They dubbed it "The Survivors' Conference." In early November, 2,000 people who handled asset-backed securities for a living crowded into a hotel ballroom in Orlando, Florida, to hear speaker after speaker explain why 2008 may be their worst year ever.
The subprime mortgage crisis, which claimed the jobs of three chief executives and prompted more than $45 billion in write-downs at the world's biggest banks, may end up spilling into 2009.
"These events tend to become deeper and play out longer than most people initially expect," said Michael Mayo, an analyst covering securities firms at Deutsche Bank in New York. "This is one of the slowest moving train wrecks we've seen."
The tumbling U.S. housing market will continue to inflict the damage. Mortgage-backed securities and collateralized debt obligations containing those securities are falling in price and will not find their footing anytime soon. That was because most of the subprime mortgages, which provided collateral for $800 billion in securities, had yet to go bad, said Christopher Whalen of Institutional Risk Analytics in Hawthorne, California.
"The collateral is not yet problematic," Whalen said. "That's the next big shoe to drop."
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