by Calculated Risk on 12/18/2007 12:00:00 AM

From the NY Times: Fed and Regulators Shrugged as the Subprime Crisis Spread. This story offers an opposing perspective to Greenspan's personal exoneration.

Greenspan is no Atlas.

by Calculated Risk on 12/17/2007 06:17:00 PM

Press Release: Fitch Places FGIC on Rating Watch Negative After CDO & RMBS Review

Fitch Ratings has placed the following ratings of FGIC Corporation (FGIC Corp.) and subsidiaries Financial Guaranty Insurance Co. (FGIC) and FGIC UK Ltd. on Rating Watch Negative:

FGIC Corp.

--Long-term 'AA';

--$325 million of 6% senior notes due Jan. 15, 2034 'AA'.

Financial Guaranty Insurance Company

FGIC UK Ltd.

--Insurer financial strength 'AAA'.


This action follows the completion of the updated assessment by Fitch into FGIC's current exposure to structured finance collateralized debt obligations (SF CDOs) backed by subprime mortgage collateral and one CDO-Squared deal, as well as FGIC's exposure to residential mortgage-backed securities (RMBS). This review indicates that FGIC's capital adequacy under Fitch's Matrix financial guaranty capital model currently falls below guidelines for an 'AAA' IFS rating by more than $1 billion, due to downgrades by Fitch in a number of FGIC's insured SF CDO's coupled with some deterioration in the company's RMBS portfolio, including second-lien mortgage securitizations.

If within the next four-to-six weeks, FGIC is able to obtain firm capital commitments, and/or put in place reinsurance or other risk mitigation measures in order to meet capital guidelines, Fitch would expect to affirm FGIC's ratings with a Stable Rating Outlook. If FGIC is unable to meet capital guidelines in the noted time frame, Fitch would expect to downgrade FGIC's ratings. In that event, Fitch anticipates downgrading FGIC's IFS rating no lower than one or two notches. FGIC and its investor group have presented plans to Fitch about bolstering FGIC's capital position to support an 'AAA' IFS rating. While the basics of the plan would appear to be sufficient to restore FGIC's 'AAA' rating and Stable Outlook, execution of the plan could be challenged by individual requirements at each of FGIC's primary investors.

by Calculated Risk on 12/17/2007 03:57:00 PM

From Bloomberg: Paulson Favors Fannie, Freddie Buying Jumbo Mortgages

Paulson said in an interview today that he favors allowing the two companies to purchase so-called jumbo loans, which exceed $417,000. ...

Paulson said he agreed with Federal Reserve Chairman Ben S. Bernanke, who suggested to lawmakers that they consider allowing Fannie Mae and Freddie Mac into the jumbo mortgage market. ``I think Ben Bernanke and I are on the same page,'' Paulson said.

Bernanke indicated in a Nov. 8 hearing that he favored letting Fannie Mae and Freddie Mac buy mortgages of up to $1 million.

by Calculated Risk on 12/17/2007 02:54:00 PM

From the Financial Times: ECB steps up liquidity fight

Emergency help for financial markets entered new territory on Monday night as the European Central Bank announced it would on Tuesday offer unlimited funds at below market interest rates in a special operation to head off a year-end liquidity crisis.

The surprise move, which follows last week's co-ordinated barrage of measures by the world's central banks to increase market liquidity, suggests the ECB is still frustrated at the failure to ease market tensions.

by Calculated Risk on 12/17/2007 01:11:00 PM

Click on graph for larger image. The NAHB reports that builder confidence was unchanged at a record low 19 in December.

NAHB: Builder Confidence Remains Unchanged For Third Consecutive Month

Builder confidence in the market for new single-family homes remained unchanged for a third consecutive month in December as problems in the mortgage market and excess inventory issues continued, according to the latest NAHB/Wells Fargo Housing Market Index (HMI), released today. The HMI held even at 19 this month, its lowest reading since the series began in January 1985.

“Builders continue to look for signs of improvement in the ongoing mortgage market crisis that is weighing on housing and the overall economy,” said NAHB President Brian Catalde, a home builder from El Segundo, Calif. ...

“Today’s report shows that builders’ views of housing market conditions haven’t changed in the past several months, and there clearly are signs of stabilization in the HMI,” noted NAHB Chief Economist David Seiders. “At this point, many builders are bracing themselves for the winter months when home buying traditionally slows, scaling down their inventories and repositioning themselves for the time when market conditions can support an upswing in building activity – most likely by the second half of 2008.”
...
In December, the index gauging current sales conditions for single-family homes improved by a single point, to 19, and the index gauging sales expectations for the next six months rose two points to 26. Meanwhile, the index gauging traffic of prospective buyers declined three points to 14.

Regionally, the HMI results were mixed in December. The Midwest and South each posted two-point gains in their HMI readings, to 15 and 21, respectively. The West held even at 18, and the Northeast, which experienced wetter weather conditions than normal in the survey period, posted a seven-point decline to 19. All regions were down on a year-over-year basis.