Tuesday, October 21, 2008

falling prices for loans and other risky assets lead banks to force hedge funds to put up more cash

Loan Market Suffering Sharp Writedowns

While all eyes have been fixed on the interbank market, and the plunge in the Baltic Dry Index has also garnered some attention, the sudden decay in the loan market (meaning for the most part leveraged loans, the sort used to finance LBOs) has gotten far less commentary. Yet this will wreak havoc on bank balance sheets, as it did last year. Banks have gone to some length to try to reduce their loan inventories, even going so far as to finance sales heavily. But values have continued to erode. Loans were recently trading in the mid 80,. Some contended those prices were suspect, on small volumes to cooperative counterparties.

Posted by malct @ 10:07 AM (830 views)
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One thought on “falling prices for loans and other risky assets lead banks to force hedge funds to put up more cash

  • Capitalism – before you run for the dictionary

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