Items of interest:
SUBPRIME TODAY - PHH ends deal; Commerzbank clears house -- Welcome to our daily roundup of subprime- and credit-crunch-related news from MarketWatch.
PHH ends deal to be bought by GE Capital - PHH Corp., the Mount Laurel, N.J., provider of mortgage and fleet-management services, said it ended its plan to be acquired by General Electric Co.'s GE Capital financing unit. The deal, reached in mid-March, had been valued at $1.69 billion. See full story.
Ghosts of Subprime Past May Continue to Haunt -- The expression “out with the old and in with the new” may not mean much to investment banks in this new year, as some industry observers are predicting that Wall Street’s subprime-related pain will extend well into 2008.
As Goldman Sachs noted in a research note last week, Citigroup’s books still contain an estimated $25 billion of collateralized debt obligations, the bundled packages of debt including subprime loans whose value has plunged as their perceived risk has increased.
Citi may be forced to cut its dividend 40 percent to preserve capital and write down more fixed-income securities than it has told investors to expect, Goldman analysts said.
Citigroup is trying to preserve capital and may be forced to write off $18.7 billion in collateralized debt obligations, up from its Nov. 4 estimate of as much as $11 billion, according to the Goldman report. [...]
Top economist says America could plunge into recession -- Losses arising from America’s housing recession could triple over the next few years and they represent the greatest threat to growth in the United States, one of the world’s leading economists has told The Times.
Robert Shiller, Professor of Economics at Yale University, predicted that there was a very real possibility that the US would be plunged into a Japan-style slump, with house prices declining for years.
Professor Shiller, co-founder of the respected S&P Case/Shiller house-price index, said: “American real estate values have already lost around $1 trillion [£503 billion]. That could easily increase threefold over the next few years. This is a much bigger issue than sub-prime. We are talking trillions of dollars’ worth of losses.”
He said that US futures markets had priced in further declines in house prices in the short term, with contracts on the S&P Shiller index pointing to decreases of up to 14 per cent. [...]