At the end of last week’s letter on the whole mortgage foreclosure mess, I wrote:
“All those subprime and Alt-A mortgages written in the middle of the last
decade? They were packaged and sold in securities. They have had huge losses. But those
securities had representations and warranties about what was in them. And guess what,
the investment banks may have stretched credibility about those warranties. There is the
real probability that the investment banks that sold them are going to have to buy them
back. We are talking the potential for multiple hundreds of billions of dollars in losses
that will have to be eaten by the large investment banks. We will get into details, but it
could create the potential for some banks to have real problems.”
John Mauldin's Thoughts From the Frontline (24-Oct-2010)
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