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Urgent Subprime Crisis Alert: The next wave is about to hit!

Posted by John Stepek on March 8, 2008

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Blogger’s Note: Our London-based associate John Stepek of MoneyWeek.com just urged his readers to take cover from the next phase in the subprime crisis: Now Alt-A denominated mortgage debt is crumbling as well, threatening to take down not just U.S. lenders, but every global group that has invested in U.S. debt derivatives. Make sure your click through to the original article!

By the way, CCC in this article is just a convenient acronym, not a ticker symbol. The ADR trades under the symbol CARYF as an over-the-counter stock in the States.

by John Stepek, MoneyWeek.com

Baltimore — (TFN): It looks like the next phase of subprime crisis is about to hit.

U.S. markets fell sharply on Friday as Carlyle Capital Corp (CCC), a fund set up to invest in U.S. mortgage debt, warned that it had missed margin calls to several of its creditors. The heavily leveraged group doesn’t have the money to back its bets, basically.

It seems the group had been buying up AAA-mortgage debt issued by key U.S. mortgage lenders Fannie Mae and Freddie Mac, believing it had fallen too far. These agencies are government sponsored, which means they’re generally seen as safer. Market timing of course, is notoriously difficult, and the AAA debt kept falling anyway.

CCC holds more than $22 billion of the debt, raising fears of a fire sale which hammered shares of other groups holding the same debt. And CCC wasn’t the only one selling. Read on!

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Posted by John Stepek · Filed Under US Stocks and Markets