Can the Fed Re-Inflate sub-prime Mortgage slime?
Toxic US sub-prime mortgage slime, has infected the biggest brokers on Wall Street, bond mutual funds, and the worlds largest banks. Its latest victim is Northern Rock NRK.L, the UKs fifth largest mortgage lender, now bracing for a takeover after its shares collapsed and its customers lined the streets to withdraw their money. Last week, NRK.L confessed that has a 275 million exposure to US sub-prime mortgage slime. It also has a 325 million position in structured investment vehicles, requiring an advanced degree in calculus to figure out. To make matters worse, about 5 million adjustable-rate US mortgages (ARMS) are slated to reset in the next 18-months. More than two million of these ARMs are sub-prime and as many as 600,000 sub-prime borrowers could lose their homes, weighing on an already weak housing market. The US housing slump could deepen if sub-prime borrowers who took out ARMs in 2004 and 2005 to secure low teaser rates for the first two or three years of the loan are forced
