US debt jolts world markets

[babylonsister]

US debt jolts world markets
Soaring foreclosure rates and a sharp slump in the US housing market have rattled traders from Frankfurt to Sydney.
By Ron Scherer | Staff writer of The Christian Science Monitor

from the August 17, 2007 edition


Reporter Ron Scherer discusses how recent turmoil in global financial markets is impacting US home mortgage rates.

New York - Over the past six years, Chinese central bankers, French pension-fund managers, and staid German bankers have been the piggy bank for America's housing boom.

In that time, foreign loans to help Americans get mortgages have quadrupled to nearly $1 trillion.

That's one reason soaring foreclosure rates in the US and a sharp slump in the housing market have rattled traders from Frankfurt au Main in Germany to Pitt Street in Sydney, Australia. The prospect of large losses has caused stock markets to tumble worldwide. And central banks have injected billions of dollars to prevent a credit crunch from becoming a financial rout.

On Thursday, there were more signs that the financial markets were trying to cope with the crisis. Instead of just providing overnight liquidity, the Federal Reserve lengthened its cash injection to 14 days. At the same time, Countrywide Financial Corp., the nation's largest mortgage lender, borrowed $11.5 billion from 40 banks. And central banks in Australia and Asia continued to inject funds into their banking system.

In the past, such financial market turmoil would have probably driven the US economy into a recession. "The financial problems may have taken a few banks down and maybe driven the economy into a recession," says Jay Bryson, an international economist at Wachovia Bank in Charlotte, N.C.

However, this time a financial innovation called securitization has allowed the packaging of mortgages and other debt obligations that have been sold to investors around the globe.

more...

http://www.csmonitor.com/2007/0817/p01s02-usec.html

[rodeodance]

1. no more coalitions of willing in the near future!~

[dipsydoodle]

2. foreign loans to help Americans get mortgages ?

It wasn't quite that magnanimous. They were doubtless attracted by the higher yields. The faster the sales increased the greater the rate at which the true default rate expressed as percentage of overall revenues was masked. The mortgage companies have been running with bricks on a pieces of elastic tied to their necks - fine game that one until you stop running. The issue now will once bitten twice shy. They've been bailed out to a certain extent for now - I don't think that their antics will be allowed to repeat.

[madrchsod]

3. they gamed the system and they made their money

now it`s time to move on to another scam..

[dipsydoodle]

4. I take it that you mean

the sub prime mortgage companies.