Concerns about systemic and the housing market

December 11, 2006 â € "officially called the Committee Chairman on financial markets, and square commonly â € œSquadra security financial â €? The body chaired by Treasury Secretary Henry Paulson move has been reactivated to deal with systemic risks that threaten markets, reported the Daily Tepegraph of 7 December. The article, written by Ambrose Evans-Pritchard refers to another article in the Weekly Standard, 27 November, which explained that the body ¨ à composed of several directors of Goldman Sachs, the financial à ¨ in Paulson was CEO, and that he brought with sà © Treasury to keep the distances from the ministerial bureaucracy.

The major concerns of Paulson, the Daily Telegraph, are: 1) the 8000 non-regulated hedge funds that manages 1.3 thousand billion in derivatives contracts of EUR 370 trillion. Ã ¨ â € œQui must be very careful €? Paulson would say on the subject, 2) the falling dollar, and in this regard, the Daily Telegraph quotes an analyst at banking group HSBC, which states: â € œAgli United States need one million dollars a year just to stay in Gallai €? . The same analyst pointed out that the crisis in the global economic systems in one dimension this fall in the dollar, reaching as to threaten the capitalismoâ € â € œl'aorta?, 3) the average price of home in the U.S. Ã ¨ fell from 244 to 221 thousand U.S. dollars in November. Paulson fears â € œuna serious crisis, which would prove a fatal blow to the economy USA â €?.

Another cause for concern given ¨ by the bubble funds, private equity funds and hedge funds. After warnings from the Bank of England, even the German Bundesbank has addressed the topic in the latest report on the stability of financial 2006. The Bundesbank stresses the growth of the interlinkages among major banks and private equity / hedge funds. In presenting the report in Frankfurt on 28 November, Edgar Meister noted as â € Oele pià ¹ banks have increasingly to do with financial market participants are not subject to rules. Hedge funds may be a potential nuisance, especially taken complessivamenteâ €?, But also individually.

Meister said, among other things: â € œCome in the case of hedge funds, asset c'a ¨ strong growth of private equities €?, And sometimes both groups are interconnected. The threat posed by private equity funds lies in their operations, buy-outa œleveraged â € €? (LBO), climbing is performed with a high debt burden, with 60% or even 80% of capital provided by banks. After the acquisition, the debt contract is discharged on Firm cosà ¬ gained. These debts, Meister said, â € œaumentano the vulnerability of businesses, particularly in the face of rising rates interesseâ €?. In a stress situation, the CIA could have â € ² œimplicazioni for the stability of financial markets €?. Only in the third quarter of 2006, the LBO debt issued in Western Europe amounted to 50 billion euros. The banks that have signed are convinced that they could place high-risk securities to hedge funds and other investors. But, he warned Meister, remains to be seen â € Oese banks, always managing to make such transfers rischioâ €?.

The crisis in the housing market

The Wall Street Journal on December 5 explained in language unusually explicit: â € œL'aumento of delinquencies on loans in recent months underscore the narrow lenders and investors in the global mortgage market U.S., worth 10 trillion dollars. What strikes ¹ easily between mortgages subprime [granted to customers yield reliable], although it is spreading to other parts of the market ipotecarioâ €?. Delinquencies increased from More than one year, but over the last two or three months c'a ¨ been a real surge. According to the FDIC institution, half of all banking assets the U.S., which amounts to 11.75 thousand billion dollars, investment in real estate.
The loans are one of the subprime pià ¹ vulnerable sectors of the housing market, where the cracks are easily ¹ striking. In October, the total loans subprime signed this year, which are in arrears exceeding 90 days or that are subject of expropriation proceedings or repurchase, rose to 2.52% in October.
Credits and loans granted to subprime are low-income social groups, especially blacks and Hispanics, to punitive conditions: high interest rates, severe penalties on arrears, etc.. In the late Nineties the volume of subprime credit was 100 billion, today ¨ risen to somewhere between 650 and 980 billion, of which one tenth are calculator-home.
About ten years ago this was a market for the moneylenders, but the big commercial banks have reached the market represented by the middle classes. In 2005, for half of subprime loans, banks have not asked for documentation on income. In the first half of 2006, a home mortgage in five subprime ¨ stipulated conditions, reports the Mortgage Bankers Association.
On 4 and 6 December have closed the Sebring Capital Partners, Texas, and Ownit Mortgage Solutions, in California, both active in the subprime market, where the second was in eleventh place in the category. The derivatives market has suffered severe shock: the cost of a CDS swaps to protect against default risk 10 million dollars in subprime bonds valued BBB Ã ¨ increased from 310 to 389 thousand dollars. Even the underlying bonds have recorded the largest loss of 'year.
The major tax consulting firm H & R Block has announced losses of 156.5 billion dollars in the three months ended October 31. The losses are due to Option One Mortgage subsidiary engaged in the subprime mortgage market. The losses in the previous quarter were 131 billion.
Toll Brothers, builder of expensive homes œMcMansionâ â € €?, Has had to revise downwards its forecasts for 2007 after recording a fall of 50% of profits in the third quarter. Ã ¨ The turnover declined from 310 million in 2005 to 178. Cancellation of orders has reached 37%.
The financial HSBC UK, third in world rankings for the value market, announced a slowdown in revenue in the third quarter because of 'increasing difficult to receive credits in America and England. Delinquencies and cancellations have increased as a result of failures and the weakness of the housing market.
On December 10, Lyndon LaRouche pointed to a crucial, although not evident in the dynamics of the seizure of the property market the U.S., sales that do not operate as a result of shrinking overall market:
â € œQualcuno owns a property worth say 800 thousand U.S. dollars, but the best offer that gets à ¨ 600-thousand. à ¨ The owner had to keep it. But the following month the hole will than 300 thousand and yet another month of 400 thousand. Dynamics of this type. Either what happens is that this is an additional risk factor, it becomes a potential detonator for a whole market in the fall. And when the reaction s'innesca only feeds if stessaâ €?.

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