If there was one sentiment to take away from this years American Securitization Forum conference in Las Vegas last month, it was that the investment banking securitization community is in complete denial.
While lists were being passed around for recently unemployed delegates to sign, and headhunters cards placed on every chair, panellists seemed to be applauding themselves on how securitization is alive and well. If only the media would be less pessimistic, and those darn ratings agencies would sort their act out, the credit crunch would be over immediately. And, one delegate pointed out, something really ought to be done about these people who accept mortgages they cannot afford, its positively "fraudulent".
The solution to the dearth of investors is simply confidence and, when that returns, fairly soon, all will be well and good again, was the consensus. But why should investors be confident?
While swanning around the luxurious Venetian Hotel in one of the most ostentatious cities in the world, did these delegates fail to notice that the business card draws for iPhones, iPods, Wiis and Nintendos were not being conducted by banks but by lawyers and risk management systems companies? Indeed, the absence of the banks in the exhibition halls was tangible.
And did they observe at all on their way in from the airport the endless rows of for-sale signs? Nevada has the nations second-highest foreclosure rate, with one foreclosure in every 392 households.
Away from the financial enclaves of US cities are families that do not benefit from having financial expertise. Families that can no longer afford their mortgages, and, to boot, that are under serious threat of unemployment. It is not these families, or indeed the media, that caused the credit crunch. It is the greed of moneylenders. It has now been uncovered that many sub-prime mortgages were sold to borrowers who had good credit.
It is going to take more than a 30-day extension to make a payment and a several hundred dollar tax rebate from the US government to put things right. There is a recession, there will be more write-downs, there will be further job cuts, and its highly unlikely well even see a bottom in 2008. It is far too late to think that talking up the market will prevent a fallout.