The rickety financial skyscaper known as the subprime mortgage business is ready to tumble..... [View All]

[marmar]

From the Nation:


The House that Hedge Funds Built

Nicholas von Hoffman


Flash! The Wall Street subprime mortgage high-wire act continues.

Flash! At the midnight hour last week Bear Stearns, a major Wall Street house, has offered up more than $3 billion to save one of its hedge funds.

The money is to go to a financial child of Bear Stearns called High-Grade Structured Credit Strategies Fund. High-Grade is in hock to Deutsche Bank AG, Merrill Lynch & Co. and Lehman Brothers Holdings, among others, for staggering amounts of money. High-Grade borrowed the money to buy billions in bonds backed by the subprime home mortgages. The delinquency and default rates on these mortgages are rising so fast it's beginning to look like something staged by NASA.

Subprime mortgages are home purchaser loans given to people with bad credit histories, insufficient incomes, overextended credit, weird work histories, overwhelming family problems and you-name-what-else in the way of warnings that these mortgage recipients are bad risks. Why any prudent investor would buy such mortgages or bonds comprised of them would be a puzzle--except that the slogan on Wall Street seems to be "Make money today and let tomorrow take care of itself."

Tomorrow has arrived and it is beginning to take care of the greedy mortgage bankers, bond houses, financiers, hedge fund geniuses and Wall Street worthies who made hay the past few years while the sun briefly shone. These mortgages with their teaser interest rates and other deceptive gimmicks were bundled together into bonds, which institutions and financial organizations bought in the belief that they were safe. .....(more)

The complete piece is at: http://www.thenation.com/doc/20070709/howl