions became very difficult after June, but it was not until November 30 that the first secondary bank, London and County Securities, went into insolvency. However the cascade of bankruptcies that followed was rapid and very severe. By December 19 the Bank of England was organizing a “lifeboat” support package to preserve liquidity in the market and allow orderly liquidation of the fringe banks’ portfolios. At its peak the “lifeboat” had loans outstanding to no fewer than 30 banks, and there was fear at one stage that the gigantic National Westminster Bank would go under.



The British economy had two dreadful years in 1974 and 1975, with a miners’ strike, a 3-day workweek and a hard-left Labour government. The Financial Times share index dropped from its 1969 and 1972 peaks of over 500, and around 400 in late 1973 to a low of 150, a drop of 70% in nominal terms and a lower level in real terms than its nadir of 40.4 after the 1940 evacuation of Dunkirk. The credit crunch persisted until the end of 1975, lasting for around 2½ years in all, and bankrupted most of the entrepreneurial financial institutions in the City of London, including notably Jessel Securities, a major fund manager, and Slater Walker, which until 1973 had been the pre-eminent financial innovator of its day.



Internationally, the British secondary banking crisis had initially only a moderate effect. The Eurobond market closed almost completely in December 1973, one of its last issues being the only Euro-financing ever done in Lebanese pounds – by the time the market reopened for such exotica in 1977 or so, Lebanon was engulfed in civil war. The syndicated loan market however remained open during the first quarter of 1974, since loans by this stage were made on a floating interest rate basis based on the London Interbank Offered Rate (LIBOR) -- thus higher inflation did not automatically destroy their value. There was indeed a large amount of both supply and demand in the banking system, since the oil exporting countries of the Middle East for the first time built up multi-billion dollar balances, mostly held in US and British banks, while countries such as Japan found themselves with a huge oil-related hole in the balance of payments and a consequent need to borrow heavily.



The next leg of the 1973-74 credit crunch came with the bankruptcy of the medium sized German bank I.D. Herstatt, which took place on June 26, 1974. This would normally have caused only a modest ripple internationally, but the foolish German authorities closed the bank in mid-afternoon, while New York was still trading. A number of banks, including my own employers the merchant bank Hill Samuel, had entered into spot foreign exchange transactions, and had paid deutschemarks into Herstatt, expecting to receive dollars from Chase Manhattan, Herstatt’s New York correspondent. The dollars were never paid. This proved to be utterly destructive of international banking confidence; a period of illiquidity followed which was similar only to that after the Creditanstalt failure of 1931. Japanese trust banks, a highly solid and well behaved bunch, were forced to borrow at 2% above LIBOR for around a year, making their funding cost 2% higher than the best U.S. and European banks. The U.S. banking system also got into difficulties, with the Franklin National Bank, a major institution which had invented the bank credit card in 1952, being declared insolvent on October 8, 1974.



The U.S. and British economies went into recession in late 1973, dragged down by the combined effect of the credit crunch and the oil price spike, but the recession was fairly short-lived, ending in late 1974. Politicians were throughout unaware of the true position, as evidenced by the Gerald Ford administration’s switch from distributing “Whip Inflation Now” buttons to proposing a recession-fighting public spending package within the space of six weeks in late 1974, after the economy had already been in recession for a year. Indeed, the final major effects of the credit crunch, the bankruptcy of Slater Walker and the near-bankruptcy of New York City, did not occur until the autumn of 1975, while Cleveland’s default did not occur until 1978.



There are a number of lessons we can learn from this history about the credit crunch we appear to be entering:



· Credit crunches very often occur after periods of excessive monetary expansion which appear to produce halcyon economic conditions of rapid worldwide growth, albeit with rising commodity prices. Check!



· “Foreshocks” occur for some considerable period before the credit crunch, generally concentrated in areas where lending has been most vigorous. In the Latin American credit crunch of 1981-2, the market more or less closed for new lending at the end of 1981, but default did not occur until August 1982. Check – the sub-prime mortgage market went into severe difficulties in February.



· Once a credit crunch hits, it inevitably spreads to other areas where lending has been aggressive, although it may take some months to do so. The international bond markets closed around the same time as the 1973 secondary banking crisis, but the loan markets did not close until several months later. The current crunch appears now to have spread to the LBO market; the emerging market debt market surely cannot be far behind.



· The principal effect of a credit crunch is to dry up lending in general. Bank balance sheets and bond investors’ portfolios become constipated, with no room for new deals and an urgent need for repayment of outstanding loans and cancellation of commitments. In 1974, it became very difficult to get a “backstop” credit line for commercial paper issues, so even though the commercial paper market remained open (there being no real equivalent of the Penn Central collapse of 4 years earlier) issuance became impossible for all but the most liquid companies.



Sub-prime mortgages didn’t cause this to happen this time around, because they had mostly been packaged and sold to outsiders such as the unfortunate IKB. However the drying up of the LBO market is causing illiquidity at the heart of the system. In just a few weeks, the major LBO market lenders have provided transaction bridge financing (short term lending) totaling around $12 billion for the Chrysler LBO, $20 billion for Boots and $35 billion for Texas Utilities, to name only 3 deals. Long term takeout financing for all three transactions appears now to be unobtainable; hence major bank and investment bank balance sheets have suddenly become highly illiquid and concentrated in a few unattractive credit risks.


Assets become almost impossible to sell during a credit crunch, and trading books become ossified, with remnants of deals attempted years earlier remaining on them and clogging up liquidity. Bargain-hunters attempt to pick up equity and loan assets involved in the crunch at prices far below those of a year earlier, but the “bargains” are chimerical; most such assets end in bankruptcy as confidence never returns.

Credit crunches don’t typically end quickly; their effects drag on for at least a couple of years. During that period, credit is very difficult to obtain and even well-run solvent companies can find themselves in sudden difficulties. It is impossible to predict which companies will be forced to declare bankruptcy, but major bankruptcies there will undoubtedly be. One difference from the 1970s is the increased importance of trial lawyers and aggressiveness of prosecutors; if 2001-05 is anything to go by, bankruptcies will be followed by prosecutions of the managements involved, sequestrations of their assets and generally lengthy prison terms. Jeff Skilling’s fate in the U.S. has not been all that different to Mikhail Khodorkovsky’s in Russia, although his prison is probably somewhat warmer than the latter’s Siberian incarceration.

Stock markets and real estate markets will go into a lengthy period of illiquidity and quiescence, with price drops far in excess of those currently expected. In a period when credit is almost impossible to obtain, valuation metrics that depend on the use of credit quickly become worthless. US business is far more leveraged than in 1973; its decline in value will thus be correspondingly more intense. Only liquid companies in the liquid countries of East Asia, particularly Japan, and maybe the Arabian Gulf states are likely to be fortified by the experience.



Joyful prospect, isn’t it? But that’s what happens after a decade of fiat money run mad.
Anonymous Coward
User ID: 276554
United States
08/08/2007 04:50 AM
Report Abusive Post
Report Copyright Violation
Re: We are clearly in the beginning phase of a classic credit crunch
Same situation that caused the first Depression, courtesy of the Federal Reserve.

"Give me control of nation's currency and I care not who makes it's laws."

~Mayer Amstel Rothschild
Anonymous Coward (OP)
User ID: 277442
United Kingdom
08/08/2007 07:13 AM
Report Abusive Post
Report Copyright Violation
Re: We are clearly in the beginning phase of a classic credit crunch
Same situation that caused the first Depression, courtesy of the Federal Reserve.

"Give me control of nation's currency and I care not who makes it's laws."

~Mayer Amstel Rothschild
 Quoting: Anonymous Coward 276554




This should be pinned.
Anonymous Coward
User ID: 260377
United States
08/08/2007 07:42 AM
Report Abusive Post
Report Copyright Violation
Re: We are clearly in the beginning phase of a classic credit crunch
Would everyone please RELAX!?

"Helicopters" Bernanke will paper it all over!

No problemmo!

Back to sleep!
Anonymous Coward
User ID: 279239
United States
08/08/2007 07:42 AM
Report Abusive Post
Report Copyright Violation
Re: We are clearly in the beginning phase of a classic credit crunch
The greenback is at an all time low against the Euro, the British Pound and at 30-year lows against the Canadian Dollar and the Australian Dollar. Yet the dumbass bulls say that the dollar is strong and stable! HA!

Stupid fucktards!
Fée des bois.
User ID: 279240
Canada
08/08/2007 07:52 AM
Report Abusive Post
Report Copyright Violation
Re: We are clearly in the beginning phase of a classic credit crunch
I don't know about you in the state but here in Canada Credit compagny still calling us week after week to send us a Gold Mater Card.

I keep telling us that I am not interested and they just keep calling.

Are we the only one with good credit???
Anonymous Coward
User ID: 268293
United States
08/08/2007 08:51 AM
Report Abusive Post
Report Copyright Violation
Re: We are clearly in the beginning phase of a classic credit crunch
The greenback is at an all time low against the Euro, the British Pound and at 30-year lows against the Canadian Dollar and the Australian Dollar. Yet the dumbass bulls say that the dollar is strong and stable! HA!

Stupid fucktards!
 Quoting: Anonymous Coward 279239

USD 80.21 -0.16

[link to kitco.com]
Anonymous Coward (OP)
User ID: 277442
United Kingdom
08/08/2007 01:03 PM
Report Abusive Post
Report Copyright Violation
Re: We are clearly in the beginning phase of a classic credit crunch
Gold is now expected to break above $730 quite soon, an event which will probably be triggered by the dollar breaking decisively below 80 on its index, which it has been struggling to stay above for several weeks. Some weeks ago it had looked like a bullish Falling Wedge was forming on the dollar chart, dating back to May last year, but it has since broken down from that, and now looks very weak. The PPT (Plunge Protection Team) can be assumed to be fighting tooth and nail to defend the 80 level on the index, which the dollar has already tripped past briefly on a couple of occasions, because failure of this long-term support level can be expected to trigger wholesale dumping of the dollar at which time gold and silver will go through the roof. Our long-term chart which now shows a long-term downtrend channel previously thought to be too pessimistic, borders on apocalyptic. This chart projects the dollar index down to about 60, assuming it drops down to the lower return line - which could easily happen if a lot of big dollar holders decide to bail.
Anonymous Coward
User ID: 105508
United States
08/08/2007 01:13 PM
Report Abusive Post
Report Copyright Violation
Re: We are clearly in the beginning phase of a classic credit crunch
Gold is now expected to break above $730 quite soon
 Quoting: Anonymous Coward 277442


Any day now.
Anonymous Coward
User ID: 105508
United States
08/08/2007 01:16 PM
Report Abusive Post
Report Copyright Violation
Re: We are clearly in the beginning phase of a classic credit crunch
The greenback is at an all time low against the Euro, the British Pound and at 30-year lows against the Canadian Dollar and the Australian Dollar. Yet the dumbass bulls say that the dollar is strong and stable! HA!

Stupid fucktards!
 Quoting: Anonymous Coward 279239


Actually, I was just wondering about the stock market, since last Friday was supposed to be the beginning of the end. How do you explain what has happened over the past three days?
Anonymous Coward
User ID: 279368
United States
08/08/2007 04:08 PM
Report Abusive Post
Report Copyright Violation
Re: We are clearly in the beginning phase of a classic credit crunch
bsflag Propaganda that is just fear mongering
Anonymous Coward
User ID: 279461
Germany
08/08/2007 04:26 PM
Report Abusive Post
Report Copyright Violation
Re: We are clearly in the beginning phase of a classic credit crunch
_bsflag_ Propaganda that is just fear mongering
 Quoting: Anonymous Coward 279368


It most certainly is not my dear boy.. but this is also far more than just a mere credit crunch.
Anonymous Coward
User ID: 264678
United States
08/08/2007 04:34 PM
Report Abusive Post
Report Copyright Violation
Re: We are clearly in the beginning phase of a classic credit crunch
The greenback is at an all time low against the Euro, the British Pound and at 30-year lows against the Canadian Dollar and the Australian Dollar. Yet the dumbass bulls say that the dollar is strong and stable! HA!

Stupid fucktards!


Actually, I was just wondering about the stock market, since last Friday was supposed to be the beginning of the end. How do you explain what has happened over the past three days?
 Quoting: Anonymous Coward 105508

because of other investment mediums failing investors need a place to put they're money and so the stock market is benifiting, eventually it will crash as well its only a matter of time. Don't get suckered in and prepair for an economic collapse now while you can.
Anonymous Coward
User ID: 105508
United States
08/08/2007 04:49 PM
Report Abusive Post
Report Copyright Violation
Re: We are clearly in the beginning phase of a classic credit crunch
The greenback is at an all time low against the Euro, the British Pound and at 30-year lows against the Canadian Dollar and the Australian Dollar. Yet the dumbass bulls say that the dollar is strong and stable! HA!

Stupid fucktards!


Actually, I was just wondering about the stock market, since last Friday was supposed to be the beginning of the end. How do you explain what has happened over the past three days?

because of other investment mediums failing investors need a place to put they're money and so the stock market is benifiting, eventually it will crash as well its only a matter of time. Don't get suckered in and prepair for an economic collapse now while you can.
 Quoting: Anonymous Coward 264678


What other mediums are failing?
Anonymous Coward
User ID: 105508
United States
08/08/2007 04:56 PM
Report Abusive Post
Report Copyright Violation
Re: We are clearly in the beginning phase of a classic credit crunch

Actually, I was just wondering about the stock market, since last Friday was supposed to be the beginning of the end. How do you explain what has happened over the past three days?

because of other investment mediums failing investors need a place to put they're money and so the stock market is benifiting, eventually it will crash as well its only a matter of time. Don't get suckered in and prepair for an economic collapse now while you can.
 Quoting: Anonymous Coward 264678


Oh, BTW, the Treasury market is usually the beneficiarly of a flight-to-quality, not the stock market.

Did it every occur to you that somebody else might be a better investor than you are?
Anonymous Coward
User ID: 278196
United States
08/08/2007 05:04 PM
Report Abusive Post
Report Copyright Violation
Re: We are clearly in the beginning phase of a classic credit crunch
The greenback is at an all time low against the Euro, the British Pound and at 30-year lows against the Canadian Dollar and the Australian Dollar. Yet the dumbass bulls say that the dollar is strong and stable! HA!

Stupid fucktards!
 Quoting: Anonymous Coward 279239

Indeed! The bullz are incredible FUCK TARDS!

Looks like a classic crash setup to me. The pundits go from the sky is falling to great guns on a day to day basis. Mid July is almost always the signal the markets are either in trouble or it is time to get aboard. Last year it was time to get on board, as the market turned up in July. This year, we probably make some kind of low if we haven't already, rally and then start crashing into September. I sense the longer we make it into September before real trouble shows up the worse it will be for the bulls.

This world is due a depression if for no other reason than the level of debt incurred and how much debt it takes to keep the economy going. Because one mans debt is anothers asset (saving rate?), the appearance of prosperity is greatest at these times. The skin is nice but there is a real bitch inside. Truly there is a vaccuum in that the debt is all subprime. A crash would pierce a bubble that much larger than it was in 2000, as it encompasses all. The stock market is less a bubble today, but the rest of the world is a much larger one. Best guess is the crash will be a short term buy and then the rally will be a long term sale. The post 9/11 rally was a great sell and the great rally that followed took a lot longer time to get back to 1176 on the SPX than it took to fall from there. The bulls made out of the SPX over the past 4 years and 8 months what it took them 2 years and 7 months to lose. The rally was a classic fibonacci 56 months. The fall in the Dow was 33 months, just short of the fibonacci 34 months.
Anonymous Coward
User ID: 279463
United States
08/08/2007 05:10 PM
Report Abusive Post
Report Copyright Violation
Re: We are clearly in the beginning phase of a classic credit crunch
Classic!
You really need to die
Eagle # 1
User ID: 275451
United States
08/08/2007 05:10 PM
Report Abusive Post
Report Copyright Violation
Re: We are clearly in the beginning phase of a classic credit crunch
I CAN smell DEPRESSION coming !

But the grasshoppers, like WW RUPPT, keep chirping their " It will ALWAYS be summer " tune, and hope their government chech comes BEFORE the banks CLOSE !
They seem intoxicated by the euphoria of GOOD TIMES are NEVER going to end. The above history lession SHOULD be enough, but reading and comprehension are two DIFFERENT things.

Then again, why waste time on those following the Piper over the CLIFF ?

Eagle
Dr Dre
User ID: 5755
United States
08/08/2007 05:25 PM
Report Abusive Post
Report Copyright Violation
Re: We are clearly in the beginning phase of a classic credit crunch
I CAN smell DEPRESSION coming !

But the grasshoppers, like WW RUPPT, keep chirping their " It will ALWAYS be summer " tune, and hope their government chech comes BEFORE the banks CLOSE !
They seem intoxicated by the euphoria of GOOD TIMES are NEVER going to end. The above history lession SHOULD be enough, but reading and comprehension are two DIFFERENT things.

Then again, why waste time on those following the Piper over the CLIFF ?

Eagle
 Quoting: Eagle # 1 275451

So buy some put options and show you have some balls!
Anonymous Coward
User ID: 279485
United States
08/08/2007 05:34 PM
Report Abusive Post
Report Copyright Violation
Re: We are clearly in the beginning phase of a classic credit crunch
LOL, I really don't understand why you think the stock market will lose. After the last major crash options were put into place to prevent it from happening. Hello, you know they control the printing press, who is to say that with the electronic money of today, they can't just pull money out of their butts to prop things up. The money they use to prop up the markets is only temporary, once the market starts going up they sell some of their temporary money and then make a real profit off of that!
Anonymous Coward
User ID: 276951
United States
08/08/2007 05:37 PM
Report Abusive Post
Report Copyright Violation
Re: We are clearly in the beginning phase of a classic credit crunch
Clearly, we are in the beginning of the next leg up of the relentless bull market that has been hammering the dumb bears since October 2002.
Anonymous Coward
User ID: 279474
United States
08/08/2007 05:41 PM
Report Abusive Post
Report Copyright Violation
Re: We are clearly in the beginning phase of a classic credit crunch
Maui Boor posts should never be pinned, as the exact opposite of whatever he posts happens...

hiding
Anonymous Coward
User ID: 246996
United States
08/08/2007 06:30 PM
Report Abusive Post
Report Copyright Violation
Re: We are clearly in the beginning phase of a classic credit crunch
Maui Boor posts should never be pinned, as the exact opposite of whatever he posts happens...

hiding
 Quoting: Anonymous Coward 279474

iamwith

UP PIN THIS YOU CUNTS!

hiding
Precious Metals
User ID: 11540
United States
08/08/2007 07:07 PM
Report Abusive Post
Report Copyright Violation
Re: We are clearly in the beginning phase of a classic credit crunch
I'm safe. I have my $ in Fidelity Select Precious Metals and over the past year averaged 40% return !!!!!

The worse the dollar gets, the better precious metals get.
The Monk
User ID: 274840
United States
08/08/2007 07:38 PM
Report Abusive Post
Report Copyright Violation
Re: We are clearly in the beginning phase of a classic credit crunch
Bernanke is well aware of the possibility of a credit crunch in situations like this and has repeatedly stated that lenders must not over-react as they tighten their standards. And since hedge funds are high risk investments to begin with, it makes no sense to "bail them out"- we're not talking about the savings & loan debacle or anything effecting the average mom & pop despite the yelps of Wallstreet interests that stand to lose their shirts. Let the shirts come off and the lashings begin, it's all part of life in the big bad free market.

When you hear doom & gloom talk and hype like this, just think of who benefits from the fear it spreads.
The Monk
User ID: 274840
United States
08/08/2007 07:42 PM
Report Abusive Post
Report Copyright Violation
Re: We are clearly in the beginning phase of a classic credit crunch
"However the drying up of the LBO market is causing illiquidity at the heart of the system. In just a few weeks, the major LBO market lenders have provided transaction bridge financing (short term lending) totaling around $12 billion for the Chrysler LBO, $20 billion for Boots and $35 billion for Texas Utilities, to name only 3 deals. Long term takeout financing for all three transactions appears now to be unobtainable; hence major bank and investment bank balance sheets have suddenly become highly illiquid and concentrated in a few unattractive credit risks."

I wouldn't call Chrysler, Boots or TXU an "unattractive credit risk" Mr. bought & paid for media bomb thrower.
Anonymous Coward
User ID: 255704
United States
08/08/2007 07:50 PM
Report Abusive Post
Report Copyright Violation
Re: We are clearly in the beginning phase of a classic credit crunch
I think this credit crunch can be ultimately traced to the big jump in oil prices over the past year or two. Some say we've reached peak oil production globally. This probably has contributed to the weakening of the dollar, and the inability of the FED to lower interest rates now. Had oil been plentiful, there would be considerably less inflation pressure (commodities)... and the FED could have accomodated the housing bubble a good deal longer with loose credit.
The Monk
User ID: 274840
United States
08/08/2007 07:52 PM
Report Abusive Post
Report Copyright Violation
Re: We are clearly in the beginning phase of a classic credit crunch
I think this credit crunch can be ultimately traced to the big jump in oil prices over the past year or two. Some say we've reached peak oil production globally. This probably has contributed to the weakening of the dollar, and the inability of the FED to lower interest rates now. Had oil been plentiful, there would be considerably less inflation pressure (commodities)... and the FED could have accomodated the housing bubble a good deal longer with loose credit.
 Quoting: Anonymous Coward 255704


VERY interesting...
Anonymous Coward
User ID: 279536
United States
08/08/2007 07:52 PM
Report Abusive Post
Report Copyright Violation
Re: We are clearly in the beginning phase of a classic credit crunch
Credit crunch my ass.

There is about to be a total melt down, and mass insaneness, to say nothing about all those who will be dead !

There is about to be hell on earth !

wake up !
Anonymous Coward
User ID: 279474
United States
08/08/2007 07:53 PM
Report Abusive Post
Report Copyright Violation
Re: We are clearly in the beginning phase of a classic credit crunch
bsflag tomato
Anonymous Coward
User ID: 268412
United States
08/08/2007 08:22 PM
Report Abusive Post
Report Copyright Violation
Re: We are clearly in the beginning phase of a classic credit crunch
Two Home-Loan Banks Discuss Merger
By JAMES R. HAGERTY
August 9, 2007

The Federal Home Loan Banks of Chicago and Dallas said they are holding talks about a possible merger.

The talks could spur a consolidation among the 12 regional home-loan banks, cooperatives that lend money to commercial banks and thrifts. The idea of merging some of them has been viewed as a way to increase efficiency, but such undertakings might run into opposition from politicians eager to preserve jobs in their districts.

Because they are government-sponsored cooperatives, the home-loan banks don't have publicly traded stock, and their market value is unclear.

In an interview, Mike Thomas, chief executive officer of the Chicago bank, and Terry Smith, his Dallas counterpart, cited consolidation in the financial-services industry, a rise in costs and opportunities for greater efficiency.

They said the talks were initiated by the two banks, not by their regulator, the Federal Housing Finance Board, which would have to approve any merger. Earnings at the Chicago bank have fallen in recent years, partly because of the shrinkage of a mortgage-investment program regulators deemed too risky.

A spokesman for the regulator declined to comment. Ronald Rosenfeld, chairman of the finance board, has spoken favorably about the possibility of consolidations. He couldn't be reached for comment.

Congress created the home-loan banks in 1932 to shore up thrift institutions devastated by the Great Depression. Because they were set up by Congress and are federally regulated, investors assume the government would feel obliged to bail out the home-loan banks in a crisis. As a result, they can borrow nearly as cheaply as the U.S. Treasury on international bond markets. They use the proceeds to make low-cost loans, known as "advances," to their 8,100 owners, who are known as members and include commercial banks, thrifts, credit unions and insurance companies.

The advances are a vital source of funding for many local banks that lack the scale to borrow on the international market. The availability of this low-cost funding is one reason the U.S. has more than 8,600 banks and thrifts, despite competition from national giants such as Bank of America Corp. and Citigroup Inc., said Bert Ely, a banking consultant in Alexandria, Va.

Supporters of the home-loan banks fear they may lose business because some big institutions, including Washington Mutual Inc., have begun raising funds through so-called covered bonds, a type of mortgage-backed security popular in Europe. Covered bonds are considered an alternative to advances from the home-loan banks.

Some of the home-loan banks were established in what seem like unlikely places -- such as Indianapolis and Topeka, Kan. -- that aren't major financial centers. Politicians in such areas would be likely to oppose consolidation that would eliminate local jobs.

News