February 13, 2007
The Subprime Mortgage Meltdown
Posted by RESPA Dog
Feb. 12 (Bloomberg) — Merrill Lynch & Co. Chief Executive Officer Stanley O’Neal was willing to lose $230 million to catch Bear Stearns Cos. and the shakeout is just beginning.
That’s because Merrill is determined to capture a dominant share of trading in bonds backed by home loans, the fastest- growing debt market since 1995 and this year’s most troubled. O’Neal’s enthusiasm for mortgages to potentially delinquent borrowers coincides with the highest default rate in more than six years, a record contraction in demand for so-called subprime loans and descending bond prices.
Merrill already has bankrolled two home lenders that subsequently failed and purchased a third, First Franklin Financial Corp., for $1.3 billion, just before HSBC Holdings Plc disclosed that its bad-loan provisions increased 20 percent because of the unraveling U.S. subprime market.
“You’ve got to remember'’ that New York-based Bear Stearns, the perennial leader in mortgage bonds with only a quarter of Merrill’s 56,000 headcount, “got into this business at the height of the boom, when you could not lose,'’ Angelo Mozilo, Countrywide Financial Corp.’s CEO, said in a …..
