U.S. Collateralized Debt Obligations Cut
On July 19, 2007, S&P cut ratings on 75 U.S. collateralized debt obligations made up of subprime mortgage derivatives. CDOs are fixed-income securities that repackage bonds, loans, derivatives and even other CDOs into new bonds. Subprime mortgages are loans to borrowers with poor or limited credit histories.
“I don’t think anyone knows enough about the magnitude of this problem,'’ said Philip Laing, investment director in Edinburgh at Standard Life Investments, which manages $265 billion in assets. “Safe assets like bonds are well- underpinned.'’
According to Household - HSBC Watch Consumer Advocates, HSBC Finance claims to a team of 150 PhD’s that perform risk analysis and their risk officer was formerly with the OCC (actually he is unemployed as of this writing) - thus an organization such as HSBC Finance should have some idea about the magnitude of the problem. “They are the largest subprime lender, which is a step up from their former status as the largest predatory lender” said the group.
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