U.S. Residential Mortgage Securitizations

Per respected Oppenheimer & Co. financial analyst Meredith Whitney, for every $1 of U.S. mortgages that were originated since 2000 there were about $7 of 'assets' that were created/SECURITIZED by Lenders. (FYI, the 'securitization' process would largely consist of mortgage lenders + banks packaging the mortgages they originated into mortgage-backed assets that were then sold to a plethora of GLOBAL customers including institutional holders like hedge funds, pension funds, brokerages, banks, etc.)

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*The Average Quarterly amount of U.S. Residential mortgage SECURITIZATIONS that were produced from 1991 to 2004:

- 1991 to 1995: $9.8 Billion
- 1996 to 2000: $59.7 Billion
- 2001 to 2004: $174.4 Billion

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*The Banks with the Greatest Residential Mortgage Exposure:

1.) Bank of America (BAC) --> $266 Billion
2.) Wachovia (WB) --> $170 Billion
3.) Citigroup (C) --> $155 Billion

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*The Banks with the LARGEST Asset Writedowns since the Beg of 2007:

1.) Merrill Lynch (MER) --> $24.5 Billion
2.) Citigroup (C) --> $19.9 Billion
3.) UBS (UBS) --> $18.1 Billion
4.) Morgan Stanley (MS) --> $9.4 Billion
5.) IKB Deutsche (DB) --> $8.9 Billion
6.) Bank of America (BAC) --> $7.0 Billion

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Net of the net, this subprime problem runs DEEP and I'm continuing to stay away from the VAST MAJORITY of stocks that belong in the financial sector. My only financial sector positions are IBN and GS and that's largely because I believe both large cap stocks offer compelling/cheap valuations given their exposure to sustainable, long term INTERNATIONAL GROWTH. Who knows when a bottom will be hit in the U.S. financials...in the meantime there are way too many other (largely international) opportunities out there to research + invest in. Lastly, fyi, the CEO of Wachovia, Kennedy Thompson, was FINALLY FIRED today...good riddance.




Data Courtesy: Oppenheimer & Co.
Full Disclosure: I own shares of IBN and GS.