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The article considers a significant fall in prices of mortgage bonds in May-June, 2011 and its effect on investment banking and banking industry finance. A cycle is discussed in which risk aversion led investment banks of large banking industry firms to seek to sell mortgage bonds when prices first declined, thereby creating further declines and causing lower profits in the securities trading that is a major revenue center for large banks.

The article discusses a report from the U.S. Senate on the U.S. mortgage market in the years leading up to the global financial crisis of 2008-2009. Investment bank Goldman Sachs Group Inc. was criticized for selling mortgage-backed securities while believing those securities would decline in value. In 2004 financial-services firm Washington Mutual ignored it's risk officer's warning that house prices were set to fall.

The article discusses efforts by investors in mortgage-backed securities to force sellers to either modify or repurchase them. The Federal Home Loan Banks of Pittsburgh, Pennsylvania and San Francisco, California have sued large banks to achieve this end. In a similar action attorney Talcott Franklin of Dallas, Texas represents investors in 2,300 mortgage securities.

The article discusses the role of financial firm Deutsche Bank AG in the collapse of the U.S. mortgage-bond market. At the same time Deutsche Bank was creating and selling mortgage securities to one group of clients, it was advising other clients to invest in a manner that would be profitable should those securities fall in value.

The article examines the relationship between the investment bank Goldman Sachs Group Inc. and the insurance company American International Group (AIG) during the global financial crisis of 2008-2009. Goldman Sachs has submitted documents to a U.S. independent commission investigating the crisis detailing how it established prices for mortgage-backed securities it insured with AIG, a transaction which brought the latter firm to the brink of collapse.

The article focuses on the business failure of the bank Washington Mutual Inc. and its financial relationship with the financial services company Goldman Sachs Group Inc. Documents released by the U.S. Senate Committee on Governmental Investigations indicate that Goldman marketed many of the mortgage-backed securities created out of subprime mortgages issued by Washington Mutual.

This article reports that the United States Securities and Exchange Commission is investigating other failed mortgage investment deals arranged by large Wall Street firms that also misled investors similarly to Goldman Sachs Group Inc. The investigations are looking at investment products designed by these firms that allowed key clients to bet that there would be a sharp housing downturn.

This article presents information about the mortgages involved in the mortgage-backed securities that the U.S. government assumed when it helped to bailout Bear Stearns Cos. and American International Group Inc. in 2008. It is reported that many of these subprime mortgages were given by borrowers who needed only to state their income. Nearly half of all those loans, primarily for properties located in Florida, California, and New York, are delinquent or in default.

This article reports that the U.S. Federal Reserve board has released information about the troubled mortgage assets which it purchased through its bailouts of Bear Stearns Cos. and American International Group Inc. The information shows subprime residential mortgages on properties all over the U.S. and commercial loans to properties in such places as Oklahoma City, Oklahoma and Panama City, Florida. The properties are now worth less than the amounts owed on the loans.

The article discusses efforts by bond insurers to avoid paying claims related to failed mortgage-backed securities. MBIA Inc. and Ambac Financial Group Inc. are among insurers that have sued banks and mortgage lenders. The insurance firms believe substandard underwriting and poor appraisals could be cited to help them evade payments that Moody's Investors Service says might total more than $10 billion.

The article reports that housing prices in the U.S. are under pressure from low-priced sales of homes by holders of subprime-mortgage bonds. Such sales often occur at prices below what banks seek for their own foreclosed properties. Professor Anthony Sanders of George Mason University observes that the large inventories of homes being sold by bondholders will push prices down further. Atlanta, Georgia has been particularly hard hit.

The article reports that American International Group (AIG) has incurred roughly $10 billion in losses from speculative investments. AIG has not publicly detailed the losses, which stem from bets the firm made on mortgage assets and corporate debt. The losses are not covered by the $150 billion federal aid package AIG received, calling into question how it will pay for them.

The article examines tensions in the world banking industry. In the wake of the ongoing credit crisis created by the fall in U.S. housing prices, banks are unsure which of their counterparties have either the cash or liquidity to meet financial obligations. The large Swiss bank UBS AG has attempted to sell its entire portfolio of mortgage-backed securities, but has found no buyers. Citadel Investment Group and Pacific Investment Management Co. both rejected the proposal.

The article discusses hedge fund manager Peloton Partners LLP. Founded by Ron Beller and Geoffrey Grant in 2005, the firm's ABS fund achieved an 87% gain in 2007. In February of 2008, however, investors were informed that significant losses in mortgage-related investments compelled a sale of the fund's assets.

The article discusses a hedge fund owned by trader Alec Litowitz and his Magnetar Capital. Litowitz allowed the creation of collateralized debt obligations (CDOs), which are large packages of subprime-mortgage securities and derivatives grouped together and sold in chunks to global investors. Magnetar sold $30 billion worth of these packages in 2006-07. The author states that many of these packages got liquidated causing major losses on Wall Street.

The article focuses on Norma CDO I Ltd., a consolidated debt obligation mortgage backed investment tool that was created by Merrill Lynch & Co. A discussion of the role Norma and other mortgage backed investment tools similar to it played in the subprime mortgage crisis of 2006 and 2007 which was seen in the United States, is presented.

The article focuses on the British bank HSBC Holdings PLC, which became, in November of 2007, the first known bank to bail out specialized funds known as structured investment vehicles (SIVs). A discussion of the bank's plans to gradually shut down two bank sponsored SIVs and take $45 billion in mortgage backed securities and other assets owned by the funds onto its own balance sheet is presented. Problems which have plagued SIVs are discussed.

The article discusses problems faced by European banks. The cost of short-term capital has risen substantially since January, 2007. Banks have become reluctant to lend to each other as they stockpile cash against possible future distress caused by mortgage-backed securities. The European Central Bank has sought to ameliorate the situation by injecting cash into the system.

The article reports on plans under discussion by Citigroup Inc. and other big banks to create a large fund giving financial backing to shaky mortgage securities and other investments hit by the global credit crisis. The talks are being brokered by the U.S. Treasury Department, specifically undersecretary for domestic finance Robert Steel.

The article reports that the hedge fund run by Caliber Global Investment Ltd. will cease operations after they posted losses in excess of 50 percent, primarily stemming from their investments in the U.S. subprime mortgage-backed investments. Their investments were predominantly based on loans made in 2005. This makes investors nervous, as it was previously thought that only subprime mortgages made in 2006, when the industry had lowered its standards the most, were at-risk investments.

The article focuses on the Markit Group Ltd, a company which in 2006 created price indexes for the subprime mortgage market and related securities. The ABX.HE indexes at first attracted little attention, but the collapse of the subprime market in early 2007 has made them some of the most closely watched market indicators on Wall Street. The Markit Group indexes are seen as bringing more transparency to the complex business of credit trading.

The article reports on the difficulty experienced by hedge funds in reviving the mortgage-securities market in the U.S. It notes that such investors are getting involved in mortgage securities in which they purchase assets that others avoid in the hopes that prices will increase. It stresses that placing value on mortgage securities remains a challenge as house prices drop and mortgage defaults increase. It adds that banks continue to get rid of more securities leading to cheaper assets.

The article reports that the financial services company HBOS PLC, Great Britain's largest mortgage loan firm, successfully sold $1billion in bonds backed by mortgage loans. The sale of the mortgage-backed securities was cited as an indication the worst of the financial crisis caused by the collapse of the U.S. housing bubble may be at an end.

The article reports on a lawsuit filed by German lender HSH Nordbank AG against Swiss bank UBS AG for allegedly selling $500 million in complex investments used by UBS hedge fund Dillon Read Capital Management as a receptacle for subprime-mortgage securities. HSH Nordbank attributed its $275 million business loss to the actions taken by UBS. It mentions other lawsuits filed by investors and banks against each other. UBS is being investigated on whether it properly assessed the value of troubled securities it held.

The article reports on the nearing completion of a deal that would pump roughly $3 billion into bond insurer Ambac Financial Group Inc. It says that it would happen if credit-rating concerns sign off on the arrangement, according to people familiar with the matter. It states that how this deal might affect the possible division of the company into separate units is not clear. It also mentions the aim of the deal which is to preserve the rating not only for mortgage-backed securities but also municipal bonds insured by Ambac.

The article reports on the planned creation of a super-size investment fund in the U.S. Bankers and other financial institutions have expressed interest in committing more than $60 billion in credit lines to create a planned superfund that will be used to support the ailing mortgage-securities market. The three U.S. banks organizing the fund, Bank of America Corp., J.P. Morgan Chase & Co., and Citigroup Inc., would come close to their goal of raising a fund of $80 billion to $100 billion if the expressions of interest turn into firm commitments.

The article reports that U.S. real-estate fund Luminent Mortgage Capital Inc. is suing HSBC Holdings PLC over valuation of fund's bonds. Luminent claims that the New York-based mortgage-trading office of HSBC placed an improperly low valuation on nine subprime-mortgage bonds, which the fund's subsidiaries had put up as collateral for loans. The Luminent-HSBC dispute highlights a problem that many banks and investors faced this summer of 2007 as troubles in subprime mortgages triggered a broader credit crisis.

The article reports that the credit troubles faced by British mortgage lender Northern Rock highlights the impact of the global credit crunch on the British housing market. It states that the decision of investors to shy away from mortgage-backed securities has been caused by the credit problems that started with subprime mortgages in the U.S.

The article reports on the decision of British bank HBOS PLC to step in to cover maturing asset-backed commercial paper issued by its affiliate called Grampian. It states that it is rare for banks to step in to cover loans for their affiliates. According to ratings agencies, Grampian owns mortgage securities that include U.S. subprime loans, which date to 2004 and earlier. It is inferred that banks sales desks in London, England, are having a difficult time trying to sell European commercial paper.

The article discusses the appearance of several Goldman Sachs Group Inc. executives before a U.S. Senate panel. Several senators including John McCain and Carl Levin accused Goldman of unsavory practices with respect to mortgage-backed securities. Goldman chief executive Lloyd Blankfein defended his firm's actions.

The article reports that Citigroup Inc. has agreed to buy most of the assets of Wachovia Corp. for almost $2 billion dollars. Citigroup will assume ownership of Wachovia's $320 billion portfolio of mortgage-related assets, although the U.S. government has agreed to absorb any losses that exceed $42 billion.

The article discusses the efforts of New York Insurance Superintendent Eric Dinallo to rescue financially troubled bond insurers. A weakening housing market in the U.S. has caused mortgage-backed securities to plummet in value, thus putting the insurers at risk. Dinallo is seen as acting aggressively in prodding banks to address the problem.