Friday, August 22, 2008

Some interesting stats stemming from Mortgage Meltdown

The topic that dominated last year's classes is still at the center of attention as classes begin here this Monday. The names have changed (last August we were talking about Bear), but the basic underlying story is the same. Moreover, the size of the problem is better known now.

Burdened by Mortgages, Lehman’s Options Narrow -
"In the last 12 months, Freddie’s stock price has dropped 95 percent. During that period, Lehman has fallen 76 percent. The Standard & Poor’s financial index has lost 42 percent...Merrill Lynch is down 68 percent and Citigroup is down 64 percent"
While the article focuses on Lehman who has problems due to its smaller size and concentration of mortgages, some of the more interesting stats are industry-wide numbers. Some short look-ins:
"According to data Standard & Poor’s...more than 41 percent of the subprime mortgages made in 2006 are delinquent....Mortgages to people with credit one rung higher than subprime, called Alt-A, are also being hammered. Standard & Poor’s estimates that more than 21 percent of such mortgages made in 2006 are delinquent."
Of course the mortgage problems have led to other problems for Wall Street firms. For instance fewer new issues are being sold which reduces fee income to the banks.
"According to Goldman Sachs research, debt underwriting...has fallen off a cliff....asset- backed issues have fallen 80 percent...and mortgage-backed offerings are off 87 percent."

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