In New Phase of Crisis, Securities Sink Banks

WSJ ^ | 8/21/09

[FromLori]

U.S. banks have been dying at the fastest rate since 1992, mainly because of bad loans they made. Now the banking crisis is entering a new stage, as lenders succumb to large amounts of toxic loans and securities they bought from other banks.

[katiekins1]

In other financial BS!

http://www.zerohedge.com/article/chinas-credit-bubbleicious-trade-balance-pain

[the invisib1e hand]

wuddameye missing here? securities -- cdo's? I thought those were already written off. securities -- equities? the markets up 50% from it's lows.

somebody hep me.

[FromLori]

Securities are packaged products in this case full of bad loans that banks sold to one another the smaller banks have their fair share of blame because they wanted to make more money so they willingly bought these products.

Market may be up now it was that way in the last Depression too and then we know what happened. They told all kinds of stories then about how good things looked. There is a you tube here on that

http://bluelori.blogspot.com/2009/08/propaganda-1929-vs-2009.html

[the invisib1e hand]

your first paragraph appears to refer to CDO's - collateralized debt obligations and other goodies in that family (cmo's etc). So as I said, these were the first things to be written just about off -- not down, but off, thanks to MTM accounting.

What am I missing?

[Jimmy Valentine]

The securities you are speaking of depend upon the tranche you bought. My outfit bought into the first and senior tranches of a number of securities and is getting paid well if at a lower rate than those who bought secondary or tertiary parts of the issue.

THe problem is that the bond issue is not rated in parts but as a whole so even if your tranche is first rate it gets dragged down by the underperforming lower rated tranches behind it.

Thanks to the Financial Accounting Standards Board the a**holes) you have to mark securities to market, so even if your tranche is fine it is rated an impaired security.

Lots of banks being downgraded on this issue alone.

[The Magical Mischief Tour]

I’m telling ya folks our economy, it’s all one big smoke and mirrors ponzi scheme that is coming home to roost.