Lay-offs on WALL STREET???

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Gee, what does it mean?

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October 4, 2007 路 The problems in the housing and credit markets are leading to more layoffs on Wall Street. Investment bank Bear Stearns says it will trim 310 jobs from its mortgage group. Merrill Lynch fired two senior executives.

Business

Citigroup, UBS to Post Sharp Losses for Bad Loans

Mark Lennihan

"The Citibank logo is shown on a branch office in New York. Citigroup estimated Oct. 1, 2007 that its third-quarter profit will drop 60 percent due to more than $3 billion in losses after writing down securities backed by underperforming mortgages and loans tied to corporate buyouts."

Lay-offs on WALL STREET???

The subprime lending market is to blame. Variable mortgage rates increased and people with the mortgages had their payments increased dramatically (they had variable rates for many possible reasons: not enough equity and/or poor credit, not enough credit history, etc.). A lot of these mortgage lenders are incredibly persistent and dishonest. They have numbers they need to make in order to keep their jobs. Investors want a return on their investment. In order for these companies to secure funds so they can make mortgages, they have to make the mortgages attractive investments. High perceived risk = Higher rate

It's ironic because people with poor credit or low income (housing costs have gone through the roof in the North East and California: it's ridiculous) need to pay a lower fixed rate in order to make their payments. They aren't making their payments because they are irresponsible. It's because they cannot afford to without starving. The real estate market is not doing well. Houses are not selling. It costs a lot of money to own a house. The upkeep alone and taxes are high.

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Lay-offs on WALL STREET???

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