Credit Crunch Hits Carlyle Unit

[R K]

Quite. It turns out that 'homo private equiticus', the master race destined to rule the world, is made up of deluded whining turds. I'm not into genocide but I really hope this particular branch of the human race will face extinction as a result of this crisis.

They might be deluded, but they've walked off with billions in fees, charges and profits on money that never existed in the first place. The real banksters are the people that let them gear up at 32X.

[_w_]

Since they are presumably backed by the USG

That is the whole point, officially they CANNOT be. When whining about banks' margin calls yesterday Carlyle petulantly asserted this, which drew an immediate denial from the US treasury. Hence the shaking of the Agency bond market that had been pretty stable until now. Well done Carlyle!

Freddie and Fannie were originally created by Congress but are privately held for profit companies. The US government cannot publicly state (or let it be known) that it would guarantee Agency bonds as it would encourage the Agencies to act even more irresponsibly than they already have. Hence their denial yesterday.

[newbie]

They might be deluded, but they've walked off with billions in fees, charges and profits on money that never existed in the first place. The real banksters are the people that let them gear up at 32X.

No! The individuals that let them gear up at 32X walked off with massive arrangement fees and hence fat bonuses at the end of the year. The real mugs are the shareholders of the Lenders and ultimately the taxpayers who'll bail out the bank as per NR.

[Mr Nice]

That is the whole point, officially they CANNOT be. When whining about banks' margin calls yesterday Carlyle petulantly asserted this, which drew an immediate denial from the US treasury. Hence the shaking of the Agency bond market that had been pretty stable until now. Well done Carlyle!

Freddie and Fannie were originally created by Congress but are privately held for profit companies. The US government cannot publicly state (or let it be known) that it would guarantee Agency bonds as it would encourage the Agencies to act even more irresponsibly than they already have. Hence their denial yesterday.

that's why I said "presumably."

but even though there isn't an "official" acceptance that the issues are government backed, there has been a long standing assumption by almost everyone that they would be.

that's how they get their AAA ratings.

if they suddenly come out and say, "nope, no backing," you would effectively have to downgrade ALL of the mortgages that they have sold on (the vast majority of loans), since their ratings were set with that expectation in mind.

Edited March 7, 2008 by Mr Nice

[REP013]

Looking even worse now (or better depending on your POV)

Carlyle Capital Says Lenders May Force Further Sales (Update4)

Little snippet

March 10 (Bloomberg) -- Carlyle Group's mortgage-bond fund said creditors may liquidate as much as $16 billion of securities unless the two sides reach agreement on debt repayments.

The fund has asked lenders to refrain from further sales after they liquidated collateral securing $5 billion of debt, Carlyle Capital Corp. said in a statement today. It is meeting lenders to discuss more than $400 million of margin calls and is ``evaluating all options,'' the Guernsey, Channel Islands-based fund said.

Carlyle Capital used loans to buy about $22 billion of AAA rated mortgage debt issued by Fannie Mae and Freddie Mac, which the firm says have an ``implied guarantee'' from the U.S. government. Even the safest mortgage bonds have slumped following the collapse of the subprime-mortgage market, leading to the failure of hedge funds led by Peloton Partners LLP.

And the other hedges?

Hedge Funds Reel From Margin Calls Even on Treasuries (Update1)

Snip /

March 10 (Bloomberg) -- The hedge-fund industry is reeling from its worst crisis in a decade as banks are now demanding more money pledged to support outstanding loans even when the investment is backed by the full faith and credit of the United States.

Since Feb. 15, at least six hedge funds, totaling more than $5.4 billion, have been forced to liquidate or sell holdings because their lenders -- staggered by almost $190 billion of asset writedowns and credit losses caused by the collapse of the subprime-mortgage market -- raised borrowing rates by as much as 10-fold with new claims for extra collateral.

While lenders are most unsettled by credit consisting of real estate and consumer debt, bankers are now attempting to raise the rates they charge on Treasuries, considered the world's safest securities, because of the price fluctuations in the bond market.

``If you have leverage, you're stuffed,'' said Alex Allen, chief investment officer of London-based Eddington Capital Management Ltd., which has $195 million invested in hedge funds for clients. He likens the crisis to a bank panic turned upside down with bankers, not depositors, concerned they won't get their money back.

The lending crackdown is the worst to hit the $1.9 trillion hedge-fund industry since Russia's debt default in 1998 roiled global credit markets and required the U.S. Federal Reserve to pressure the securities industry to arrange a $3.6 billion bailout of Greenwich, Connecticut-based Long-Term Capital Management LP. Today, hedge funds are being forced to sell assets to meet banks' margin calls, resulting in the dissolution of the funds.

``There has to be more in the next weeks,'' Allen said. ``There are people who have been hanging on by their fingernails who can't hold on much, much longer.''

Jimi Hendrix springs to mind ... "Castles made of sand!"