Quoted from the New York Times:

For all the pain in the mortgage market, investors who hold bonds backed by risky home loans have continued to receive their monthly interest payments — until now.

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Collateralized debt obligations — made up of bonds backed by thousands of subprime home loans — are starting to shut off cash payments to investors in lower-rated bonds as credit-rating agencies downgrade the securities they own, according to analysts and industry executives.

Such a cutoff would be the latest blow to financial markets as investors try to anticipate the next problem that might shake confidence.

All Wall Street cares about is confidence and money. If there is confidence in the markets, then there is money being invested. When confidence sours, is when these investors pull their cash out and cause the markets to tank.

“It’s still the early stages of a very significant stress,” said John Schiavetta, a group managing director at Derivative Fitch, which rates the debt obligations.

In the last two weeks, leading investment banks have written down about $20 billion, much of it in collateralized debt obligations and mortgage-related securities. Merrill Lynch wrote down $4.5 billion in debt linked to home loans and ousted two senior executives in charge of its bond division. UBS wrote down $3.4 billion and ousted the chief financial officer. Citigroup wrote down $1.3 billion from the deterioration in the value of mortgage-related securities.

Investment banks still hold billions more that could be under threat by the recent downgradings and a continued deteriorating in the mortgage market, said Brad Hintz, an analyst at Sanford C. Bernstein & Company. UBS, for instance, still holds about $20 billion in subprime securities.

Well, duh! They are not disclosing the facts because the facts would cause a break down in confidence and not coincide with their deceptive reporting abilities. Everythings fine guys and then 3 months later, oh, it’s worse than we thought! How many times do we need to hear that till we know that when we hear these banks say everything is fine, that they mean the exact opposite.

 Scene from Dumb and Dumber:

Bank:
Oops, my bad guys. I know we told you it was cool but now since we HAVE to report the FACTS because the dumb LAW says so. Man, we are actually not that cool and in fact it’s reaaaaallllly bad out there. So baaaad we took a $1.2 billion loss on paper and have a gazillion is losses that we don’t have to report to you yet so lets’ just forget about that. But duuuuuuuuuuude next quarter looks sweeeeeeeeeeeeeet!

Wall Street:
“Duuuuuuuuuuude. But you told us that it was all good. That’s OK. So, it’s bad but next quarter looks sweeeeeeeeeeet. ” The investment broker then picks up the phone, “Joe Investor, Countrywide took a $1.2 billion loss. I know it’s bad. But Angelo says next quarter looks sweeeeeeeeeeeeeeeeeeeet, I recommend picking this stuff up dirt cheap because, ummmmmmmmmmm, because duuuuuuuuuude he said next quarter will be sweeeeeeeeeeeet.

It amazes me that I keep hearing the analysts and investors say that they are surprised when these reports come out. Are they that gullible to the fact that most ALL of these banks have significant exposure to these subprime securities and of course they are going to tell everyone there is little to worry about.

      IT’S CALLED DECEPTION AND PROPAGANDA FOLKS!

Deception – From Wikipedia, the free encyclopedia

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