It appears that nobody in the open market wants the junky mortgage backed securities anymore. Not even Canadians!
Coventree Fails to Sell Asset-Backed Commercial Paper
Aug. 13 (Bloomberg) -- Coventree Inc., the Canadian finance company that went public in November, failed to sell asset-backed commercial paper to replace maturing debt because of the credit crunch caused by U.S. subprime mortgage losses.
The shares tumbled 35 percent after the company extended maturities on C$250 million ($238 million) of commercial paper and sought emergency funding for another C$700 million of debt. Toronto-based Coventree's units have about C$16 billion of asset- backed commercial paper outstanding.
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In the U.S., asset-backed commercial paper comprises about $1.15 trillion of the $2.16 trillion in commercial paper outstanding. The debt is backed by mortgages, bonds, credit card and trade receivables as well as car loans.
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The company has other commercial paper maturing and may be forced to extend maturities on that debt too and draw more money from other sources, Coventree said.
I love the main stream media, it took about 1/3 through the article to get a definition of "commercial paper". I kind of figured that it was MSB's, but I did not want to put words in their mouths.
It appears that the Fed is trying to have it's cake and eat it too. They kept the Fed rate the same, but are throwing money at the problem. But who is catching it? And which problem are they talking about? Bush does not want a bail out for the lonely homeloaner. So why is the Big Banks getting free cash from the Fed, and where is it coming from?
The Fed Bought What?
What is significant about Friday's repurchase agreements is not so much their size, but the securities that the Fed exchanged for money: mortgage-backed securities (MBS). Indeed, the entire $38 billion dollar injection went to MBS purchases, the largest open market purchase of this asset type ever conducted by the Fed, smashing the previous record of $8.6 billion set back in September of 2005. See chart, above.
Remember, it's not the Fed's money to throw away. It's our. (And China's and Japan's and Russia's.........)
4 comments:
The best the Fed can hope to do is cause this thing to extend out a decade. The best thing would be to let the whole thing unravel. It would be more painful but much quicker. Like a band aid...RIGHT OFF!
This is such wonderful news... that I am paying taxes so that the Fed can put support under the ridiculous housing market to keep places out of my reach for another year.
Had it not been for gov't meddling in the housing industry for the past 80 years, in the form of subsidies,FHA, HUD,tax abatements for development, federally chartered and subsidized entities like Fannie Mae and Freddie Mac, and local subsidies as well, and Fed manipulation, rents and purchase prices would be nowhere near these levels.
The housing bubble was sponsored by the taxpayers, and will cost the taxpayers.
9:07,
well said.
in the beginning homes had to be purchased from savings and this limited the price that could be charged. financing enables higher prices/fees/taxes and creates income for the money man.
then the gov,t got involved with tax deductions, loans, rent subsidies, low income ownership programs, TIF's and intrest rate manipulation.
i remember as a kid asking my father why anyone would pay allmost 2x the purchace price in intrest over 30 yrs and his reply was "thats the way it works".
his reply was "thats the way it works".
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It is called "Groupthink".
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