U Not Gonna Like This

If you don't already know about it the United States economy is on the verge of a nasty recession possibly even a depression. As I stated in an earlier post banks in the United States made "sub-prime loans." These loans were made to people who would not normally qualify for regular loans. (Example: people with low incomes, bad/poor credit history. )

If you want some idea of how bad this situation is here are a few headlines for you:

Protections for home-loan borrowers OKd

The House approves restrictions on lenders that the president and the mortgage industry oppose. The measure's future in the Senate is unclear.



The House voted as the mortgage market continued to be roiled by mounting foreclosures and the fallout on Wall Street reached into the billions of dollars.



Treasury Secretary Henry M. Paulson Jr. recently said there could be more than 1 million foreclosure proceedings started this year, with 620,000 of them dealing with sub-prime loans made to people with poor credit. Some analysts say a much larger number of mortgages are headed for trouble.

and this:

FT.com

Another week, another memorable encounter with a nervous financial beast. This time, however, the animal in question is Royal Bank of Scotland, the British banking group.

Last week, RBS raised eyebrows when it was widely reported that one of its highly respected credit analysts had predicted that subprime losses could eventually rise to between $250bn and $500bn or twice previous estimates.

and this:

The fallout




The sub-prime loan crisis has put a question mark on the health of the American economy. Dollar has depreciated against major world currencies over the last three months. With inflationary pressures building up and the clouds of credit crunch still looming over head, the outlook for the global economy seems to be pessimistic even though the outlook for core economic fundamentals like unemployment rate, trade, manufacturing etc. remain extremely positive. The property market activity in matured markets has slowed down significantly.

and this:

Mortgage crisis echoes through region spared most of its effects



For nearly two years, the house at 3345 Arcadia Drive — a three-bedroom, 1950s-style bungalow with a backyard pool and remodeled kitchen — has been vacant, its last owner ousted, neighbors said, by a subprime mortgage he could no longer afford.

“He had just reached out too far,” said Charles Adams, who lives next door to the foreclosed property. “He had two trucks that he had [borrowed] money on, and it all hit him at once.”

Subprime adjustable-rate mortgages have starting interest rates well below the U.S. Treasury standard. Rates adjust upward, often dramatically, after a period of time. In the current economic climate, many borrowers cannot afford the new rates, which can boost monthly payments by as much as 35 percent.

and this:

Barclays calculates £1.3bn sub-prime loss

Barclays bank has taken a £1.3bn hit on the sub-prime mortgage crisis in the US. Britain's third biggest bank said it had written off £500m during July, August and September, and £800m in October alone.

Barclays' share price has been under severe pressure in recent days as concern mounted about losses the bank could be facing. Last Friday shares were suspended as rumours swirled of £10bn, and investors rushed to sell.

and this frighting story:

Goldman Sachs warns on surge in loan troubles

The subprime mortgage crisis in the US could lead to the opening up of a US$2 trillion black hole as banks and financiers stop lending money because of mounting losses, the leading Wall Street bank Goldman Sachs warned on Friday.

Goldman Sachs chief economist Jan Hatzius, who is regarded as an expert on the domestic housing market, warned that losses on outstanding loans could balloon to US$400 billion as borrowers struggled to repay debts.

That figure is well ahead of the US$50 billion or so losses already announced by major banks including Citigroup and Merrill Lynch, and well ahead of the Federal Reserve's own estimates. In July Fed Chairman Ben Bernanke estimated that losses on loans could be up to US$100 billion.

But the effects of the crisis are already being felt in other areas of the economy as banks tighten their lending criteria and speculative investment vehicles, which invested heavily in subprime mortgages, find it increasingly hard to borrow money on the short-term markets.

and this:

£3bn And Counting ...

THREE MONTHS into the biggest crisis to have hit the financial markets this decade, it is only now that we are starting to see true extent of the fall-out this side of the Atlantic. With the financial reporting season for the British banks finally under way, HSBC and Barclays announced write-downs totalling £3 billion this week, and everyone is waiting to see how Royal Bank of Scotland will be affected when it reports in several weeks' time.

The latest bout of debt ratings by Standard & Poor's tells you everything you need to know about the extent of the problems. Last week, the ratings experts delivered their verdict on a total of $38.4bn (£18.7bn) worth of the latest tarnished bundle of mortgages.

and this:

Shinsei Profit Decline Widens on Subprime Loan Costs

Nov. 13 (Bloomberg) -- Shinsei Bank Ltd., the worst- performing Japanese bank stock, said first-half profit plunged 40 percent, a steeper decline than it reported three weeks ago, after setting aside more provisions linked to U.S. home loans.

Net income slid to 23.1 billion yen ($210 million) from 38.8 billion yen a year earlier for the six months ended Sept. 30, the Tokyo-based bank said today. On Oct. 25, Shinsei reported a 31 billion yen profit for the period.

The meltdown in U.S. subprime mortgages forced Shinsei to add $69 million in provisions for loans to providers of such credits, boosting total charges to $172 million. Profit is also being squeezed by bad loans in Japan's consumer finance industry after the government and courts cracked down on interest rates.

``Shinsei shares will continue to be pressured as long as the bank has exposure to the U.S. mortgage market,'' said Shinichi Tamura, an analyst at UBS Securities Japan Ltd.

and this:

Subprime loan foreclosures hurt communities, report finds

Subprime loan foreclosures are having a spillover effect on communities, resulting in an estimated price tag for the nation of $223 billion, according to a new report.

and this:

How will the subprime housing crisis affect you?

WASHINGTON -- Much is known about those directly affected by the subprime mortgage crisis --- like the lenders and hedge funds that relied heavily upon subprime loans, as well as the borrowers who struggle under the increased burden of readjusted mortgage interest rates and declining home values. But less is known about the indirect effects that the crisis will have on consumers who have not taken out a subprime loan and who do not live in areas where such loans are prevalent.

The magnitude of the impact of this crisis on the national economy is not clear yet. But there is little doubt as to the indirect impact it will likely have on consumers. Here is a summary.

and this:

Wachovia Credit-Loss, Loan Reserves Reach $1.7 Bln

Nov. 9 (Bloomberg) -- Wachovia Corp., the fourth-biggest U.S. bank, said mortgage-related losses and reserves for bad loans total $1.7 billion so far this quarter, more than the lender reported for the previous three months.

Wachovia set aside as much as $600 million to cover loan losses in the fourth quarter and said securities linked to subprime mortgages fell by $1.1 billion last month. The Charlotte, North Carolina-based company's $1.3 billion of writedowns in the third quarter prompted its first earnings decline in six years.

Chief Executive Officer Kennedy Thompson bought Golden West Financial Corp. for $24 billion in October 2006 to expand into California as housing prices reached peak levels. California and Florida are now Wachovia's most challenging markets as more borrowers pay late or default on their mortgages, Wachovia Chief Risk Officer Donald Truslow said on a conference call today.

There's so much more but I can't possibly post it all . But, this should give you some idea of the massive problem we're facing. Bankers greed for creating these sub-prime loans along with unbridled consumerism on the part of the people who signed up for these sub-prime loans will create the worst nightmare this generation has ever seen...

This is part of the reason why in my previous post I urged readers to buy bullion coins. The fall out from this one is gonna be really bad. So I urge you to protect yourself now by trying to earn your money in Euros and buying bullion coins.