主题：【讨论】“六个月之后不会再有投行存在了”。 -- 厚积薄发

Seventh, the banks losses on their portfolio of leveraged loans are already large and

growing. The ability of financial institutions to syndicate and securitize their leveraged

loans – a good chunk of which were issued to finance very risky and reckless LBOs – is

now at serious risk. And hundreds of billions of dollars of leveraged loans are now stuck

on the balance sheet of financial institutions at values well below par (currently about 90

cents on the dollar but soon much lower). Add to this that many reckless LBOs (as

senseless LBOs with debt to earnings ratio of seven or eight had become the norm during

the go-go days of the credit bubble) have now been postponed, restructured or cancelled.

And add to this problem the fact that some actual large LBOs will end up into bankruptcy

as some of these corporations taken private are effectively bankrupt in a recession and

given the repricing of risk; covenant-lite and PIK toggles may only postpone – not avoid

– such bankruptcies and make them uglier when they do eventually occur. The leveraged

loans mess is already leading to a freezing up of the CLO market and to growing losses

for financial institutions.

Eighth, once a severe recession is underway a massive wave of corporate defaults will

take place. In a typical year US corporate default rates are about 3.8% (average for 1971-

2007); in 2006 and 2007 this figure was a puny 0.6%. And in a typical US recession such

default rates surge above 10%. Also during such distressed periods the RGD – or

recovery given default – rates are much lower, thus adding to the total losses from a

default. Default rates were very low in the last two years because of a slosh of liquidity,

easy credit conditions and very low spreads (with junk bond yields being only 260bps

above Treasuries until mid June 2007). But now the repricing of risk has been massive:

junk bond spreads close to 700bps, iTraxx and CDX indices pricing massive corporate

default rates and the junk bond yield issuance market is now semi-frozen. While on

average the US and European corporations are in better shape – in terms of profitability

and debt burden – than in 2001 there is a large fat tail of corporations with very low

profitability and that have piled up a mass of junk bond debt that will soon come to

refinancing at much higher spreads. Corporate default rates will surge during the 2008

recession and peak well above 10% based on recent studies. And once defaults are higher

and credit spreads higher massive losses will occur among the credit default swaps (CDS)

that provided protection against corporate defaults. Estimates of the losses on a notional

value of $50 trillion CDS against a bond base of $5 trillion are varied (from $20 billion to

$250 billion with a number closer to the latter figure more likely). Losses on CDS do not

represent only a transfer of wealth from those who sold protection to those who bought it.

If losses are large some of the counterparties who sold protection – possibly large

institutions such as monolines, some hedge funds or a large broker dealer – may go

bankrupt leading to even greater systemic risk as those who bought protection may face

counterparties who cannot pay.

Ninth, the “shadow banking system” (as defined by the PIMCO folks) or more precisely

the “shadow financial system” (as it is composed by non-bank financial institutions) will

soon get into serious trouble. This shadow financial system is composed of financial

institutions that – like banks – borrow short and in liquid forms and lend or invest long in

more illiquid assets. This system includes: SIVs, conduits, money market funds,

monolines, investment banks, hedge funds and other non-bank financial institutions. All

these institutions are subject to market risk, credit risk (given their risky investments) and

especially liquidity/rollover risk as their short term liquid liabilities can be rolled off

easily while their assets are more long term and illiquid. Unlike banks these non-bank

financial institutions don’t have direct or indirect access to the central bank’s lender of

last resort support as they are not depository institutions. Thus, in the case of financial

distress and/or illiquidity they may go bankrupt because of both insolvency and/or lack of

liquidity and inability to roll over or refinance their short term liabilities. Deepening

problems in the economy and in the financial markets and poor risk managements will

lead some of these institutions to go belly up: a few large hedge funds, a few money

market funds, the entire SIV system and, possibly, one or two large and systemically

important broker dealers. Dealing with the distress of this shadow financial system will

be very problematic as this system – stressed by credit and liquidity problems - cannot be

directly rescued by the central banks in the way that banks can.