Monday, July 23, 2007

A New Tidbit of Information From The Fed

Eacb week the Fed puts out a fun report called the "Assets and Liabilities of Commercial Banks in the United States". Over the weekend, reader Max brought to my attention that the Fed has started to include a little extra info datum: the amount of securitized loans outstanding.

Check out page 13, line 34:

It's no surprise that the figure has been running at an average of about $1.2 trillion in the last two weeks the figure has suddenly been reported. This why a sinking ABX across the board is a problem... hello? It's not even the $1.2 trillion that's important to grasp but the leverage that's tied to the $1.2 trillion. No wonder there are blow hards out there who try to mislead and dismiss the mortgage market problems as the latest passing doom and gloom fad. They've got it right, you really don't want to think about this when you go beyond rhetoric and look at hard numbers. But then again, there are no hard numbers since every thing is marked to model at fantasy par when the reality is that trading desks on a marked to market basis won't easily provide you with a bid/ask quotation on OTC paper.

I have no guess why the Fed has deemed it necessary to put the securitized figure out, but I will try to find out on Tuesday. Could be nothing, or pursuant to a new internal directive, but if anything, it's a reminder of why some concern about the mortgage world might be warranted given its size and how mortgages have been repackaged (securitized). Housing is not a shrub in the economic landscape.

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