China's is not facing a real estate market downtun but a general
credit crunch - that is a lack of liquidity in the banking
sector.which is effecting the number to real estate transactions.
This credit crunch probably caused by concerns over how
much Chinese exposure is there to the Fannie Mae/Freddie Mac Subprime
Bonds and how to stablize the Yuan when its
pegged to a falling US dollar..Because these subprime mortgage bonds
were sold on the international market (as safe investments backed by
the US government) the effects of this financial disaster is
international in scope (I'm not sure if it's any comfort to know one
has company in the frying pan - but there are alot of foriegn banks
that are hopping mad at the USA now.).

The USA problem is due to the situation where the property values fall
below the mortgage value. In the subprime disaster - brokers were
allow to ignore the mortgagee's ability to pay using what is called a
"liar's loan." Often in this situation - the buyer of the mortagage
had less equity or none at all - when the real estate bubble bursted
and the real property values declined below the mortgage value - there
is no incentive to hold onto the property and pay the mortgage. These
bad mortagages (which were sold by Wall Street firms ,e.g.
Countrywide) to Fannie Mae and Freddie Mac were bundled
together as low risk US government backed bonds to banks around the
world. When these subprime mortagages foreclosured after the USA real
estate bubble bursted the foreclosure's resale often did not recover
the amount mortgaged by the bonds. This means Fannie Mae and Freddie
Mac as the bond issuers ha come up with the difference (eat the
loss).
Unfortunately - they didn't have enough cash to cover these bad debt -
so the US federal government had to take over both companies before
the became insolvent (go belly up) and cause a global banking
disaster. If the US govenment doesn't pay up these bonds - many
foriegn banks would be holding Freddie Mac and Fannie Mae bonds which
would be worth much less than what they paid for - hence they would
have far less cash to lend out and hence there would be a global
credit crunch.Therefore, the US government has to make sure that these
bonds are covered when they matured to avoid a global banking
problem. Hence, it is very likely that bond holders will be okay;
however, stockholders of both Freddie Mac and Fannie Mae are likely
to take a very severe financial hit - for both common and preferreed
stocks are now pretty much penny stocks now. Freddie Mac's and Fannie
Mae's CEOs and the BOD have been fired; Angry US Congressmen faced
with the huge bill left on their doorstep by Freddie Mac and Fannie
Mae's CEOs are also moving to eliminate any golden parachutes as
well. I suppose this isn't all that horrible as it sound though since
if this had happened in China these wayward CEOs would probably be
facing a firing squad....(9_9)

On Sep 11, 5:53 pm, Micky Wong wrote:

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