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Speculators' Morgue Getting Crowded

Aug. 8, 2007 (EIRNS)—The Lyndon LaRouche Political Action Committee (LPAC) issued the following release today.

A fifth asset-based security (ABS) fund was suspended in Germany yesterday, 8 days after the supposedly acute crisis of Industry Credit Bank (IKB) broke out there: West LB Mellon Compass, which reports problems with its 1.2 billion euros of engagement in this market segment. Also an Austrian ABS fund, Hypo KAG, was suspended two days ago.

More German funds are expected to be shut down in the coming days. Rumors in financial news wires had it yesterday evening, that the DWS ABS Fund, a subsidiary of Deutsche Bank, Cominvest (with two ABS funds), Allianz, as well as subsidiary firms of the state banks of Rhineland-Palatinate and Bavaria, may suspend their ABS funds as well. Most of these ABS funds are, by the way, registered in Luxembourg.

The credit-crunch also caused a prominent victim among producers in the USA, yesterday, when Oneida, Ltd., a dinnerware maker in upstate New York, was forced to withdraw a planned offering of $120m in high-yield bonds to investors because credit markets froze up. If the deal had been offered a month earlier, no problem. But, Oneida chief financial officer Andrew Church said, "But it all happened so quickly. We've never seen anything as quick as this."

William Gross, Chief Investment Officer of Pacific Investment Mgt (PIMCO), a bond management firm, said "the liquidity in the investment markets was abysmal. On Friday afternoon, the brokers were unwilling to make markets in almost anything that didn't have a Treasury sticker attached to it. That's pretty bad."

In Japan, Shinsei Bank of Tokyo, one of the country's worst-performing bank stocks, said yesterday that losses on subprime loans had reached $30m and that it had more than six times that amount of mortgage securities that might be affected. The $200m in sub-prime holdings is more than double that bank's net income in the 1st Q.

The sub-prime crisis is also spreading to other smaller Asian banks: for example Bank Thai, 25% owned by TPG, a Texas Pacific unit, also announced that it might need to set aside more money to cover losses on $50m of sub-prime mortgages.