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Ben Bernanke Tells US Congress That Subprime Crisis Will Get Worse
Posted by Dan Denning on Nov 9th, 2007

Yesterday we mentioned the possibility of synchronous recessions/crashes in China and the US. It’s worth mentioning again. It’s the biggest objection to buying into the resource bull at these prices.

On that score, US Fed Chairman Ben Bernanke fronted the US Congress yesterday and told them that the subprime problem would get worse. But traders are learning to quickly discount what the Fed chief says. “Bernanke’s comment that the subprime mess could be in the US$150 billion ballpark exacerbated the sell-off. Why should we believe him? He didn’t see any of it coming,” said Elliot Spar of Stifel, Nicolaus & Co.

The Fed is spinning the story anyway. What’s going on in the credit markets is no longer just a subprime story. It’s a corporate debt story too. It’s a bank asset quality story. And it’s a story about the health and viability of the balance sheets of some of America’s largest financial firms.

Markets generally muddle through even the worst of situations. But as the Austrian theory of the credit cycle suggests, massive misallocations of capital have to be liquidated before the next bullish phase can begin. Right now, investors seem to be in full denial that liquidation is necessary and healthy. Acceptance will come eventually, after anger and grief.

Ben Bernanke Tells US Congress That Subprime Crisis Will Get Worse

The worst of the subprime crisis may not be over
By Sameera Anand | 14 November 2007

Howard Marks and William Kerins from Oaktree Capital discuss the firm's global investment strategy and explain why subprime contagion could still spread.

“If we avoid the losers, the winners take care of themselves,” says Howard Marks, chairman of Oaktree Capital Management, describing the firm’s motto. Marks is categorical that an investment management firm needs to stand for something other than amassing assets, thus Oaktree’s focus is on avoiding ...

The worst of the subprime crisis may not be over - General - FinanceAsia.com - The network for financial decision makers

Western Health’s Multi-Million Dollar Losses

Losses at Western Health are more extensive than first thought and the Health Minister Daniel Andrews continues to fail to reveal the full extent of potential future losses.

“The annual report released last week revealed Western Health, which includes Western, Williamstown and Sunshine hospitals, recorded a $10.7 million deficit, a significant loss from a $5 million surplus in 2005/06,” said Helen Shardey, Shadow Health Minister.

“A $2 million loss by Western Health in the subprime crisis was also revealed, on which the Auditor-General signed off on 17 August 2007, adding further pressure to precious hospitals resource.
. . .
“The Brumby Government and the Health Minister must be held accountable for funds lost on the high risk offshore subprime market. This is money which could have been used to pay for resources and staff across the already stretched Western Health system, but instead the government chose to stake it on high risk, secret investments.

“The Victorian Government currently provides the lowest level of per capita funding to public hospitals, it spends the least per head of population on hospitals and has the fewest number of beds per head compared to all the other state and territories, yet it is willing to gamble with hospital funds,” said Mrs Shardey.

2007 November

Commonwealth Bank ready to lift interest rates

By AAP and staff writers
November 22, 2007 10:36am
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THE Commonwealth (sic) Bank is ready to lift interest rates on variable home loans again, saying higher funding costs caused by the US mortgage crisis need to be passed on to customers.

Commonwealth Bank ready to lift interest rates | NEWS.com.au Business

In a further sign that the US housing sector could be in for more pain, Treasury secretary Henry Paulson said the number of US home-loan defaults could be "significantly bigger'' than originally thought.

"This is not business as usual. This is an extraordinary situation,'' Mr Paulson told the Wall Street Journal.

Mr Horner said the comments show "just how serious the issues are in the US housing market and how difficult they are going to be to resolve.

"It's not a situation that's going to turn around anytime soon and that's going to make it hard for risk appetites to strongly bounce while that remains the focus,'' Mr Horner said.

Australian dollar falls below US87 cents | Mercury - The Voice of Tasmania