Archive for August, 2007

Fieldstone Investment Corp., the Columbia-based subprime mortgage lender that was acquired last month, has stopped accepting new loan applications from consumers and mortgage brokers as its new owner scrambles to overcome a liquidity squeeze and answer margin calls.

I hope the Securities Exchange Commission is more cautious in evaluating and granting private companies “ public” status, than lenders were with the mortgage industry. I am seeing more Initial Private Offering from private investment companies. Divisions of companies are being separated from parent companies and offered as IPOs. The categories of some of the IPOs are also difficult to define. Some but not all areas effected by mortgage fallout are investment, insurance, and home improvement retailers. A fellow researcher asked about the purpose of an IPO. Talk about a delayed fuse, I did not give it a serious thought at the time. I answered the question, “Raise capital and distribute risk”. I was deep in other research and resented the distraction.

Sherrod Brown, a newly elected Democratic senator from Ohio who serves on the banking committee, said, “While the economy is good for people at the top, it’s not so good for a steelworker in Lorain, Ohio, or a small-business owner in Dayton”. Representative Charles Wilson, another newly elected Democrat from Ohio and a member of the financial services panel, said that “people in my district, when they pick up the paper, aren’t checking their stock holdings. They’re checking the help-wanted ads.”

Maybe it is time for a new acronym for the financial industry. How about WALLOP, Wild A—-d Lending Loan Originator Products? The overall economy has been WALLOPed.

As a torrent of corporate debt hits the market in the weeks ahead, losses could grow for both investment banks and hedge funds, some say. The availability of credit has disappeared, and there are $220 billion of leveraged-buyout loans that need to be financed. One analyst thinks the problem will hit investment banks hard and many more funds be singing the mortgage blues.

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