ABS

Fraudulent practices and false representations made by units at Countrywide Financial Corp. led MBIA Insurance Corp. to guarantee mortgage-backed securities that have already cost the insurer $459 million in policy claims and exposed it to several hundred millions more, MBIA said in a lawsuit filed earlier this week.

The House of Representatives, by a vote of 263-171 early Friday afternoon, approved a $700 billion rescue package of the credit and mortgage markets, paving the way for the bill to be sent to President George Bush.

The markets were set for positive news on Monday with the expected passage of the government's Emergency Economic Stabilization Act of 2008, which includes the Troubled Asset Relief Program (TARP).

The far-reaching effects of the U.S. subprime crisis have brought into focus the efficacy of information flows in the securitization industry - and found them wanting. The chickens came home to roost when the shock waves of an essentially U.S. home loans problem were widely felt in Europe and beyond. The trend has been toward ever more complex products backed by opaque and fluctuating asset pools leading to increased reliance on the ratings of credit rating agencies rather than on an investor's own analysis.

Lehman Brothers' overnight collapse has left a heap of trouble in Europe, setting off an alarming domino effect.

The dramatic fall in RMBS activity is clearly demonstrated by the numbers. According to Thomson Reuters, industry totals for the period covering the first quarter to the third quarter of 2008 only reached $176.3 billion compared with $829.5 billion over the same period last year.

Prospects for CDO issuance is slim. As JPMorgan Securities analysts said in a recent report, "supply has yet to come into the market, with many prospective sellers waiting for market stability."

The ABS market was especially quiet last week as participants waited anxiously to see if Congress would pass its second attempt at an Emergency Economic Stabilization Act. This, in addition to the Rosh Hashanah holiday, kept new issuance and secondary trading at bay.

The acquisition of Washington Mutual by JPMorgan Chase and Wachovia by Citigroup, which is currently being challenged by Wells Fargo's attempting to buy Wachovia, have created mortgage and credit card powerhouses. As of today

With the year 2008 in its home stretch, consumer ABS has managed to hold up relatively well, despite increasingly deteriorating economic conditions.

The credit crisis rippling from the U.S. was pressuring liquidity in Latin American markets well before the bailout plan's "will they or won't they" moments last week sent stocks in the region gyrating.

Manager Activity: AutosFull Credit to Book (Equal if Joint) U.S. Public ABS Market/144A Market

Wells Fargo and Citigroup have started a game of tug of war over Wachovia.

CIBC announced today that it will be further strengthening its balance sheet by considerably reducing its remaining exposure to the U.S. residential real estate market.

Jefferies & Co., the principal operating subsidiary of Jefferies Group, today announced that Kelly Holloway has joined as a senior vice president in the company's fixed-income group.

CDO shop Deerfield Capital Corp. announced the company's conversion to a C corporation to maximize its use of significant tax benefitsto increase stockholder value.

Fannie Mae announced that it would cancel the planned increase in its adverse market delivery charge.

Mortgage rates remained almost the same this week as reported by Freddie Mac in its weekly survey.

France is working on a €300 billion ($417 billion) bailout fund to rescue European banks caught up in the credit crunch, according to press reports.

The Senate approved a bill 74 to 25 late Wednesday that is designed to stabilize the financial markets.