Any body who thought that the subprime pain is going to diminiish quick is surely living in a fairy land. The total of all US$-based mortgage bonds is $10.4 trillion.A conservative estimate of the prime mortgages within this giant mass is $7 trillion. We all know it is more, so bear with my lowball for argument's sake."The prime mortgage bond index measures an aggregate of prime-rated bonds scattered across the beleaguered 50 states, varying over loan size from large to medium to small. The 'AAA' mortgage bond index has lost a whopping 30%, a fact that continuously eludes the big bankers and their legion of obsequious monitoring mavens", and the estimated $1.4 trillion in subprime mortgages, as representative of the "BBB" mortgage bond index, "has lost 80% of its value". Hence saying that Indian Banks are going to loose 5 tp 10% of their investment is like living in a fools paradise. The sub prime bonds have lost 80% of their value, hence he same goes for valuation for these bonds held by Indian Banks. And no one knows what would be the loss of Reserve Bank of India incase if they have also invested in these subprime bonds with their huge dollar reserves. Only thing the Reserve Bank of India does not let this most crucial data available to the markets about its investment portfolio. Coming back to the overall losses a 30% loss in prime related mortgages maths out to 2.1 trillion dollars & 80% loss in the 1.2trillion dollar sub prime mortgages. Well i leave the simple calcula
RE:SUB PRIME LOSS-NOT BILLIONS ITS GOING TO BE TRILLIONS
by Ramesh M on Feb 06, 2008 03:22 PM Permalink
Can't they revert the subprime loan rate to a fixed rate so the people with not-so-good-credit-rating can repay the loan as they were doing before? This way the problem can be solved...atleast the principal can be recovered if not the interest on it.
RE:SUB PRIME LOSS-NOT BILLIONS ITS GOING TO BE TRILLIONS
by Kishore Bondada on Feb 06, 2008 03:40 PM Permalink
exactly.....tht's why US Federal Bank has been cutting the interest rates off late, so that their EMI amounts come down and would be affordable for them to pay
RE:SUB PRIME LOSS-NOT BILLIONS ITS GOING TO BE TRILLIONS
by netinetineti on Feb 06, 2008 03:44 PM Permalink
why is it then, inspite of such huge interest rate cuts, experts still say that the chances of recession are very high?
RE:SUB PRIME LOSS-NOT BILLIONS ITS GOING TO BE TRILLIONS
by Fab Reens on Feb 06, 2008 03:40 PM Permalink
Thanks for the eye-opening. I knew there is more pain than they foretell but didn't know the numbers. And "legion of obsequious monitoring mavens" is a nice esoteric touch for the credit-rating agencies. Nice post.
