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Countrywide Now Junk

From Badpaper.org

Standard & Poor’s lowered the debt rating of Countrywide Financial Corp to junk bond status. S&P cut its long-term rating on Countrywide Financial by 3 notches to BB+from BBB+. The short-term rating was lowered to B from A-2. S&P prompted the lower rating because of disclosures from Bank of American that it may not stand behind some of the Countrywide debt after their planned acquisition of the mortgage giant.

Credit Suisse Loses $5.2 Billion

Credit Suisse is the latest financial institution to announce large losses related to credit market write-downs. Switzerland’s second largest bank reported a loss of $5.2 billion dollars in the first quarter and the company announced that management was comfortable with the current capital position.

CEO Brady Dougan stated that “things have stabilized a bit in April. While we’re certainly hopeful that things will improve from here, we’re not counting on it.” He also stated that he will manage the bank under the assumption that things will continue to be difficult.

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New Zealand Home Sales Drop

Home sales in New Zealand dropped 53 percent, another signal that the real estate flu is spreading around the globe. According to Bloomberg, the number of homes sold dropped from 10,989 last year to only 5,129 last month. Sales were the lowest reported since 2001. Further declines seem likely. The article quotes Nick Tuffley, the chief economist at ASB Bank Ltd. in Auckland as saying “There is a glut of supply and the mechanisms to reduce that are weaker prices or sellers withdrawing from the market.”

Let’s Just Call It An Even Trillion

The International Monetary Fund said that losses related to the U.S. mortgage crisis may total as much as $945 billion. Residential losses could total $565 billion with commercial real estate accounting for the rest. Bloomberg quotes the IMF report “The current turmoil is more than simply a liquidity event, reflecting deep-seated balance-sheet fragilities and weak capital bases, which means its effects are likely to be broader, deeper and more protracted. The report also states that “a serious funding and confidence crisis that threatens to continue for a significant period.”

I am not sure how the IMF managed to be so precise with their estimate. However just for the sake of simplicity let’s just say it is an even trillion. After all the next estimate is probably going to blow through the trillion mark anyway.

We Are Not Alone

The International Monetary Fund warned in a report this week that the U.S. isn’t the only developed country with significantly overvalued home prices. According to the report there are several nations where real estate values are more overpriced than in America. The report concluded that homes were overpriced by a mere 11 percent in the U.S., but more than 32 percent in Ireland. In addition, home prices in Britain, Australia, France, Norway, and the Netherlands were overvalued more than 20 percent.

More Euro Bank Losses

WestLB AG, the German bank posted a $2.5 billion loss attributed to the current “capital market crisis.  According to Bloomberg, the bank swung to a loss amid the U.S. subprime meltdown and an investigation into its trading practices.