Planning for the Slowdown; Texas Ratio Update; MGIC Honoring Claims; Putting Funds to Work
January 29, 2010 – 1:30 pmPosted To: The Garrett Watts Report
Securities firm Keefe, Bruyette & Woods has identified 393 banks with Texas ratios greater than 100%. If we assume that 75% of them will fail (our number, not Keefe’s), that would represent $141 billion in assets, and assuming a 25% loss ratio (our number, not theirs), this would cost the FDIC $35 billion. If you’re worried that you’ll be required to own 5% of every loan you sell, find something else to worry about. Congress is not going to allow something that would kill the housing recovery….. and housing itself. Even if it did get passed, we guarantee you that some Wall Street firm would figure out how to securitize the 5% pieces. Private funds would buy them, and even if they got bought at a discount, that would just be factored into what the borrower pays….(read more)