Credit market brothel raided
As the financial-liquidity police raid the credit-market brothel, even the piano player faces arrest. The malaise enveloping global markets is becoming increasingly indiscriminate in choosing its victims.
By Agencies |
LONDON: As the financial-liquidity police raid the credit-market brothel, even the piano player faces arrest. The malaise enveloping global markets is becoming increasingly indiscriminate in choosing its victims.
At the start of July, Tunisia hired Daiwa Securities SMBC and Nikko Citigroup to help its central bank sell yen-denominated bonds. By the time the fund-raising finished this week, Tunisia’s borrowing costs had risen by almost a quarter of a percentage point.
So the taxpayers of an African nation suffer because Joe Blow in Detroit can’t pay his mortgage.
In Germany, while IKB Deutsche Industriebank’s losses aren’t up to the system-shaking standards of Long-Term Capital Management, its subprime woes have nevertheless inspired a government-engineered bailout. In Asia, Taiwan Life Insurance booked a $13 million first-half loss on its investment in one of the failed Bear Stearns funds.
In Australia, at least three fund companies are in trouble. Basis Capital Funds Management and Absolute Capital Group, both based in Sydney, froze investor accounts last month.
Macquarie Bank, Australia’s largest securities firm, said this week two of its funds may lose a quarter of customers’ investments even though “there have been no defaults in the portfolio and no reason to believe that the loans will not continue to pay their interest and repay principal.”
In France, stockbroker and money manager Oddo & Cie said this week it plans to close three funds overseeing a total of 1 billion euros ($1.37 billion) because of the “unprecedented” crisis in US asset-backed bonds. It wasn’t even concentrated in the toxic waste; more than half of the collateralised debt obligations in the funds were rated AAA or AA.
Investors from Harvard University to the Chinese government are licking wounds after the latest salvo of repricing. Harvard waved bye-bye to about $350 million invested in hedge fund Sowood Capital Management, which lost more than 50% of its value last month. China spent $3 billion buying stock in Blackstone Group’s initial public offering in June; the shares have since lost about a fifth of their value.
In the UK, plans by Mitchells & Butlers to sell a 50% stake in 1,300 pubs to billionaire Robert Tchenguiz in a deal worth £4.5 billion ($9.1 billion) were derailed this week, with the company citing credit-market “turbulence”.
The winner of this week’s “Honey, I Shrunk the Company” award has to be American Home Mortgage Investment.
Perhaps part of its downfall was the May decision to let customers make their mortgage payments using American Express credit cards. Think about that for a second. Using your Amex card.
At the start of July, Tunisia hired Daiwa Securities SMBC and Nikko Citigroup to help its central bank sell yen-denominated bonds. By the time the fund-raising finished this week, Tunisia’s borrowing costs had risen by almost a quarter of a percentage point.
So the taxpayers of an African nation suffer because Joe Blow in Detroit can’t pay his mortgage.
In Germany, while IKB Deutsche Industriebank’s losses aren’t up to the system-shaking standards of Long-Term Capital Management, its subprime woes have nevertheless inspired a government-engineered bailout. In Asia, Taiwan Life Insurance booked a $13 million first-half loss on its investment in one of the failed Bear Stearns funds.
In Australia, at least three fund companies are in trouble. Basis Capital Funds Management and Absolute Capital Group, both based in Sydney, froze investor accounts last month.
Macquarie Bank, Australia’s largest securities firm, said this week two of its funds may lose a quarter of customers’ investments even though “there have been no defaults in the portfolio and no reason to believe that the loans will not continue to pay their interest and repay principal.”
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In France, stockbroker and money manager Oddo & Cie said this week it plans to close three funds overseeing a total of 1 billion euros ($1.37 billion) because of the “unprecedented” crisis in US asset-backed bonds. It wasn’t even concentrated in the toxic waste; more than half of the collateralised debt obligations in the funds were rated AAA or AA.
Investors from Harvard University to the Chinese government are licking wounds after the latest salvo of repricing. Harvard waved bye-bye to about $350 million invested in hedge fund Sowood Capital Management, which lost more than 50% of its value last month. China spent $3 billion buying stock in Blackstone Group’s initial public offering in June; the shares have since lost about a fifth of their value.
In the UK, plans by Mitchells & Butlers to sell a 50% stake in 1,300 pubs to billionaire Robert Tchenguiz in a deal worth £4.5 billion ($9.1 billion) were derailed this week, with the company citing credit-market “turbulence”.
The winner of this week’s “Honey, I Shrunk the Company” award has to be American Home Mortgage Investment.
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Worth more than $1.8 billion just six months ago, the company’s value dropped to as low as $56 million this week. The lender specialises in Alternative A mortgages, a catch-all classification for loans made to borrowers that don’t meet the standard to be classified as “prime” while not scoring low enough to drop into the subprime category. In April, American Home Mortgage said demand from financial companies that buy and repackage its so-called Alt-A mortgages was “stabilising”. This week, banks cut its credit lines. Perhaps part of its downfall was the May decision to let customers make their mortgage payments using American Express credit cards. Think about that for a second. Using your Amex card.
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To make your mortgage payments. Can you spell usury? A cardholder with a $3,000 monthly obligation could earn enough points in a year to get a free DVD player or portable video player. Never mind that gizmos like that come free with cornflakes these days. Download
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