KeNo's Housing and Economic Portal: Thursday December 3 Housing and Economic stories

TOP STORIES:

China banks turn blind eye to soaring overdue loans - (www.reuters.com) Some Chinese banks, hit by a surge of troubled borrowing in a weakening economy, are increasingly failing to recognise loans gone sour on their books to avoid having to stump up capital. Loans to borrowers that have missed a payment are growing three times faster than loans the banks recognise as non performing, according to their regulatory filings. An increasingly large chunk of these overdue loans sit on the banks' books at their full value, even when payments have been missed for more than 90 days - the accepted international criteria for classifying loans as non-performing. This hidden build up of substandard corporate loans, spurred by China's slowest economic growth in a quarter of a century, flatters the strength of its banks' balance sheets and would hit earnings if the loans were declared in default and written down.

Surge in Subprime Auto Lending Draws Attention - (online.wsj.com) N.Y. Fed report feeds into some regulators’ concerns about borrower profile; overall household borrowing at $12.1 trillion. Subprime auto lending is shifting into higher gear, raising some concerns in Washington where top financial regulators have sounded alarms about this category of loans. Over the six months through September, more than $110 billion of auto loans have been originated to borrowers with credit scores below 660, the bottom cutoff for having a credit score generally considered “good,” according to a report Thursday from the Federal Reserve Bank of New York. Of that sum, about $70 billion went to borrowers with credit scores below 620, scored that are considered “bad.”

As Investors Shun Debt, Banks Are Left Holding the Bag - (www.nytimes.com) In recent years, Wall Street firms have reaped big profits in the scrappy reaches of the credit markets, selling the debt of companies with weak credit ratings to investors who crave higher returns. But now, as investors have suddenly grown skittish, some big Wall Street banks have been stuck with piles of debt that they are struggling to sell. As a result they are starting to book multimillion-dollar losses as they write down the value of these positions. The investment banks that focus on this market appear to be sitting on potential losses that may exceed $600 million, according to an analysis by debt market specialists of several deals that are struggling. These deals have not closed yet, but the markings are based on the lower prices investors are demanding. A large portion of the paper losses is from debt issued by Veritas, a software entity that the private equity firm Carlyle Group is buying in a $5.5 billion leveraged buyout. Morgan Stanley and Bank of America led this transaction. A lack of demand for the debt has effectively left it on the books of the banks.

The European Crackdown on Bitcoin is Misguided - (www.nasdaq.com) Here we go again. It didn’t take long after the Paris attacks for somebody to point the finger at Bitcoin. The digital currency was included in a list of possible methods used by ISIS and maybe other terrorist organizations to move money around. That is quite possibly the case. We have seen by their use of Facebook and Twitter that these terrorists are tech-savvy, and diversifying illicit money is, from the perspective of those involved, a sensible precaution. In fact, I would be surprised if they didn’t use some form of digital currency in some way. Even so, the stated intention of the European Union to crack down on Bitcoin in the immediate aftermath of the attacks looks more like a panicked reaction than a reasoned response. The main methods used for financing this and other criminal operations are still cash and the banking system, but somehow in the rush to point out that Bitcoin might have been used this got overlooked by many who reported on the financing angle.

China Coal Miner Gets Government Bailout Before Bonds Mature - (www.bloomberg.com) A Chinese state-owned coal miner said it will get a 3.8 billion yuan ($595.6 million) bailout from the local government before two bonds mature next month. Heilongjiang Longmay Mining Holding Group will use the money, which will be transferred to its account by Dec. 1, toward payments on 5 billion yuan of bonds due Dec. 5 and 800 million yuan of notes maturing Dec. 15, according to a companystatement on Chinamoney’s website Thursday. Longmay, the biggest coking coal company in northeast China, will also use 2.3 billion yuan of its own cash to repay the debts, which include principal and interest, it said. At least six firms have defaulted in China’s onshore market this year, as President Xi Jinping shifts from reliance on smokestack industries amid the slowest economic growth in a quarter century. The global slump in commodities has added to financial strains in China’s energy industry. In the international market, coal trader Winsway Enterprises Holdings Ltd. failed to pay interest on dollar bonds for a second time this year in October, and Hidili Industry International Development Ltd. didn’t repay its dollar notes due Nov. 4.

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