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This news "came home to Americans on Main St. from tainted Chinese products to the fact that practically every toy sold in America comes from Red China. [sic] Boston seniors on group tours of the great capitals of Europe were humbled to discover that their greenbacks had shriveled in value to 60 per cent of the local currency....[C]ascading defaults on U.S. subprime mortgages had so weakened the balance sheets of leading financial institutions...that the likes of Citigroup and Merrill Lynch had sought bailouts from state-owned investment funds in Singapore and the United Arab Emirates." Canadians felt the shifting balance of power, too, "in a 15-percent gain against the greenback." .
Wells Fargo to absorb $1.4B provision in 4Q for losses on loans
Wells Fargo & Co. is absorbing $1.4 billion in losses on home equity loans that borrowers have stopped repaying amid a deepening real estate slump that's turned into a financial sinkhole. Until Wells Fargo disclosed its projected losses late Tuesday, the San Francisco-based bank had suffered relatively little damage in a mortgage meltdown that had already battered other major U.S. lenders. "Clearly, this is a disappointment because (Wells) had been seen as better managers of credit than many other big banks," said RBC Capital Markets analyst Joseph Morford. "But now they have a big blemish on them, too." After gaining 34 cents to finish at $29.83 in Tuesday's regular session, Wells Fargo shares plunged $1.40, or 4.7 percent, in the extended trading that followed a Securities and Exchange Commission filing outlining the bank's home equity loan losses.
After the Deluge
In addition, companies like Citigroup (ticker: C), Merrill Lynch (MER) and others have to re-equitize their balance sheets, and that process is just beginning. People are way underestimating the dilution this will cause financial-services companies. They are in an awkward position. The faster they take writeoffs, the less capital they have and the less lending they can do. The market has not fully appreciated how much more equity will have to be raised. The first half looks awful, but it doesn't mean the whole year will be awful. I'm a big believer in not trying to anticipate the end of the world. Hickey: Only home mortgages have blown up. There are problems in auto loans, student loans, leveraged-buyout and junk-bond loans. Wherever people were lending, they were lending stupidly. Delinquencies have risen across the board, but defaults haven't come yet.
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