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New crisis: U.S. subprime debt is accused of losing $600 billion



New crisis: U.S. subprime debt is accused of losing $600 billion In the past two days, the news that “U.S. subprime debt will lose US$600 billion and may trigger another cris…

New crisis: U.S. subprime debt is accused of losing $600 billion

In the past two days, the news that “U.S. subprime debt will lose US$600 billion and may trigger another crisis” has been frequently reproduced in major financial forums. How credible is this news? Will “sub-prime” hidden dangers trigger a new wave of crises after “sub-prime”, or are they just a few alarmist figures? Yesterday, Morning News reporters conducted multiple investigations and verifications.


“Sub-prime” losses are said to be equivalent to “sub-prime”


U.S. mortgages are usually divided into three categories: the higher-rated ones are “prime mortgages”, which are still relatively safe assets. Lower grades are “subprime mortgages” whose borrowers tend to have poor credit records and less stable incomes. Since last year, the default rate of subprime lenders has increased sharply, triggering a domino effect in the financial market and subsequently leading to the outbreak of a sweeping financial tsunami.


As for the so-called “subprime” loan (“Alt-A” mortgage), the credit rating is exactly between “prime mortgage loan” and “subprime mortgage loan”. “Second-prime” lenders have relatively good credit records, although their incomes are less stable. The original intention of its product design is to enable this group of people to afford housing, so the document requirements for proving the qualifications of the lender are extremely low.


Previously, the safety of “sub-prime” loans did not cause widespread concern in the market. However, the above-mentioned news that caused an uproar said that the speed of deterioration of “sub-prime” loans is jaw-dropping. There has been a spike in defaults in recent months. At the same time, the attitude of rating agencies has also undergone a major reversal.


Half a year ago, the internationally renowned rating agency Moody’s was optimistic about “suboptimal”, but its new report predicts that these bonds will generate four times the previous losses. Moody’s expects losses on securities related to “subprime” mortgages issued in 2006-2007 to reach 20%, compared with the historical average loss of less than 1%.


The news also quoted analysts from Goldman Sachs as saying that losses on “subprime” bonds (including securitization and non-securitization) with a total loan amount of US$1.3 trillion may reach US$600 billion, which is “almost the same as the subprime mortgage crisis.” The expected losses are the same.”


“Pessimistic data” provides evidence


After searching through various sources, the Morning Post reporter discovered that the above news was first published in The Economist, and it was its translation that was reprinted by major forum websites.


As one of the four famous financial magazines, The Economist has a good reputation in the industry for the authoritativeness and authenticity of its reports. Correspondingly, a number of data have been released recently, and the results also support the news published by The Economist.


Yesterday, the U.S. Department of the Treasury released a survey report saying that 20 major U.S. banks that received government assistance in the fourth quarter of last year reduced credit to businesses and consumers, showing that the U.S. government’s financial rescue plan has so far been effective in increasing credit. has little effect.


On the same day, the New York manufacturing index for February was released. Data showed that New York’s manufacturing index fell to an all-time low in February, indicating that the economic recession that has lasted for more than a year is still deepening.


Data from the U.S. Department of Labor show that the U.S. unemployment rate was 7.6% in January, the highest level since September 1992. Some economists even predict that the U.S. unemployment rate may rise to 9% in the next few months.


The key to “second-best” prospects lies in commercial banks


“The emergence of the ‘subprime’ crisis stems from people’s vicious expectations for the future economic situation.” Regarding the above news, the assistant director of the Institute of Economics of the Shanghai Academy of Social Sciences weighed that after the subprime mortgage crisis triggered economic turmoil, , people’s confidence in the future economy is shaky. “Not only non-performing assets are affected, but good assets that could have been regarded as more secure will inevitably be impacted, thus creating a vicious downward spiral.”


In this case, the trade-off is more worried about the impact on the real economy. “If the real economy deteriorates further, it will inevitably have an impact on the recovery of European and American economies, and this increase in time will inevitably make my country’s economic downturn cycle Stretch, this is not good news.”


Sun Lijian, deputy dean of the School of Economics at Fudan University and professor of finance, believes that this is a signal that risks from the personal loan market are spreading to the corporate credit market.


“Commercial banks are the last firewall of the U.S. financial system. If the institutions holding ‘sub-prime’ bonds are limited to hedge funds and investment banks, then the risks are relatively controllable.” Sun Lijian said that once commercial banks also hold large amounts “sub-prime bonds”, then there are likely to be problems in the corporate credit market as well. “Because in terms of credit rating, corporate credit will definitely be more creditworthy than individuals. To a certain extent, the exposure of the ‘subprime’ crisis is that after the subprime mortgage crisis affects the real economy, the recession of the real economy once again affects the financial sector. Industry.”

AAVEGTRHYTJ


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