Thursday, October 08, 2009

Can we still take this: another global crisis to watch out for?

2008 until today, the world hasn't fully recovered yet from the subprime crisis - and yet another warning was given out today in Manila:

VISITING INVESTMENT GURU Mark Mobius warned that the rapid growth of money supply and lax regulation on derivatives could lead to another global financial crisis in the future.

Mobius, executive chair of Templeton Asset Management Ltd. and considered to be one of the world’s most influential asset managers, said liquidity growth that could induce inflation and unbridled growth of derivatives were the two “big elephants” in the global investment area.

“As you know, elephants can be very gentle and they can also be very wild and destructive,” the Singapore-based Mobius said in a briefing before addressing delegates to the 9th Annual Pacific Region Investment Conference in Manila.

on the other hand, concerns are growing over another mortgage giant in the US, from New York Times:

First it was Fannie Mae and Freddie Mac. Now concern is growing that another government mortgage giant might teeter, just as the nation’s housing market is stabilizing. A year after Fannie and Freddie were effectively nationalized, problems at the Federal Housing Administration are raising worries among industry executives and Washington policy makers.

Some 20 percent of F.H.A. loans insured last year — and as many as 24 percent of those from 2007 — faced serious problems including foreclosure, offering a preview of a forthcoming audit of the agency’s finances. Mr. Stevens said that the F.H.A., which insures mortgages with low down payments, holds more than $30 billion of cash in reserve to cushion against potential losses, and the average credit score of borrowers is about 9 percent higher now than two years ago.

“It appears destined for a taxpayer bailout in the next 24 to 36 months,” the former Fannie Mae executive, Edward Pinto, said in testimony prepared for the hearing. Mr. Pinto, who was the chief credit officer from 1987 to 1989 for Fannie Mae, predicted losses on its mortgage insurance would more than wipe out the agency’s reserves.