The US financial sector has already entered bankruptcy: Today Ownit, Mortgage USA Lenders,… tomorrow Ameriquest, Wells Fargo, HSBC Finances?
While these days big international players boast about the extraordinary health of international finances and about the record-profit margins made by hedge funds and private banks, the first mortgage lenders file for bankruptcy. Beyond the confidential OWNIT bankruptcy (#11 on a list of US largest subprime mortgage firms) (1) between Christmas and New Year's Eve, the entire US mortgage industry is directly or indirectly at risk. Indeed Ownit was apparently neither a marginal nor a suspect player.
The list of the top-ten subprime mortgage originators shows that big names such as Wells Fargo, HSBC Finance, Ameriquest or Option One run risks of bankruptcy or colossal losses at any time, just like Ownit, #11 on this list. But it is also the case of major investment banks, as shown by the bond rating agency Moody's concern about Lehman Brothers' subprime mortgage bonds (2). And it is of course also the case of many financial organizations of lesser international fame, as illustrated at the beginning of January 2007 by the closing of Mortgage Lenders USA's main unit due to excessive losses on subprime mortgages (3). Ownit too started by freezing its processes and ended up filing for bankruptcy three months later.
In Europe Eurozone in crisis with a bursting housing bubble in Spain and speculative currency bubbles in Eastern Europe. The new combination built by the EU (and in particular by its Brussels centre) is a new power learning about its new role. The learning process will be tough over the next six months because the EU will experience its first real systemic crisis, i.e. an asymmetric shock already looming in Spain…
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