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NEW YORK, N.Y. – SecondMarket, the largest marketplace for illiquid assets, announced today that it has launched markets for mortgage-backed securities (MBS), whole loans, and collateralized debt obligations (CDO). Through SecondMarket, buyers and sellers are able to trade these assets in a robust, centralized marketplace that provides transparency, price discovery and an extensive network of market participants.
“Today, the multi-trillion-dollar MBS, whole loans and CDO secondary markets are nearly frozen. For the global economy to recover, it is critical to unfreeze these assets from the balance sheets of financial institutions around the world and restart the securitization markets,” said SecondMarket CEO Barry Silbert. “The most effective solution lies in a time-tested model – an organized, independent secondary marketplace that provides transparency and price discovery.”
Through its online trading and auction platform, proprietary matching algorithm and deep network of relationships, SecondMarket has successfully established itself as a trusted marketplace for a variety of illiquid asset classes since its founding in 2004, including auction-rate securities, bankruptcy claims, limited partnership interests, and restricted securities and blocks in small capitalization companies.
SecondMarket’s trading network includes 2,500 buyers and sellers, hundreds of whom have already expressed an interest in purchasing residential and commercial MBS, CDOs, and portfolios of various whole loans, including residential, commercial, construction, consumer and industrial loans. To date, more than $1 billion in illiquid assets have already been traded over SecondMarket.
Due to the esoteric and opaque nature of many of these assets, pricing is extremely difficult. In an effort to improve investors’ abilities to determine the value of these assets, SecondMarket is providing unparalleled transparency by aggregating data on MBS, whole loans and CDOs and offering it for free to SecondMarket participants. SecondMarket also has established a network of third-party service providers – the SecondMarket Ecosystem – to offer valuation, research, data, analytics, legal and transaction advisory services.
Bill Seidman, former chairman of the FDIC and Resolution Trust Corporation (RTC) and advisor to SecondMarket, endorsed the SecondMarket model. “When we were working with troubled bank assets during the S&L crisis, we were forced to do a lot of work to create a market for these assets,” said Seidman. “Had there been a SecondMarket when I was at the RTC, I would have jumped at using their platform.”
The SecondMarket online marketplace and auction platform is expected to serve as a complementary market to assist the efforts being undertaken to address the legacy asset problem by governments in the U.S. and abroad. “We applaud the federal government’s initial efforts to address the legacy assets and restart the securitization markets,” Silbert said, “and an independent, active secondary marketplace is essential to bolster those efforts.”
SecondMarket is also pleased to announce that it has hired two former Credit Suisse directors to lead its efforts in these asset classes. Elton Wells, previously a Director with Credit Suisse in their Structured Products Group, will head SecondMarket’s MBS and whole loans markets and Adrian Radulescu, formerly a Director with Credit Suisse and Head of the European Leveraged Finance CDO Structuring Desk in London, will head SecondMarket’s CDO market.
“Over the past six months, SecondMarket has been diligently and expeditiously preparing for the launch of these markets by hiring dozens of employees, expanding our technology capabilities and developing key industry relationships,” said Silbert. “We are confident that our efforts will result in transparency, liquidity, a functioning secondary market for the so-called ‘legacy’ assets and, consequently, the restart of the securitization market.”
About SecondMarket
Founded in 2004, New York-based SecondMarket (member FINRA | MSRB | SIPC) is the world’s largest marketplace for illiquid assets, such as auction-rate securities, bankruptcy claims, collateralized debt obligations, residential and commercial mortgage-backed securities, limited partnership interests, restricted securities and blocks in small capitalization companies, and whole loans. SecondMarket has 2,500 participants, including global financial institutions, hedge funds, private equity firms, mutual funds, corporations and other institutional and accredited investors that collectively manage over $500 billion in assets available for investment. For more information, visit www.SecondMarket.com.
Atlanta Journal Constitution – Unlike the nation’s banks, hedge funds haven’t been lining up for government bailouts in the wake of losses they can’t handle. But the funds do share one Wall Street problem: a huge mismatch between the short-term funds they take in and the long-term bets they make. Without a rethink of their business models, many in the hedge fund business risk going the way of the investment banking dodo.
Recall the nightmare on Wall Street. Going into 2008, America’s five big investment banks held trillions of dollars in long-term and illiquid assets that were financed largely by short-term borrowings. That did not work out so well. Two of them disappeared. Another was swallowed by a traditional bank, and the last two had to don the sober garb of regulated, deposit-taking banks to survive.
International Herald Tribune – Hedge funds have suffered a shakeout in 2008. The average hedge fund fell almost 20 percent, according to Hedge Fund Research. No fund has yet required a bailout. But many won’t be around in the new year, and those that have survived are battered and bruised. Hedge fund managers must accept that the industry won’t be quite the same again.
Here are six changes they need to prepare for:
Liquidity is the new watchword. Like investment banks, hedge funds didn’t think much about the structure of their financing during the boom times. But a flood of redemption requests in late 2008, just as they were struggling with illiquid markets and scarce credit, caught them out. Many hedge funds annoyed their investors by blocking withdrawals. In the future, funds that invest in illiquid assets will need to lock in their investors longer. And those wishing to give investors regular access to their money will have to focus on liquid markets.
New York Times – Hedge funds have suffered a shakeout in 2008. The average hedge fund fell almost 20 percent, according to Hedge Fund Research. No fund has yet required a bailout. But many won’t be around in the new year, and those that have survived are battered and bruised. Hedge fund managers must accept that the industry won’t be quite the same again. Here are six changes they need to prepare for:
Liquidity is the new watchword. Like investment banks, hedge funds didn’t think much about the structure of their financing during the boom times. But a flood of redemption requests in late 2008, just as they were struggling with illiquid markets and scarce credit, caught them out. Many hedge funds annoyed their investors by blocking withdrawals. In the future, funds that invest in illiquid assets will need to lock in their investors for longer. And those wishing to give investors regular access to their money will have to focus on liquid markets.
Fees will face greater scrutiny. The archetypal hedge fund charges 2 percent of assets and skims off 20 percent of investment gains, the longstanding “2-and-20” structure. But some funds have had to offer breaks on fees lately to persuade investors not to take their money out. Investors will be more selective and are likely to put downward pressure on fees. All the same, it is probably too soon to sound a Last Post bugle call for 2 and 20.
New York (HedgeCo.Net) – Saying that GM is in the “worst shape,” Senate Banking Committee Chairman Christopher Dodd told the struggling automaker that they’ve got to consider new leadership if they want to receive federal aid. The comments prompted many to believe he was referring in fact to GM CEO Richard Wagoner, whom Dodd said “has to move on,” on CBS’s “Face the Nation.”
President-elect Barack Obama didn’t exactly reaffirm Dodd’s position, but said at a Chicago press conference that if management “doesn’t understand the urgency of the situation and is not willing to make the tough choices and adapt to these new circumstances, then they should go.”
Congress will reconvene this week to discuss the proposed $15 billion rescue plan that would hopefully salvage both General Motors and Chrysler. Although they are closer to finalizing a plan of action for the troubled companies, they are still met with reluctance from certain individuals.
Alabama Senator Richard Shelby, who has been outspoken about his disdain for any auto rescue plan, is supporting a filibuster that would put a halt to the legislation and instead prompt a lengthy debate about the issue.
Dodd, however, realizes it is a time-sensitive issue and focused during the interview on the fact that the auto industry could completely sink in the next few weeks if nothing is done. “Even if people don’t like this idea, none of us want to wake up January 1st and discover we don’t have an industry to save.” According to the Connecticut Senator, 1 out of every 10 jobs in the U.S. is either directly or indirectly related to the American auto industry.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
New York (HedgeCo.Net) – The debate on whether or not to grant the big three Detroit automakers billions in bailout funds continues as Democratic leaders set a timetable for the companies to present a “credible restructuring plan.”
In a letter sent Friday to GM’s Rick Wagoner, Ford’s Alan Mulally and Chrysler’s Robert Nardelli, Speaker of the House Nancy Pelosi and Senate Majority Leader Harry Reid outlined what the auto executives must do to receive the rescue they are desperately seeking.
"The American people – deserve to see a plan that is accountable to taxpayers and that is viable for the long-term," the letter said. The democratic leaders also insisted that the auto executives must be "making significant sacrifices and major changes to their way of doing business."
With the majority of media attention focusing on the fact that each of the three men flew private jets to Washington and proceeded to beg Congress for $25 billion in bailout money, “significant sacrifices” could mean perhaps flying commercial next time.
The letter states that the companies must provide a detailed assessment of their finances, along with a request for an amount that they feel would bring them to “long-term viability.” The December 2nd deadline leaves plenty of time for heated debates on what seems to be the most prevalent issue in the current economic crisis.
Some republicans, like Alabama Senator Richard Shelby, are reluctant to provide aid to what he feels is already a lost cause. In a recent CNN interview, Shelby argued that even $25 billion would not save the automakers. He went on to say that perhaps $50 billion or even $100 billion would not be enough. His take is that unless these companies have “new management, new innovation and new products,” they are going to sink, no matter how much of an infusion of cash they receive.
The Democratic leaders said the companies have failed to convince Congress that they have a coherent strategy to stay afloat once any funding was granted. The letter urges the automakers to bring to the table a long-term plan with reasonable objectives for repayment.
Should the companies receive any taxpayer-funded loans, those would receive “senior status,” meaning they would have to be paid off before any other company debt. The Democrats are hoping that Congress will reconvene the second week in December to decide if and how there will be a rescue package for the three automakers.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
New York (HedgeCo.Net) – Auto executives stood before Congress yesterday and requested a $25 billion rescue package, pleading that their industry was going under fast. After allocating billions to bailouts in recent months, the auto industry was met with quite a bit of reluctance from many of the same individuals who were all for the $700 billion in handouts to financial firms.
"Detroit’s basic problem is that they created a business model that doesn’t have a snowball’s chance in hell of surviving in a global economy," said Republican Senator Lindsey Graham from South Carolina.
Alabama Republican Senator Richard Shelby agreed, saying that the automakers, aka “failed models,” should just file for bankruptcy.
The hearing was held a day after Senate Democrats proposed the $25 billion in rescue loans. However, the auto industry just happens to be at the end of the line after the government handed out funds to AIG, Bear Stearns and mortgage lenders Fannie Mae and Freddie Mac.
“This is about much more than just Detroit,” Rick Wagoner, head of General Motors, said in his testimony. It’s about saving the U.S. economy from a catastrophic collapse.”
General Motors is seeking approximately $10 billion from Uncle Sam while Ford and Chrysler are asking for about $8 billion and $7 billion respectively.
"While the domestic auto industry has made mistakes in the past, the current problems have been exacerbated by one of the worst economies in nearly three decades," Alan Mulally, CEO of Ford Motor Corp. said in his testimony.
Mulally and Wagoner, along with head of Chrysler Robert Nardelli and Ron Gettelfinger, head of United Auto Workers Union were all part of the team that testified before Congress.
Gettelfinger added, "If one of these companies was to go into bankruptcy, I would almost bet it would take two of them or possibly all three."
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
New York (HedgeCo.Net) – The $700 billion rescue plan proposed by the Treasury and backed by President Bush seems to be greeted with disdain by republicans and democrats alike. After excruciatingly long hearings and even an emergency meeting with the two presidential candidates, an agreement was still not reached as to how the rescue will play out.
“There will ultimately be $700 billion available, but how soon and with what other steps, are still being debated,” House Financial Services Committee Chairman Barney Frank told reporters.
Some issues that lawmakers are trying to come to terms on include executive compensation, foreclosures, accountability, regulation, and how taxpayers can be provided equity stakes in the companies whose rescues they would be helping to fund.
Some republicans are pushing for financial institutions to purchase insurance on mortgage-backed securities, while the Treasury is opting for a plan where the government would instead purchase the bad debt.
"I don’t believe this Paulson plan will solve the problems, it might exacerbate them,” said Richard Shelby, a Republican member of the Senate Banking Committee.
Experts agree that unless the majority of the party hops on board with the president, it’s unlikely this will be passed through congress.
“Ms. [Nancy] Pelosi will not bring a partisan bill to the floor,” Frank said. “If the House Republicans continue to reject the president’s approach then there is no bill.”
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
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