Archive for March, 2008
What happens in hard-hit areas as people try anything to save their homes from foreclosure? Some will not admit the problem – an actual state of denial. Other are turning to short term loans as high fuel costs and home heating costs eat into what little is left. “We’re hearing from around the country that many folks are buried deep in pay day loan debts as well as struggling with their mortgage payments,” said Uriah King, a policy associate at the Center for Responsible Lending (CRL).
Goldman Sachs is expected to lay off up to 15 percent of its work force, from its capital markets division and related support staff, the New York Post said on Friday. Employees were first notified about the cuts on Monday, with most of them taking place by the end of March, the Post said. It said Goldman employs about 32,000 people. The report did not give the number of people effected, nor did the report say how many Goldman Sachs employees work in its capital markets division.
Very few think Alan Greenspan’s retirement was anything but a timely decision before his juggling act fell apart. Of course hindsight is clearer for most, but not for economists. A wonderful trait of economists is hindsight and foresight are often both in clear focus. For example, when HSBC bought predatory lender Household International, leadership at the time realized the deal was time sensitive. Make the money, make money for your friends, and retire before everything crashs around you. The time to retire is the most important critical goal, not the long term fiscal effects of your decisions. It is sound third grade logic, in practice by 8-year olds every day, although they are probably not thinking of retirement.
There is no disputing the fact that Thornburg mortgage is in a slump. The 52 week high for Thornburg was $28.40, while the 52 week low was 69 cents. No, not a typo – 69 cents. So when Thornburg said it needs to raise $1 million (USD) or perhaps they will go broke, who is going to listen? Obviously there must be a handsome return on the risky investment. In exchange for consideration Thornburg will seriously dilute their stock. The capital, to be raised via a convertible bond issue, would lead to investors in those securities owning 27% of the company.
Fannie Mae and Freddie Mac have new revised capital requirements granted by their regulator, the Office of Federal Housing Enterprise Oversight. The two were previously required to hold 30 percent of extra capital. Now they are only required to have 20 percent. The net result is the two can now pump up to $200 billion into the distressed U.S. mortgage market. Remember, however, that the original 30 percent capital requirement was a hedge against accidents after Fannie Mae and Freddie Mac were found to have lax accounting standards and risk controls a few years ago.