Morgan Stanley Said to Freeze Home-Equity Credit Withdrawals: “Morgan Stanley, the second-biggest U.S. securities firm, told thousands of clients this week that they won't be allowed to withdraw money on their home-equity credit lines, said a person familiar with the situation.
Most of the clients had properties that have lost value, according to the person, who declined to be identified because the information isn't public. The New York-based investment bank will review home-equity lines of credit, or HELOCs, monthly from now on, the person said yesterday.
Wall Street firms including Morgan Stanley are ratcheting back on risks after the collapse of the subprime mortgage market and ensuing credit contraction saddled banks and brokerages with almost $500 billion of writedowns and losses. Consumers fell behind on home-equity credit lines at the fastest pace in two decades in the first quarter, the American Bankers Association reported last month.”
I really love how these guys are cutting back
AFTER the bubble has burst and residential real estate prices have plunged. Go
RISK MANAGEMENT!“JPMorgan Chase & Co., the second-biggest U.S. bank by market value after Bank of America Corp., has notified 150,000 customers about changes in their home-equity lines of credit since March, said Christine Holevas, a Chicago-based spokeswoman.
Bank of America and Washington Mutual Inc. are among the other lenders that have frozen home-equity credit lines this year.”
I also really love how the Fed is flooding the financial system with liquidity as the banks are draining the system of liquidity. Everything is being scaled back or outright suspended, from credit cards to mortgages and business loans. With net credit rapidly contracting, there can’t be an economic recovery of any significance. Considering that this last ‘boom’ cycle was fueled almost entirely by cheap access to credit, expect the GLOBAL economy to deteriorate rapidly over the very near future.
A rapid credit contraction will translate into a continued ass kicking over at Fannie Mae (FNM) and Freddie Mac (FRE).
Freddie Mac Posts Fourth Straight Loss, Cuts Dividend (Update2): “Freddie Mac, the U.S. mortgage-finance company hobbled by record foreclosures, will slash its dividend at least 80 percent after posting a quarterly loss that was three times wider than analysts' estimates.
The second-quarter net loss of $821 million, or $1.63 a share, compares with the 54-cent a share average estimate of nine analysts in a Bloomberg survey.
