HSBC to start selling £25bn of toxic US debt

[FarCenter]

The bank is planning to sell four sub-prime loan portfolios worth a total of $2.7bn in the next year, with hedge funds already expressing an interest. The disposals will mark the first time HSBC has sold any of its holding of sub-prime debt since the collapse of Lehman Brothers in September 2008 and is intended to kick off the sale of the $44.2bn of toxic debt still held by the bank.

HSBC was one of the first banks to recognise the problems in the US sub-prime housing market, where millions of Americans were given loans to buy properties they could not afford.

The bank's warning in February 2007 of the large losses it said it expected to take on the low-quality mortgages precipitated the credit crunch.
...
Selling off large parts of its toxic debt would mark the final stage of HSBC’s clean up of its US business. The bank is expected to sell the debt off in parcels ranging from $450m to $750m. The disposals will free billions of dollars of capital that HSBC has had to hold against the toxic loans.

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/9717776/HSBC-to-start-selling-25bn-of-toxic-US-debt.html

[Tutonic]

1. This "bank" is an elaborate "ponzi" scheme.

[FarCenter]

3. HSBC and Barclays were the two big UK banks to get through the financial crisis

It shut down and sold its former US units Household Finance and Republic Bank.

[salin]

2. who would buy toxic debt?

I am guessing another big scheme to bilk markets, investors and the like is getting underway.

[FarCenter]

4. If it is discounted, there are always buyers at a price.

The US real estate market is relatively stable now with more predictable prices.

[salin]

6. but this debt isn't about current loans, nor stable prices.

If anywhere my money is invested is buying this crap up for anything more than .01$ per $2000 of toxic debt, than I am taking my money elsewhere.

I seriously doubt the discounts are deep enough to make the risk worthwhile for the investors. If it was, then the bank would hold on to it in its portfolio.

[dipsydoodle]

8. The article explains.

It effectively improves their liquidity by reducing the capital they need to retain to cover the deliquent debt.

[salin]

9. I read why the banks are selling it.

It's rather obvious.

My question is how deeply discounted is it - and why - unless *severely* discounted would any other entity buy it from the banks?

[alcibiades_mystery]

5. Have you ever been to a Dollar Store?

[dipsydoodle]

7. Whatever was owed

remains owed. The risk lies in the ability to recover it and hence the discounted price.