Banks face "systemic margin call," $325 billion hit: JPM
NEW YORK (Reuters) -
Wall Street banks are facing a
"systemic margin call" that may deplete banks of $325 billion
of capital due to deteriorating subprime U.S. mortgages,
JPMorgan Chase & Co (JPM.N), said in a report late on Friday.
JPMorgan, which sent a default notice to Thornburg Mortgage
Inc. (TMA.N) after the lender missed a $28 million margin call,
said more default notices and margin calls were likely. The
Carlyle Group's mortgage fund also failed to meet $37 million
in margin calls this week.
"A systemic credit crunch is underway, driven primarily by
bank writedowns for subprime mortgages," according to the
report co-authored by analyst Christopher Flanagan. "We would
characterize this situation as a systemic margin call."
But these systematic problems won't only be felt by big financial organizations and their shareholder. Ordinary home 'owners' will also feel the crunch:
The JPMorgan report included a revised bleaker forecast for
subprime-related home prices. The bank now sees prices falling
30 percent, from its prior 25 percent forecast. Those prices
have declined 14 percent since mid-2006, JPMorgan said.