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[ogm]

http://www.cnbc.com/...94948/for/cnbc/

NEW YORK - Standard & Poor's is considering cutting the credit rating of more than $12 billion in bonds backed by risky home loans as more borrowers miss payments, the ratings agency said Tuesday.

These bonds _ sold by some of Wall Street's biggest banks _ represent a principal source of financing for the housing market.

Lower ratings for mortgage-backed bonds could cause a domino effect that might ultimately strangle what until this year was a major propellent of home prices: access to easy money.

Standard & Poor's Ratings Service, the credit-rating division of McGraw-Hill Cos., said it may slash its rating on 612 classes of mortgage-backed bonds issued by such banks as Citigroup Inc., Bear Stearns Cos., Lehman Brothers Holdings Inc., Morgan Stanley, Merrill Lynch & Co., and JPMorgan Chase & Co.

S&P is focusing on bonds backed by subprime mortgage debt, or loans to people with spotty credit histories. The bonds, issued in late 2005 and much of 2006, are backed by subprime home loans. Subprime borrowers collectively have missed a lot more payments on loans amid higher interest rates and a slowdown in the economy.

[jjc]

http://www.cnbc.com/...94948/for/cnbc/

NEW YORK - Standard & Poor's is considering cutting the credit rating of more than $12 billion in bonds backed by risky home loans as more borrowers miss payments, the ratings agency said Tuesday.

These bonds _ sold by some of Wall Street's biggest banks _ represent a principal source of financing for the housing market.

Lower ratings for mortgage-backed bonds could cause a domino effect that might ultimately strangle what until this year was a major propellent of home prices: access to easy money.

Standard & Poor's Ratings Service, the credit-rating division of McGraw-Hill Cos., said it may slash its rating on 612 classes of mortgage-backed bonds issued by such banks as Citigroup Inc., Bear Stearns Cos., Lehman Brothers Holdings Inc., Morgan Stanley, Merrill Lynch & Co., and JPMorgan Chase & Co.

S&P is focusing on bonds backed by subprime mortgage debt, or loans to people with spotty credit histories. The bonds, issued in late 2005 and much of 2006, are backed by subprime home loans. Subprime borrowers collectively have missed a lot more payments on loans amid higher interest rates and a slowdown in the economy.

The question is: Who is holding the paper?

[ogm]

The question is: Who is holding the paper?

http://globaleconomi...olding-bag.html

Overall an interesting read, here is some of it.


".....Who holds the toxic tranches? Answer: the originating banks and syndicating investment banks for the most part.

As these lower-rated tranches retain the bulk of the credit risk in the mortgages, their retention by such banks means the much-trumpeted shifting of credit risk off balance sheets was less than met the eye. If the higher-rated stuff is worth 85-90 per cent of face value at best, what is the value of the $750bn of mortgage-backed securities said to be held in US commercial banks' balance sheets?...."

".....Hedge funds bought about 10% of equity tranches in 2006, according to Bear Stearns. But pension funds bought more -- 18%. Insurance companies bought even more -- 19%. And asset managers bought even more -- 22%. When pension funds take big losses, parent companies have to make up the loss or workers have to take smaller pensions. When insurance companies take the loss, insurance rates go up. When asset managers take the loss, well, we all cry when we open our monthly mutual-fund statements.

It's hard to get a complete list of who owns equity-tranche CDOs. But some names that come up include the California Public Employees' Retirement System ($140 million), the Teachers Retirement System of Texas ($63 million), French financial giant AXA (AXA, news, msgs) and the New Mexico State Investment Council ($223 million)...."

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