Tuesday July 10, 2007

Banks losing up to $52 billion over subprime

reuters.com :

Credit Suisse analysts estimated banks could lose up to $52 billion over time due to their exposure to collateralized debt obligations that invested in U.S. subprime mortgages. Most of the losses would stem from loans to hedge funds, compared with an expected $5 billion to $10 billion from banks' direct investment in subprime CDOs, the Credit Suisse analysts said in a report dated July 6.

In June, fears of hedge fund losses in subprime mortgages, or home loans made to borrowers with blemished credit histories, rattled financial markets after news of hefty losses at two funds managed by Bear Stearns. Troubles at several other hedge funds have came to light since Bear Stearns' fund problems: Cheyne Capital's Queens' Walk, Cambridge Place Investment's Caliber Global Investment, and United Capital's Horizon Funds.

Worries about broader systemic impact from subprime woes have kept some investors on the defensive, spurring bids for low-risk investment such as U.S. Treasury securities. Subprime CDOs are instruments created from securities backed by subprime mortgages whose fortunes deteriorated with a spike in loan defaults and delinquencies.

See also :

1. United Capital halts hedge fund refunds
2. $908m Cambridge Place Caliber Fund shuts on subprime loss
3. BIS warns of Great Depression dangers from credit spree
4. How professionals dump their toxic waste on you

(2007-07-10 12:55:38 SGT) [Biz] Permalink

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