US Treasury Secretary Henry Paulson said he's moving "fast" in seeking a solution to the subprime crisis as securities industry lobbyists warned against any deal that weakens the US$7.1 trillion mortgage-bond market.
Paulson, who led a meeting of bankers and regulators last Thursday, is negotiating an agreement to fix interest rates on some troubled loans. He's seeking to stem a wave of foreclosures that threaten to drive the US economy into recession next year.
top risk
"The No. 1 risk of across-the-board loan modification is losing investor confidence in mortgage backed-securities markets," Tom Deutsch, deputy executive director of the American Securitization Forum, said in an interview in Los Angeles on Friday.
"If they no longer invest in mortgage-backed securities, you cut off the credit available for refinancing, you cut off the lifeblood of being able to give better loans," he said.
The comments suggest some differences between investors and regulators over how long lenders should freeze rates and what conditions must be met before a borrower qualifies for relief. An accord may come as soon as next week, said a person familiar with the talks. Paulson addresses a housing conference tomorrow.
The forum, whose members include Goldman Sachs Group Inc and Citigroup Inc, was represented at the meeting with Paulson. The group lobbies for investors, traders, underwriters, accounting firms, ratings firms and other institutions involved in the creation and sale of mortgage-backed securities.
"The investors are the people who are ultimately going to either lose money because the loan doesn't get paid or because a lesser amount gets paid on the loan," said Oliver Ireland, a partner at Morrison & Foerster LLP in Washington and a former associate general counsel at the US Federal Reserve.
"The challenge here is to make sure that somehow you create workouts that the ultimate investors can agree to," he said.
loan defaults
Adjustable-rate subprime loans were typically sold with low rates for the first two or three years and then reset at a higher rate for the duration, usually another 28 years. Defaults on the loans, some of which were the product of what Fed officials called "lax" lending standards, climbed to a record this year.
That's likely to worsen as more than 1.5 million nonprime mortgages valued at US$331 billion will reset by the end of next year, the Federal Deposit Insurance Corp said.
"We're moving as fast as we can move," Paulson told ABC News in an interview posted on its Web site. "We believe that the biggest issue is gonna be beginning next year when the number of resets is going to be increasing dramatically."
The US dollar was trading at NT$29.7 at 10am today on the Taipei Foreign Exchange, as the New Taiwan dollar gained NT$1.364 from the previous close last week. The NT dollar continued to rise today, after surging 3.07 percent on Friday. After opening at NT$30.91, the NT dollar gained more than NT$1 in just 15 minutes, briefly passing the NT$30 mark. Before the US Department of the Treasury's semi-annual currency report came out, expectations that the NT dollar would keep rising were already building. The NT dollar on Friday closed at NT$31.064, up by NT$0.953 — a 3.07 percent single-day gain. Today,
‘SHORT TERM’: The local currency would likely remain strong in the near term, driven by anticipated US trade pressure, capital inflows and expectations of a US Fed rate cut The US dollar is expected to fall below NT$30 in the near term, as traders anticipate increased pressure from Washington for Taiwan to allow the New Taiwan dollar to appreciate, Cathay United Bank (國泰世華銀行) chief economist Lin Chi-chao (林啟超) said. Following a sharp drop in the greenback against the NT dollar on Friday, Lin told the Central News Agency that the local currency is likely to remain strong in the short term, driven in part by market psychology surrounding anticipated US policy pressure. On Friday, the US dollar fell NT$0.953, or 3.07 percent, closing at NT$31.064 — its lowest level since Jan.
The New Taiwan dollar and Taiwanese stocks surged on signs that trade tensions between the world’s top two economies might start easing and as US tech earnings boosted the outlook of the nation’s semiconductor exports. The NT dollar strengthened as much as 3.8 percent versus the US dollar to 30.815, the biggest intraday gain since January 2011, closing at NT$31.064. The benchmark TAIEX jumped 2.73 percent to outperform the region’s equity gauges. Outlook for global trade improved after China said it is assessing possible trade talks with the US, providing a boost for the nation’s currency and shares. As the NT dollar
The Financial Supervisory Commission (FSC) yesterday met with some of the nation’s largest insurance companies as a skyrocketing New Taiwan dollar piles pressure on their hundreds of billions of dollars in US bond investments. The commission has asked some life insurance firms, among the biggest Asian holders of US debt, to discuss how the rapidly strengthening NT dollar has impacted their operations, people familiar with the matter said. The meeting took place as the NT dollar jumped as much as 5 percent yesterday, its biggest intraday gain in more than three decades. The local currency surged as exporters rushed to
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