Housing Woes Becoming Global Problem
November 15, 2007
The housing market woes spreading across America are now spreading across the globe. The Shinsei Bank Limited of Japan recently stated that its first-half profit dropped by 40 percent, which is a much steeper decrease than it reported just 3 weeks ago. At that time it had set aside more securities linked to U.S. home loans. The net income for the bank dropped to $210M.
Because of the US housing sub-prime mess, Shinsei was forced to add $69M to help back up its loans. To make matters worse, Japan is having its own period of bad loan increase as the government of that country is legislating new interest rate criteria for consumers.
An ominous warning recently came from Shinichi Tamura, financial analyst at UBS Japan. He states: “Shinsei shares will continue to be pressured as long as the bank has exposure to the U.S. mortgage market.”
The current credit crisis which began with the United States mortgage defaults has quickly sent equity prices and bond prices tumbling across the world. The once-strong international market for mortgage-backed securities has decreased significantly, being big problems to those companies that trade or sell these types of bonds to global investors