Loan firm leaders say credit crisis worst to come
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By Don Mecoy
Published: September 14, 2008
The leaders of an Oklahoma City company that markets huge portfolios of bank loans saw the subprime mortgage crisis coming.
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‘Throwing gasoline on the fire'
Last week's decision by a Warren Buffett-owned firm to stop issuing insurance to banks on large deposits that exceed the $100,000 of coverage by the Federal Deposit Insurance Corp. was an important signal, Geary said.
"Buffett could have done a lot of damage to a lot of banks, some of it deservedly so; some not so much,” Geary said. "That's throwing gasoline on the fire.”
While the turmoil is unsettling for Oklahoma bank customers, Geary said state banks generally are safe although they will pay for some of the losses guaranteed by the FDIC.
"People should feel safe about their banks here in Oklahoma,” he said.
Meanwhile, some large institutions like Lehman Brothers Holdings and Washington Mutual are struggling to stay afloat.
"The financial sector still has a way to go before it hits bottom,” Geary said. "No one in the marketplace has a sense that we're there.”
Jeff Blumenthal, vice president of investments at Wachovia Securities in Oklahoma City, said he also thinks the financial sector will struggle in the near term.
"Be prepared for more bad news and more scary news, because I do think there will be more bad news,” he said.
Bank losses compared to dot-coms
But these tough times can offer opportunities for investors, Blumenthal said. The huge losses inflicted on the stocks of some well-capitalized financial institutions are as overblown as some of the massive gains that dot-com firms recorded in 1999 and 2000, Blumenthal said.
"Back then it was easy for people to make investments when it did not make sense at all,” he said. "Now it is so difficult for people to make investments in the financial sector when it makes sense.”
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Related Topics:
Business, Personal Finance, Home Financing, Consumer Credit and Debt, National Economy, U.S. National Economy



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