Wake up to the dangers of a deepening crisis

November 25, 2007 (Lawrence Summers) – Three months ago it was reasonable to expect that the subprime credit crisis would be a financially significant event but not one that would threaten the overall pattern of economic growth. This is still a possible outcome but no longer the preponderant probability.Even if necessary changes in policy are [...]

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Now this is what I call a beautiful short

 
Novastar Financial, Inc (NFI), is [soon was] a “speciality finance” company that deals heavily in the “origination, purchase, securitization, sale, investment in, and service of residential nonconforming loans and mortgage-backed securities.”  Today, the company announced a $600 million loss for the third-quarter, or $64.05 per share.  The stock reached a high of $127 earlier this year, and is now [...]

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U.S. Regulators to Probe Rating Agencies

NEW YORK, Sept 7 (Reuters) – U.S. regulators plan to probe how the major credit-rating agencies are paid and their independence from Wall Street firms that issue bonds amid the crisis in the mortgage market, the Wall Street Journal reported in its online edition on Friday.The regulators have begun to examine how the ratings firms [...]

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Rating Firms’ Next Subprime Role: Defendant

August 23, 2007 (TheStreet.com) – As the carcasses of subprime mortgage-backed securities lie rotting on Wall Street, the buzzards are circling heretofore untouchable prey: the rating agencies.
Critics say the ratings industry was too late in downgrading mortgage-backed securities, echoing cries after past crises involving Enron, WorldCom and Russian debt, among others. But the current episode [...]

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“Credit Rating Companies Must Shoulder Some Responsibility”

August 21, 2007 (LA Times) – Credit rating companies must “shoulder some responsibility” for sub-prime mortgage bonds that have sparked a crisis in credit markets, Sen. Richard C. Shelby, the Senate Banking Committee’s top Republican, said Monday.
Moody’s Investors Service, Standard & Poor’s and Fitch Ratings face congressional scrutiny for an “inherent conflict” in helping construct [...]

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Fed’s Move is a “Cream Puff”

Not surprised that the U.S. markets rallied so much on Friday.  With not a lot of options left, the Fed lowered the discount rate for banks by 50 basis points.  Other than continuing to print money out the back door, this is their only way left of avoiding a complete meltdown.  I feel bad for [...]

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The Rating Agency Witch Hunt is Just Starting

August 17, 2007 — WASHINGTON (Reuters) — U.S. Senate Banking Committee Chairman Christopher Dodd on Friday called for an examination of the credit rating agencies’ role in valuing the subprime mortgage securities market.
Dodd, a Connecticut Democrat and presidential candidate, also urged federal regulators to raise the investment portfolio cap by 5 percent for mortgage finance [...]

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European Commission Jumps on Rating Agencies

As we have been posting, the rating agency blame game is only beginning. Moody’s and S&P are the big names that will continue to get hit by regulators, investors, and investment banks.
August 16, 2007 – LONDON (MarketWatch) — The European Commission will investigate the role played by credit-rating agencies in the recent crisis over [...]

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Moody’s (MCO) is Toast

Aug. 14 (Bloomberg) — Moody’s Investors Service and Standard & Poor’s, the arbiters of creditworthiness, are losing their credibility in the fastest growing part of the bond market.
The New York-based ratings firms last month gave a new breed of credit derivatives triple-A ratings, indicating they were as safe as [...]

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Cerberus Jumps in Too Early

NEW YORK, Aug 13 (Reuters) – Aegis Mortgage Corp., a mortgage lender controlled by private equity firm Cerberus Capital Management, on Monday filed for Chapter 11 bankruptcy protection, a week after it stopped making home loans and fired 60 percent of its employees.
The Houston-based lender and several affiliates filed for protection from creditors [...]

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