Whodathunk
In the Whodathink Department we now see bank credit quantity in a major free fall. The reason for this is straightforward, the bank system as a whole simply does not meet capital requirements even with all the fictitious capital accounting and lack or proper reserving being employed. And they know it, so loans are being called, and new ones capped.
The latest report from the Fed of assets and liabilities of commercial banks in the U.S. showed the sharpest 13-week contraction in bank credit – loans and investments – in the history of the series, which dates back to January 3, 1973. In the 13 weeks ended June 18, bank credit contracted at an annualized rate of 9.14%.
Tying into this is a mark down of “prime” mortgages of an exotic nature.
June 30 (Bloomberg) — Subprime and Alt-A mortgage bonds, trading at or near record lows, may continue their declines as banks limit purchases of some securities and are forced to sell off what they hold, JPMorgan Chase & Co. analysts said. Prices for typical fixed-rate Alt-A bonds rated AAA have tumbled to near an all-time low of less than $84 per $100 of principal from about $87 in April, JPMorgan said. Subprime debt is also down, benchmark Markit ABX indexes indicate, as AAA bonds lost 5.1 percent in three months, Lehman Brothers Holdings Inc. index data show
And it’s not exactly like they figured this out on their own, they were literally forced to. For instance Wachovia who is a real mess, just recently dropped offerings on toxic negative amortization mortgages. Bankamerica goes ahead with the CFC merger, the effect so far is a ratcheting up of Bankamerica credit protection. One of the great irony of the international banking collapse is that the megabanks in Japan may be in a position to pick up some of the pieces. For the record IndyMac is claiming a collapse is not imminent. And Whodathunk that with assets being marked severely down, and the Ponzi finance now MIA that the LBO Riskloves have decided to return the money to ‘investors”.
Speaking of lawsuits, a big save the Sheeple case is about to be ruled on in the higher courts. Should transfer billions of more dollars of losses on to lenders.On the shutting down the economy front, Chrysler shutters one plant and cuts production in another.
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