Mortgage Saga Rages On

Seeing Red:
Why Anemic Income Statements Anticipated.

The fallout from the foreclosure debacle will lie heavily on the banks, who will be forced to take back more and more faulty loans. A Federal Reserve official, Chris Whalen, was quoted as saying this could cost the biggest banks upwards of $50 billion to buy backs of problem loans.

Fannie Mae and Freddie Mac who guarantee 90% of the mortgage loans in the Unites States, will have no choice but to exercise their right to force loan originators to repurchase erroneous or fraudulent loans. Income statements for mortgage underwriters are not going to be a pretty sight for the next 2 quarters, particularly the 4th quarter . It will be interesting to who will push the limits of creative accounting in order to spread out the bad news over time, to avoid the possible ramifications of reporting larger than anticipated losses

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K. Reilly
Cohn-Reilly Report / News Flash

Toxic Mortgages Haunt Goldman

Meanwhile, Toxic Mortgages continue to haunt Goldman Sachs. Barely recovering from the poor publicity derived from an SEC investigation which ended in a settlement, Goldman is facing another law suit. The tainted Golden Goose of the Investment Banking industry was hit with a suit from a German Bank concerning a pool of mortgage assets sold to them in 206.

According to the Wall Street Journal, the suit alleges that Goldman failed to fully disclose the risks underlying the mortgage back securities. According to court documents, the suit contends that Goldman knowingly dumped collateralized debt obligations on their subsidiary LBBW Luxemburg, even though they saw signs that the market was tanking.

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K. Reilly
Cohn-Reilly Report / News Flash

NY Fund Mgrs Dodge Tax Increases

Hedge funds can breathe a sigh of relief as the expected State tax increase was voted down by State lawmakers.The controversial tax increase was to target out-of-state fund managers, which could have lead to an exodus to nearby states, namely Connecticut._____________
NY State lawmakers did manage to finalized the $136 billion budget, approving a final piece of legislation that will raise about $1 billion through a array of tax hikes and other measures. These measures are anticipated to cover the over $9 billion in deficits.

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K. Reilly
Cohn-Reilly Report / News Flash