A new thread about the economy
Special for Ed and any body else interested.
More major domino just toppled. ========== Carlyle Capital Corporation, which is based in Guernsey, Channel Islands and invests mainly in triple-A rated mortgage securities, missed four of seven margin calls worth a total of $37 million. The firm said it expects to receive at least one more default notice as banks call in loans.
"As the market continues to go down it becomes ever more difficult to meet margin calls," said Joseph Biernat, director of research at fund manager European Credit Management in London. "Even if there is no risk for the securities, no one wants to support high levels of leverage these days."
Peloton Partners, a London-based hedge fund founded by former Goldman Sachs partners, said last week it plans to liquidate its Asset Backed Securities Fund because of losses on mortgage-backed debt, just a year after it won the title of best new fixed-income fund 2007 by EuroHedge magazine. Two hedge funds managed by Bear Stearns collapsed and Sowood Capital Management, run by a former manager of Harvard University's endowment, shut down last year.
The Carlyle fund, which is run by John Stomber, a former executive at investment firm Cerberus, had $21 billion assets under management as of January with 99 percent of those being triple-A rated U.S. agency mortgage securities. The firm raised more than $300 million in an initial public offering on the Amsterdam stock exchange in July last year. The shares dropped 40 percent to $7.21 on Thursday in Amsterdam.
========== Note: (1) These are among the major players. (2) The assets of these firms were not some sort of exotic derivatives but AAA rated paper from government sponsored enterprises [GSE] such as Fannie Mae and Freddie Mac that have the "implied guarantee '' of the U.S. government. Even those bonds have slumped, leading to the failure of premiere hedge funds such as Peloton Partners LLP & Carlyle.
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Unka' George [George McDuffee]
------------------------------------------- He that will not apply new remedies, must expect new evils: for Time is the greatest innovator: and if Time, of course, alter things to the worse, and wisdom and counsel shall not alter them to the better, what shall be the end?
Francis Bacon (1561-1626), English philosopher, essayist, statesman. Essays, "Of Innovations" (1597-1625).