Economy Watch: The Greek Contagion Expands Like… Ebola?

April 30, 2010
By Dees Stribling, Contributing Editor

Courtesy Flickr Creative Commons user jonrawlinson

The eyes of the financial chattering classes are on Greece, whose problems have lately been compared by Angel Gurria, secretary general for the Organization for Economic Cooperation and Development, to (of all things) the fast-spreading, all-consuming viral disease Ebola. Gurria also suggested that “amputation” might be the best metaphor for what the eurozone needs to do: kick Greece and other national schnorrers out of the club.

In a statement this week, Standard & Poor’s said, “we assigned a recovery rating of ‘4’ to Greece’s debt issues, indicating our expectation of ‘average’ (30 percent to 50 percent) recovery for debtholders in the event of a debt restructuring or payment default.” Trouble is, it seems that European banks are on the hook for a lot of that debt–many as much as $190 billion. Those assets could probably be considered “toxic.” Sound familiar?

The question now is whether “Europe,” which is to say “Germany,” will be politically willing to bail out the Eurobanks that will be grievously hurt by the hard-to-avoid default by Greece. The country is under water, to borrow another apt phrase from another part of the Great Recession, and might be tempted to walk away from its problems like the owner of a 2006-vintage mortgage in Vegas.

Wynn Cleans Up in Macau

On the other side of the world, Wynn Reports is benefitting handsomely from its operations in the Special Administrative Region of Macau. According to the gaming company, its property in the Chinese gambling enclave, Wynn Macau, saw revenues of $590.6 million in 1Q10, compared with $448.7 million during the same period last year.

Among other reasons for the spike in revenues, wealthy Chinese are back at the tables in a big way. Table games turnover in the VIP segment was $20.2 billion for the 2010 quarter, compared to $10.7 billion for the first quarter of 2009.

Non-gaming revenues at Wynn Macau increased 45.7 percent during the quarter to $62.7 million, driven in large part by retail revenues, which were up 91.3 percent to $30 million for 1Q10, according to Wynn. The company saw increased sales at several outlets and the opening of Wynn and Co. Watches and Jewelry, which sells Cartier, Jaeger Le Coultre and Kwiat products.

Wells Fargo Jumps Into Reviving RMBS Game

Wells Fargo is expanding its mortgage-bond desk to 30 employees, up from five, and has named Mike Buttner, a 19-year veteran with the bank, to lead its residential mortgage-backed securities unit, according to a report by Bloomberg on Thursday. The bank is looking forward to more securitizations as soon as late 2010, anticipating some kind of comeback to the market.

Just this month, Mill Valley, Calif.-based Redwood Trust closed on an $222.4 million offering of securities backed by 225 jumbo mortgages issued by Citigroup Inc. No dodgy mortgages for this round of RMBS: the borrowers all put down at least 20 percent, with an average loan balance of $933,000. It was the first securitization of mortgages not backed by GSEs (jumbos being too big for that) in about two years.

Wells Fargo, for all its clout in originating mortgages, has not been a major securitization player thus far. The bank originated $76 billion in mortgages during the first quarter of 2010, making it number-one in that regard for US banks.

Even as anti-Wall Street protesters were making themselves heard on the real Wall Street in downtown Manhattan, the figurative Wall Street bounced back more on Thursday even than on Wednesday, erasing everything it lost while upset over the Greek sticky wicket earlier in the week. The Dow Jones Industrial Average gained 122.05 points, or 1.11 percent, while the S&P 500 was up 1.29 percent and the Nasdaq advanced 1.63 percent.