Even though I’ve been blogging for just a couple of months it’s hard to believe how many times I could title today’s blog what I named one just a few days ago. Today a story headlined on the Wall Street Journal’s website entitled: HSBC Hurt by Bad Loans – and to me, it’s like déjà vu all over again.
Those who have read my book know that it was HSBC (Hong Kong and Shanghai Banking Corp.* [China]) who fired the first salvo in what turned out to be the “financial crisis.” The announcement, which arrived in February 2007, claimed much higher than expected losses on subprime mortgage debt in the U.S. It was the first time most of us heard the words subprime mortgage. Now we know what kind of hell it brought.
Today’s WSJ article is all too reminiscent of that one. It reports that HSBC’s third quarter profit dropped 36% to $3 billion. A 24% jump in bad loans cost them a whopping $4 billion in the three month period. The steep decline in profits was “mainly because of higher U.S. impairments on mortgages.”
Like in 2007, this HSBC announcement took Wall Street by surprise (they were expecting HSBC’s profit to be $6 billion, missing the mark by a not so slight 50%.) Like then, the HSBC announcement caused the market to shake, as the Dow quickly traded down 300 points in the first thirty minutes of trading today.
Could HSBC have fired another flare of financial doom?
Well if they didn’t, Fannie Mae certainly did.
Another Wall Street Journal article reports that Fannie Mae (notorious culprit to the 2008 crash) needs another $8 billion of government assistance to continue operations. Fannie posted a $5 billion dollar loss in the third quarter alone, triggered by sales of foreclosed properties at lower than rock bottom prices. It’s like a fire-sale.
Let me ask: How can the American real estate market recover when Fannie and Freddie are fire-selling our land at low prices and devaluing its worth? The government supposedly took control of these entities to prevent this from happening.
This, not to mention, that the government doesn’t have the money to fund Fannie Mae. Remember, the U.S. government is currently running a $2 trillion deficit for 2011. Since there is no Budget (the Obama Administration has failed to produce a budget since it commenced) there’s no room in it to bail Fannie again this time.
So how will they get the cash?
They’ll print it.
And when HSBC submits their bad mortgage claims to Fannie and Freddie they’ll need even more government assistance to cover that shortfall. Then the Fed, once again, will print more currency – to grab more land, to sell at much lower prices or to leverage in the world market. None of this is good for money, markets, or investments – not to mention that it devalues our currency and our land!
Is it me, or is this hard to believe?
Investors be aware…