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According to the latest Wachovia filings, as of June 30th 2008, they had $79 billion in Mortgage-backed securities and $21.5 billion in CMOs on the books, with all of it marked as for available for sale (fair market value).
I'm with c1ue, Mr. Mortgage and the rest on this one ~ Wachovia is D-U-N, DONE.
Bloomberg.com - 09/25/08 - Short-Sale Ban Fails to Save Ambac From 50% Plunge
Financial Times 09/25/08 - Morgan Stanley suffers cash flight
see also: the Daily List Of Companies Reporting Lehman Bros Exposure on CNNMoney.com.
I'm with c1ue, Mr. Mortgage and the rest on this one ~ Wachovia is D-U-N, DONE.
September 26, 2008
Source: FinanceMarkets.co.uk
by Brian Turner
Wachovia Corporation (WB)
When Harvard economist, Professor Kenneth Rogoff - formerly head of the IMF - predicted at the end of August that at least one major US bank would collapse along with hundreds of smaller banks, trader speculation fell on three names:
- Lehman Brothers
- Washington Mutual
- Wachovia Corporation
Since his warning on August 28th, we saw Lehman Brothers file bankruptcy on September 15th, and Washington Mutual was taken over by the OTS last night and sold to JP Morgan.
It now remains to be seen how the Wachovia bank will hold up.
What all three had in common was extensive exposure to subprime mortgage assets, specifically ALT-A, interest only mortgages, which were a particularly toxic mix of short-term discount and self certification - and which have seen defaults in the region of up to 20% in some US metropolitan areas.
While Washington Mutual had exposure of $56 billion in ALT-A mortgages, Wachovia has exposure to over $160 billion in the same market.
The 20% foreclosure rate isn’t the only loss for banks holding these mortgage loans - there is another 20% potential loss through foreclosure and resale in the middle of the worst housing crisis in the US.
With a string of high profile collapses in the US, and a lack of confidence in US companies with significant mortgage exposure, all eyes will be on Wachovia to see whether it can survive long enough to see a Federal plan legislated.
Ambac (ABK)
Ambac is the second-largest bond insurer in the US, and between July 2007 to 2008, lost over 95% of its share price value.
The main reason, again, was massive exposure to subprime mortgages, as a number of bond insurers had expanded from insuring not just bonds, but also subprime mortgage assets.
The result was that bond insurers backing mortgages faced heavy write-downs.
We’ve not been the only ones to cheer the downtrodden bond insurers such as Ambac and MBIA, and both companies saw share prices leap to highs over August, before these slipped back.
While Ambac shares have since recovered from $1.9 a share on July 15th of this year, to $3.0 yesterday, the company is facing serious problems.
Moody’s has given notice that Ambac credit ratings are under review. If it does, Amabc could be next to go without a US government bail-out plan.
According to a report on Marketwatch:
Neither which is likely to instill confidence in the US financial system, which is already reeling from a strong of collapses and outright lack of investor confidence.
Of course, if the Paulson Plan comes to fruition first, then there is hope yet for Ambac - but it’s hardly comforting that the future of the company’s survival could be entirely dependent on massive government aid.
Source: FinanceMarkets.co.uk
by Brian Turner
Wachovia Corporation (WB)
When Harvard economist, Professor Kenneth Rogoff - formerly head of the IMF - predicted at the end of August that at least one major US bank would collapse along with hundreds of smaller banks, trader speculation fell on three names:
- Lehman Brothers
- Washington Mutual
- Wachovia Corporation
Since his warning on August 28th, we saw Lehman Brothers file bankruptcy on September 15th, and Washington Mutual was taken over by the OTS last night and sold to JP Morgan.
It now remains to be seen how the Wachovia bank will hold up.
What all three had in common was extensive exposure to subprime mortgage assets, specifically ALT-A, interest only mortgages, which were a particularly toxic mix of short-term discount and self certification - and which have seen defaults in the region of up to 20% in some US metropolitan areas.
While Washington Mutual had exposure of $56 billion in ALT-A mortgages, Wachovia has exposure to over $160 billion in the same market.
The 20% foreclosure rate isn’t the only loss for banks holding these mortgage loans - there is another 20% potential loss through foreclosure and resale in the middle of the worst housing crisis in the US.
With a string of high profile collapses in the US, and a lack of confidence in US companies with significant mortgage exposure, all eyes will be on Wachovia to see whether it can survive long enough to see a Federal plan legislated.
Ambac (ABK)
Ambac is the second-largest bond insurer in the US, and between July 2007 to 2008, lost over 95% of its share price value.
The main reason, again, was massive exposure to subprime mortgages, as a number of bond insurers had expanded from insuring not just bonds, but also subprime mortgage assets.
The result was that bond insurers backing mortgages faced heavy write-downs.
We’ve not been the only ones to cheer the downtrodden bond insurers such as Ambac and MBIA, and both companies saw share prices leap to highs over August, before these slipped back.
While Ambac shares have since recovered from $1.9 a share on July 15th of this year, to $3.0 yesterday, the company is facing serious problems.
Moody’s has given notice that Ambac credit ratings are under review. If it does, Amabc could be next to go without a US government bail-out plan.
According to a report on Marketwatch:
Ambac Financial Group said late Friday that a downgrade by ratings agency Moody’s Investors Service would leave its guaranteed investment-contract business short of collateral to meet liabilities. The company also said plans to pump $850 million into a new municipal bond-insurance business called Connie Lee have been postponed. In addition, Ambac cancelled a $50 million share-buyback plan that was announced earlier this year.
In other words, the company’s recovery plans have been shelved, and if downgraded, Ambac has no cash to pay its obligations - setting the scene for either a bankruptcy or bail out.Neither which is likely to instill confidence in the US financial system, which is already reeling from a strong of collapses and outright lack of investor confidence.
Of course, if the Paulson Plan comes to fruition first, then there is hope yet for Ambac - but it’s hardly comforting that the future of the company’s survival could be entirely dependent on massive government aid.
Farmer Mac, as government-sponsored enterprise Federal Agricultural Mortgage is known, plunged 65 percent to $5.25 since Sept. 18. The Washington-based company said Sept. 22 that its reserves may fall short of federal requirements. Farmer Mac hired a financial adviser to assist in selling assets and common and preferred stock.
[..]
New York-based Morgan Stanley retreated 50 percent to an almost 10-year low of $21.75 in the seven days ended Sept. 17. It rebounded 14 percent, helped by the Bush administration's proposal to spend $700 billion on troubled bank assets. Goldman, which lost 36 percent to $108 over eight days ending Sept. 18, has since rallied 23 percent, helped by a $5 billion investment from Warren Buffett's Berkshire Hathaway Inc.
Conseco Inc., a Carmel, Indiana-based insurer that's also on the no-short list, retreated 40 percent to $4.78 since Sept. 18. Western Alliance Bancorp, a Las Vegas-based lender, plunged 43 percent to $14.68, while Ames National Corp., a bank based in Ames, Iowa, sank 37 percent to $26.71.
[..]
New York-based Morgan Stanley retreated 50 percent to an almost 10-year low of $21.75 in the seven days ended Sept. 17. It rebounded 14 percent, helped by the Bush administration's proposal to spend $700 billion on troubled bank assets. Goldman, which lost 36 percent to $108 over eight days ending Sept. 18, has since rallied 23 percent, helped by a $5 billion investment from Warren Buffett's Berkshire Hathaway Inc.
Conseco Inc., a Carmel, Indiana-based insurer that's also on the no-short list, retreated 40 percent to $4.78 since Sept. 18. Western Alliance Bancorp, a Las Vegas-based lender, plunged 43 percent to $14.68, while Ames National Corp., a bank based in Ames, Iowa, sank 37 percent to $26.71.
Morgan Stanley lost close to a third of assets in its prime brokerage last week, amounting to hundreds of billions of dollars, as hedge funds fled after the collapse of Lehman Brothers and moved to rival banks.
The losses, confirmed by several people familiar with the business, will deal a big blow to Morgan Stanley as its prime brokerage is one of its most profitable and successful businesses.
[..]
Many of the world’s biggest hedge funds moved their assets to commercial banks regarded as safer last week, as they and their investors worried that Morgan Stanley could follow Lehman into trouble.
“The primary thing our investors have been trying to understand is counterparty risk,” said the head of one big London fund.
Morgan Stanley’s London prime brokerage lost closer to half its assets, as hedge funds worried about fellow funds caught up in the collapse of Lehman that found they could not access assets in Lehman’s European arm.
In the US, the bankruptcy filing for Lehman’s brokerage subsidiary was delayed for several days after the bank failed, allowing many funds to move elsewhere, but the London business was put straight into administration, trapping an estimated $40bn of hedge fund assets.
Banks such as JPMorgan, Credit Suisse, Citigroup, Deutsche Bank, Barclays Capital and UBS attracted many Morgan Stanley clients, in spite of efforts by the bank’s executives to persuade rivals not to approach customers.
The losses, confirmed by several people familiar with the business, will deal a big blow to Morgan Stanley as its prime brokerage is one of its most profitable and successful businesses.
[..]
Many of the world’s biggest hedge funds moved their assets to commercial banks regarded as safer last week, as they and their investors worried that Morgan Stanley could follow Lehman into trouble.
“The primary thing our investors have been trying to understand is counterparty risk,” said the head of one big London fund.
Morgan Stanley’s London prime brokerage lost closer to half its assets, as hedge funds worried about fellow funds caught up in the collapse of Lehman that found they could not access assets in Lehman’s European arm.
In the US, the bankruptcy filing for Lehman’s brokerage subsidiary was delayed for several days after the bank failed, allowing many funds to move elsewhere, but the London business was put straight into administration, trapping an estimated $40bn of hedge fund assets.
Banks such as JPMorgan, Credit Suisse, Citigroup, Deutsche Bank, Barclays Capital and UBS attracted many Morgan Stanley clients, in spite of efforts by the bank’s executives to persuade rivals not to approach customers.
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