Has Goldman Set a Dangerous New Precedent By Folding on Subprime Lending in Boston? [View article]
Bruce - - -
You wrote: "Fannie Mae (FNM) and Freddie Mac (FRE) hold tens of billions of these insured or ‘enhanced’ mortgages. FHFA recently reported that the Agencies collectively held or guaranteed 30.2 million mortgages. Of that amount 16%, or 4.8 million are identified as “Non Prime”. Put differently, the Agencies hold 6,000 times more non-prime mortgages then Goldman originated in Boston."
If we multiply the Massachusetts $50 million by 6,000, the result is $300 billion. And not all mortgages are backed by Fannie and Freddie.
So either Goldman overpaid in Boston, or the potential anchor on the economy is huge.
Has Goldman Set a Dangerous New Precedent By Folding on Subprime Lending in Boston? [View article]
Bruce - - -
Good commentary. If this is the tip of an iceberg, the play-out will be dramatic. Such outcomes for Bank of America, Wells Fargo and others could be many billions of dollars. With lawyers fees and cuts for states, the cost could be far greater than voluntary renegotiations of the same mortgages by the banks. I doubt that this eventuality was considered in the stress tests or is recognized by the bold statements by bankers of intention to earn their way out of capital shortfalls.
On Short-Sellers and Dishonest Executives [View article]
This is a repeated comment from your article "Short Selling Revisited"
Good article. I like to "short against the box" in volatile markets for downside protection of long-term capital gains (and sometimes profit). Since I am shorting companies I already own, this is a good example of shorting that does not have the objective of "bringing down the company". In many cases, shorting against the box is a much more cost effective way to hedge than buying put options. The more volatile a stock, the larger the time value in the premium. Writing calls as a hedge provides limited protection, whereas, whereas selling short provides unlimited value protection. Finally, selling short has no expiration date.
Has Goldman Set a Dangerous New Precedent By Folding on Subprime Lending in Boston? [View article]
You wrote: "Fannie Mae (FNM) and Freddie Mac (FRE) hold tens of billions of these insured or ‘enhanced’ mortgages. FHFA recently reported that the Agencies collectively held or guaranteed 30.2 million mortgages. Of that amount 16%, or 4.8 million are identified as “Non Prime”. Put differently, the Agencies hold 6,000 times more non-prime mortgages then Goldman originated in Boston."
If we multiply the Massachusetts $50 million by 6,000, the result is $300 billion. And not all mortgages are backed by Fannie and Freddie.
So either Goldman overpaid in Boston, or the potential anchor on the economy is huge.
Has Goldman Set a Dangerous New Precedent By Folding on Subprime Lending in Boston? [View article]
Good commentary. If this is the tip of an iceberg, the play-out will be dramatic. Such outcomes for Bank of America, Wells Fargo and others could be many billions of dollars. With lawyers fees and cuts for states, the cost could be far greater than voluntary renegotiations of the same mortgages by the banks. I doubt that this eventuality was considered in the stress tests or is recognized by the bold statements by bankers of intention to earn their way out of capital shortfalls.
On Short-Sellers and Dishonest Executives [View article]
Good article. I like to "short against the box" in volatile markets for downside protection of long-term capital gains (and sometimes profit). Since I am shorting companies I already own, this is a good example of shorting that does not have the objective of "bringing down the company". In many cases, shorting against the box is a much more cost effective way to hedge than buying put options. The more volatile a stock, the larger the time value in the premium. Writing calls as a hedge provides limited protection, whereas, whereas selling short provides unlimited value protection. Finally, selling short has no expiration date.