Monday, September 15, 2008

Financial Markets & Credit Crisis: A Potential Solution

The failing of financial institutions are having a global impact on the financial and credit markets. The issues with Fannie Mae, Frddie Mac, Merryl Lynch, Lehman, AIG, and Countrywide were fairly obvious. Since March I have been predicting these type of failures by using the ratio of mortage based securities in a companies portfolio to total capital under management (mortage based securties/total capital under management). Also, I suggested that you use the Carlysle Fund ratio as your upper benchmark (or alarm). See, If investors are being caught in these financial institutions failures and downgrades is because they are failling to do basic due diligence.

Also, I have suggested potential solutions that may have sounded fairly radical 6 months ago, but they are sounding more reasonable in today's financial markets. Let's allow more direct foreign investment in our capital markets. Second, target housing relief, for homeowners and financial institutions, to primary homes with a market value of up to $250,000. Lastly, let the market forces dictate what happens to properties valued at over $250,000. See,

I have also suggested new metrics, using advanced analytics, as well as financial models that can be used to gauge risk and create a robust decision support system. See,

These problems are not easy, but that is part of life...what we need is the will to implement these changes.

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