Tuesday, November 06, 2007

Credit Crunch claims Chuck, 2m foreclosures in US

With $11bn write-off of sub-prime mortgages, CitiGroup became the largest victim of of overzealous selling of mortgages in the US. Projected foreclosures or property repossessions in the US are the 2million over the next year or so. This may well lead to a recession unless Fed rates come down considerably which will perversely make the dollar even weaker than it is. This will have the benefit of making US goods cheaper and exports into the US less attractive.

At the NSE, KQ, and tea/coffee exporters will be impacted by this weaker dollar as will our diasporian friends who send remittances back home.

2 comments:

Ssembonge said...

Maina, What is your inside view of this mess. How is the mood in the city? Are guys expecting bigger blows?

MainaT said...

Put it this way, every bank is sitting on some of the sub-prime stuff and trying to move it out to somebody who also has the same. The origination business (i.e. buying of mortgages from the retail banks) is almost zero and probably won't be revived until Q1 2008 and maybe longer especially now peeps won't be buying houses.
To put it into context, a couple of weeks ago, some of the banks put together a $75bn fund to buy up some of the higher quality abs/mbs securities is seen as a drop in the ocean. Reason being the higher quality stuff amounts to $250bn+ and is $1trn if you include the remainder.