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."
‘SWASTICAR’: Tesla CEO Elon Musk’s close association with Donald Trump has prompted opponents to brand him a ‘Nazi’ and resulted in a dramatic drop in sales Demonstrators descended on Tesla Inc dealerships across the US, and in Europe and Canada on Saturday to protest company chief Elon Musk, who has amassed extraordinary power as a top adviser to US President Donald Trump. Waving signs with messages such as “Musk is stealing our money” and “Reclaim our country,” the protests largely took place peacefully following fiery episodes of vandalism on Tesla vehicles, dealerships and other facilities in recent weeks that US officials have denounced as terrorism. Hundreds rallied on Saturday outside the Tesla dealership in Manhattan. Some blasted Musk, the world’s richest man, while others demanded the shuttering of his
ADVERSARIES: The new list includes 11 entities in China and one in Taiwan, which is a local branch of Chinese cloud computing firm Inspur Group The US added dozens of entities to a trade blacklist on Tuesday, the US Department of Commerce said, in part to disrupt Beijing’s artificial intelligence (AI) and advanced computing capabilities. The action affects 80 entities from countries including China, the United Arab Emirates and Iran, with the commerce department citing their “activities contrary to US national security and foreign policy.” Those added to the “entity list” are restricted from obtaining US items and technologies without government authorization. “We will not allow adversaries to exploit American technology to bolster their own militaries and threaten American lives,” US Secretary of Commerce Howard Lutnick said. The entities
Minister of Finance Chuang Tsui-yun (莊翠雲) yesterday told lawmakers that she “would not speculate,” but a “response plan” has been prepared in case Taiwan is targeted by US President Donald Trump’s reciprocal tariffs, which are to be announced on Wednesday next week. The Trump administration, including US Secretary of the Treasury Scott Bessent, has said that much of the proposed reciprocal tariffs would focus on the 15 countries that have the highest trade surpluses with the US. Bessent has referred to those countries as the “dirty 15,” but has not named them. Last year, Taiwan’s US$73.9 billion trade surplus with the US
Prices of gasoline and diesel products at domestic gas stations are to fall NT$0.2 and NT$0.1 per liter respectively this week, even though international crude oil prices rose last week, CPC Corp, Taiwan (台灣中油) and Formosa Petrochemical Corp (台塑石化) said yesterday. International crude oil prices continued rising last week, as the US Energy Information Administration reported a larger-than-expected drop in US commercial crude oil inventories, CPC said in a statement. Based on the company’s floating oil price formula, the cost of crude oil rose 2.38 percent last week from a week earlier, it said. News that US President Donald Trump plans a “secondary