Mortage backed securities are toxic Monday, December 01, 2008
Image by Getty Images via DaylifeI'm catching up on some of the "View from the Market" videos on FT.com and just watched one featuring Chris Flanagan, who is Head of Asset-Backed research at JP Morgan.
In his first video he affirms that virtually every mortage-backed security could be classified as toxic or distressed. Prices on the triple A part of the capital structures are down to 30, 40, 50 cents on the dollar. A huge proportion of the asset-backed investor base, anywhere from 65% to 75%, is gone from the market which combined with continuing losses on mortgages is placing major downward pressure on MBS prices.
In a second video, he is very negative on any asset backed security that is not government backed. In his view banks holding other than government backed securities are essentially stuck with them on their balance sheet.
It's rare to find so candid a set of responses in an interview of this sort and he makes no attempt to gloss over or play-down the situation faced.
Labels: jp morgan