Tony Meldonian – Apex Associates
November 16, 2007

Capital Ratios under fire.

Lending Shock

Today, Goldman Sachs says credit supply could be curbed by $2 trillion as the mortgage mess fallout makes its way, with Jan Hatzius, Goldman Sachs chief U.S. economist and CNBC’s Mark Haines.

I am on record, months ago, for stating the deficiency can be at $2.5 to $3 trillion plus and probably will be acknowledged by banking community before January 2009, when the Basel II accord demands / guidelines, go into the penalty phase… – likely sooner.

As my recent mortgage comments have caused a remarkable amount of negative feedback and cancellations from unbelieving readers, I feel a small bit of vindication. It seems most people do not want to know or certainly do not believe what is happening. It is understandable as most do not have access to the governing process.

Credit offered to Dr. David Martin, who aptly outlined the scenario in July, 2006 and gave us the root and formula for what is happening by exposing the media blackened Basel II Accord and its potency as the governing body for world banks. I wonder how many people even know that? Certainly no direct reference on CNBC or Bloomberg….

The good news (for my psyche), I was right. The bad news, I am right – so hunker down and secure your financing while you can.

This deficiency can cripple the lending process and / or demand NEW Cash into Bank system to stimulate an otherwise, soon to be frozen lending environment – at least until capital ratios come into alignment. So who / where does the money come from? SIV’s? Dubai, who’s your master?

Source: © Apex Associates, November 16, 2007. Used with permission.