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Excessive Debt Defaults -- Three War Fronts in Credit Debacle

London, UK - 4 November 2007, 10:47 GMT

Dear ATCA Colleagues

[Please note that the views presented by individual contributors are not necessarily representative of the views of ATCA, which is neutral. ATCA conducts collective Socratic dialogue on global opportunities and threats.]

We are grateful for the 84th contribution to the "Global Credit Crunch" Socratic dialogue:

84* Dr George Feiger, President & CEO, Contango Capital Advisors, based in Berkeley, California, USA for "Excessive Debt Defaults -- The Three War Fronts in The Credit Debacle."

The number of iterations of an ATCA Socratic dialogue is a very rough indicator of how critical a particular asymmetric threat is perceived to be and how protracted it has become over time. This Socratic dialogue was started on 12th July 2007, nearly one month before the global credit crunch crisis and associated fallout began with the European Central Bank (ECB) emergency injection of Euro 95bn on 9th August 2007. Three months and three weeks later, it remains the longest and deepest running Socratic dialogue on ATCA, since our inception in October 2001.

Dear DK and Colleagues

Re: Excessive Debt Defaults -- The Three War Fronts in The Credit Debacle

We have seen a series of "steps" in the global credit crunch: where there is a crisis it seems to pass, various governmental authorities assure us that their wise intervention has stabilized things and then, shock, horror, something else happens. Here is what is still to come: 3 major fronts in credit problems which will endure through 2008 and well into 2009; a significant slowing or recession in the US and probably a significant fall in equity valuations.

[CONTINUES] [ATCA Membership]


George Feiger

Dr George Feiger is President and CEO of Contango Capital Advisors, based in Berkeley, California. He brings to the firm a diverse background in the banking, financial services and wealth-management industries. He is also Executive Vice President of the firm's parent company, Zions Bancorporation listed on Nasdaq and based in Salt Lake City, Utah. Prior to Contango, Dr Feiger served in a number of senior positions in the financial services sector. He was a Senior Advisor to the Monitor Group, Global Head of Onshore Private Banking for UBS, Global Head of Investment Banking at SBC Warburg and was a Senior Partner at McKinsey & Co during his time in Europe. He led the merger integration of the corporate finance businesses of Swiss Bank Corp and SG Warburg, and oversaw the consolidation of SBC Warburg's sales and trading businesses. He was also a partner at Capco, a financial services consulting firm. He holds a PhD in Economics from Harvard University and was an Associate Professor of Finance at Stanford University's Graduate School of Business. He has served as a director on several corporate boards and is a frequent writer and speaker on a wide range of financial topics.

[ENDS]

The ATCA submissions can be accessed from here. We are grateful to:

83. Dr Harald Malmgren, CEO, Malmgren Global, based in Washington DC, USA, for, "Rising Contagion - Global Credit Crunch Cuts Deeper."
82. Gerald Clark, Head of the International Energy Practice at KMT Partners and member of the Advisory Board of 33 St James's, based in London, UK, for "The Sustainability of Uranium Resources."
81. Andrew Hunt, Founder and Consultant Economist, Andrew Hunt Economics, City of London, UK, for "Inflation Black Swan & China's Achilles Heel: Two Economies, One Country."

80+ The Rt Hon The Lord Howell of Guildford, President, British Institute of Energy Economics, based at The Palace of Westminster, London, UK, for "Question of Trust, Total Transparency and Extreme Volatility;"
79* Prof Joseph Mason, LeBow College of Business, Drexel University, Philadelphia, USA for "Monitoring the Monitors -- Central Banking and Rating Agencies;"
78. The ATCA Research & Analysis Wing (RAW), based in Canary Wharf, London, UK, for "The Largest American and Swiss Banks hit by Sub-Prime Meltdown & Global Credit Crunch;"
77. The Rt Hon Lord Howell of Guildford, President, British Institute of Energy Economics, based at The Palace of Westminster, London, UK, for "New Variables in Oil Supply at USD 100;"
76. Hamid Hakimzadeh, Hedge Fund Specialist, based in Buckinghamshire, England, UK, for "The Credit Pyramid and Energy Crisis;" and
75. Ashutosh Sheshabalaya, CEO, India-Advisory, from Brussels, European Union, and Bassilly, Belgium, for "New India's Role in Global Energy Equation;"
74. The ATCA Research & Analysis Wing (RAW), based in Canary Wharf, London, UK, for "Energy Crunch: The Overlay of Peak Oil and Peak Uranium on the Credit Crunch;"
73+ Rudi Bogni, Chairman, Medinvest, and Director, Old Mutual, based in London, UK, and Basel, Switzerland, for, "Transparency always Pays in the Long Run;"
72+* Mark Cliffe, Chief Economist, ING Group, based in London, UK, and Amsterdam, Netherlands, for "The Credit Crunch Blame Game -- Inevitable, Necessary... but Dangerous;"
71+ The ATCA Research & Analysis Wing (RAW), based in Canary Wharf, London, UK, for "Stress Testing BoE and FSA System 10 Years post 1997 as Credit Crisis Winds 140 Years Back;"

70. Dr Harald Malmgren, CEO, Malmgren Global, based in Washington, DC, USA, for, "The Fed's Bold Action confirms Multiple Threats to Financial Stability and Economic Growth;"
69. The ATCA Research & Analysis Wing (RAW), based in Canary Wharf, London, UK, for "Asymmetric Solutions: Fed Cuts Key Rate;"
68. Prof Jean-Pierre Lehmann based in Ouchy and IMD Lausanne, Switzerland, for "Asymmetric Solutions: No War with Iran?;"
67+ Arthur Probert, Associate, & Mark Goyder, Founding Director, Tomorrow's Company, London, UK, for "Asymmetric Solutions: Restoring Trust after the Credit Crunch;"
66+ Jean-Yves Gresser, Vice-Chairman, Black Forest Group, New York, USA, based in Paris and Granville, France, for "Asymmetric Solutions: Enhancing Trust in Computing Platforms, Networks & Processes;"
65. Dr Philippa Malmgren, Founder, Policy & Markets, & President, Canonbury Group, based in London, UK, for "Geo-Political Risk & Inflation based Black Swans;"
64. Dr Harald Malmgren, CEO, Malmgren Global, based in Washington, DC, USA, for "Greenspan's Double-Digit Inflation Shadow over the World's Central Bankers;"
63. The ATCA Research & Analysis Wing (RAW), based in Canary Wharf, London, UK, for "Fiat Money and Northern Rock's Parallels with 1973-1975;"
62. The ATCA Research & Analysis Wing (RAW), based in Canary Wharf, London, UK, for "Margin of Safety and The Bubble Phenomenon: Differentiating between Value Investment and Speculation;"
61. DK Matai, Executive Chairman, mi2g, ATCA, The Philanthropia, based in Canary Wharf, London, UK, for, "Predicting the Future: How does the 'wisdom based super-sensitive a priori knowledge' ATCA engine work?"

60* The ATCA Research & Analysis Wing (RAW), based in Canary Wharf, London, UK, for "In Goldman Sachs We Trust;"
59. Dr Harald Malmgren, CEO, Malmgren Global, based in Washington, DC, USA, and The ATCA Research & Analysis Wing (RAW), based in Canary Wharf, London, UK, for "Currencies Turmoil Ahead: Euro and Sterling Weakness around Point of Inflexion?;"
58. Eric Best, Founder and President, Best Partners SC, New York City, NY, USA, for "Captains' Priorities and Requisite Virtues in Deep Financial Storm;"
57. Andrew Hunt, Founder and Consultant Economist, Andrew Hunt Economics, City of London, UK, for "The UK's Non-Bank Banks and High LIBOR;"
56. The ATCA Research & Analysis Wing (RAW), based in Canary Wharf, London, UK, for "Worst Financial Crisis in 20 Years and the 10 Day Debt Bomb;"
55+ DK Matai, Executive Chairman, mi2g, ATCA, The Philanthropia, based in Canary Wharf, London, UK, for "Breach-of-Trust in Computing Platforms: Systemic Risk & Black Swans;"
54+ The ATCA Research & Analysis Wing (RAW), based in Canary Wharf, London, UK, for "ATCA QUERY: The Question of Trust;"
53. Dr Harald Malmgren, CEO, Malmgren Global, based in Washington, DC, USA, and The ATCA Research & Analysis Wing (RAW), based in Canary Wharf, London, UK for "Central Banks' Intervention and Europa;"
52. Hamid Hakimzadeh, Hedge Fund Specialist, based in Buckinghamshire, England, UK, for "The Physics of Humpty Dumpty;" and
51. Nigel Reed, Senior Analyst, Financial Markets, based in Cornwall, England, UK, for "China, Japan & US T-Bonds."

50* The ATCA Research & Analysis Wing (RAW), based in Canary Wharf, London, UK, for "Credit Card Debt Default - The Domino Crisis post Sub-Prime Overflow;"
49* Dr George Feiger, President & CEO, Contango Capital Advisors, based in Berkeley, California, USA for "Responsibility for Credit, Securitisation and Moral Hazard."
48. Anthony Whitehouse, Founder, Bittiner Whitehouse (now Maitland), Geneva, Switzerland, for "Blame and Sanctions in the Credit Crunch;"
47. Prof Prabhu Guptara, Executive Director, Organisational Development, Wolfsberg (UBS), Switzerland, for "Unique Problems with 1990s Japan;"
46. The ATCA Research & Analysis Wing (RAW), based in Canary Wharf, London, UK, and Dr Harald Malmgren, CEO, Malmgren Global, based in Washington, DC, USA, for "Central Bankers, Monetary Policy and Moral Hazard;"
45* William Sturge, Partner, Reinsurance, Lawrence Graham (LG) based in Central London, UK, for "Litigation Exposure and Insurances that may Respond;"
44. Peter Tasker, Founding Partner, Arcus Investment, based in Tokyo, Japan, for "Invaluable Lessons from 1990s Japan - Risks of Schadenfreude;"
43. Andrew Leung, CEO, AL International, London, UK, and frequent visitor to China for "The China Dimension of The Global Credit Crunch;"
42* The ATCA Research & Analysis Wing (RAW), based in Canary Wharf, London, UK, and Dr Harald Malmgren based in Washington, DC, USA for "Off-Balance Sheet Conduits & SIVs Raise Wider Concerns;"
41* Prof Charles Calomiris, Columbia Business School, New York & Prof Joseph Mason, LeBow College of Business, Drexel University, Philadelphia, USA for "The Conflict of Rating Agencies and Regulation - We need a Better Way to Judge Risk;"

40. Dr George Feiger, President & CEO, Contango Capital Advisors, based in Berkeley, California, USA for, "Questioning the Views of a Nobel Laureate;"
39. Prof Joseph Stiglitz, Nobel Laureate in Economics (2001), Columbia University, New York, USA , for "Day of Reckoning for Americans who lived Beyond their Means;"
38. Dr George Feiger, President & CEO, Contango Capital Advisors, based in Berkeley, California, USA for "Suggestions for Resolving Sub-Prime Dilemma Step by Step;"
37* Dr Harald Malmgren, CEO, Malmgren Global, based in Washington, DC, USA for "Understanding Rating Agencies beyond the Sub-Prime Meltdown;"
36* The ATCA Research and Analysis Wing (RAW), based in Canary Wharf, London, UK, for "Asymmetric Knowledge Risk and Market Deadlock;"
35* Anthony Whitehouse, Founder, Bittiner Whitehouse (now Maitland), Geneva, Switzerland, for "High Credit Ratings and Breakdown of Trust;"
34* John Pickering, Vice-Chairman, Labour Finance and Industry Group, based in London and Tunbridge Wells, UK, for "Role of Auditors;"
33* The ATCA Research and Analysis Wing (RAW), based in Canary Wharf, London, UK, for "ATCA QUERY: Role of Credit Rating Agencies;"
32. Peter Tasker, Founding Partner, Arcus Investment, based in Tokyo, Japan, for "Resilience of Corporate Profits & Sub-Prime Fiasco -- Global View from Japan;"
31. Daniel Morler, Head of Middle East, LGT Private Bank, based in Vaduz, Liechtenstein, for "Human Factor, Information Lag, Geo-Politics and Central Banks;"

30. Justin Urquhart Stewart, Director, Seven Investment Management, London, UK, for "Pride Before the Fall -- Those Who Don't Know that they Don't Know;"
29. Martin Wolf, Associate Editor & Chief Economics Commentator, Financial Times, London, UK, for "To Cut or Not to Cut: Federal Reserve must Prolong the Party;"
28. The Hon Al McDonald, Chairman and CEO, Avenir Group, from Michigan, USA, for "Balancing The Role of Management in Extreme Financial Turbulence."
27. The ATCA Editorial Team based in Canary Wharf, London, UK, for "Subprime Crisis Spreads Across Regions and Financial Sectors;"
26* Hervé de Carmoy, European Vice-Chairman, Trilateral Commission, based in Paris, France, for "Role of Large Financial Institutions in Fuelling Crisis;"
25* Dr Jim Walker, Chief Economist, CLSA, based in Hong Kong for "China Chaos and Subprime Butterfly;"
24. Ashutosh Sheshabalaya, CEO, India-Advisory, based in Brussels, EU, and Bassilly, Belgium, for "India turns History Upside Down;"
23. John Elkington, Chief Entrepreneur, SustainAbility, based in London, UK, and returning from India, for "Mother Convulsion - India's Third Liberation;"
22. Stephen Lendman, based in Chicago, Illinois, USA, for "Slow Motion Train Wreck" via Ashok Khosla, Chairman, Development Alternatives, New Delhi, India;
21. The ATCA Editorial Team based in Canary Wharf, London, UK, for "Market Convulsions;"

20. Dr Harald Malmgren, CEO, Malmgren Global, based in Washington, DC, USA for "Federal Reserve's Changed Focus;"
19. Bill Emmott, Director, UK-Japan 21st Century Group, based in London and Somerset, UK, for "Japan's Strong Yen;"
18* Dr Harald Malmgren, CEO, Malmgren Global, based in Washington, DC, USA for "The Asymmetric Loss of Trust and Chain Reaction;"
17. The ATCA Editorial Team, based in Canary Wharf, London, UK, for "Public Inquisition of Credit Rating Agencies may Accelerate Downturn;"
16. Dr George Feiger, President and CEO, Contango Capital Advisors, based in Berkeley, California, USA, for "Watch out for Dramatic Winners;"
15* The ATCA Editorial Team, based in Canary Wharf, London, UK, for "Systemic Risk & Sectoral Meltdown: Heightened Correlation and Deleveraging;"
14. Rudi Bogni, Chairman, Medinvest, and Director, Old Mutual, from Basel, Switzerland, for, "Non-Stop Central Banks' Intervention;"
13. Dr Ravi Batra, Professor of Economics, Southern Methodist University, Dallas, Texas, USA, for, "Towards a Global Economic Crisis?;"
12. Aurora Carlson, Founder, Open One Center, based on the West Coast, Sweden, for "The Coming Storm of Change;"
11. The ATCA Editorial Team, based in Canary Wharf, London, UK, for "Large Quake hits Quants as Computer-Driven Quantitative Hedge Funds Short-Circuit;"

10* Dr Harald Malmgren, CEO, Malmgren Global, based in Washington, DC, USA for "Prolonged Credit Market Correction Ahead;"
9. Prof Dr Norbert Walter, Chief Economist, Deutsche Bank Group, based in Frankfurt, Germany, for "Economic Consequences of The Sub-Prime Crisis;"
8. Anthony Whitehouse, Founder, Bittiner Whitehouse (now Maitland), Geneva, Switzerland, for "Regulators, Hedge Fund Lending and Cross-Selling;"
7. The ATCA Editorial Team, based in Canary Wharf, London, UK, for "Perfect Storm: Credit Freeze and Distress Selling by Hedge Funds;"
6. Dr George Feiger, based in Berkeley, California, USA, for "Two Faces of the Same Coin;"
5* The ATCA Editorial Team, based in Canary Wharf, London, for "Contagion and Systemic Risk? ECB Injects Record Euro 95bn post Major Disturbance;"
4. The ATCA Editorial Team, for "Flight to Quality as Markets finally Appreciate Risk;"
3. Robert McNally, Chairman, London Chamber of Commerce Property and Construction Group, for "Erosion of Commercial Real Estate as a Solid Asset Class;"
2. Alexander Hoare, CEO, C Hoare and Co, Private Bankers, based in the City of London, for "Destructive Creativity, Leverage and The Derivatives Market;" and
1. Dr Harald Malmgren, CEO, Malmgren Global, based in Washington, DC, for "The Fear of Central Bankers -- Flight from Illiquidity, Derivatives and Heightened Risk of Contagion;"

in response to, "Are the Currency Markets Warning that there is Trouble Ahead? The Precipitous Decline of the US Dollar and its Impact on the World."

+ Denotes ATCA QUERY: The Question of Trust +

* Denotes ATCA QUERY: Role of Credit Rating Agencies *

We look forward to your further thoughts, observations and views. Thank you.

Best wishes


For and on behalf of DK Matai, Chairman, Asymmetric Threats Contingency Alliance (ATCA)


ATCA: The Asymmetric Threats Contingency Alliance is a philanthropic expert initiative founded in 2001 to resolve complex global challenges through collective Socratic dialogue and joint executive action to build a wisdom based global economy. Adhering to the doctrine of non-violence, ATCA addresses asymmetric threats and social opportunities arising from climate chaos and the environment; radical poverty and microfinance; geo-politics and energy; organised crime & extremism; advanced technologies -- bio, info, nano, robo & AI; demographic skews and resource shortages; pandemics; financial systems and systemic risk; as well as transhumanism and ethics. Present membership of ATCA is by invitation only and has over 5,000 distinguished members from over 120 countries: including 1,000 Parliamentarians; 1,500 Chairmen and CEOs of corporations; 1,000 Heads of NGOs; 750 Directors at Academic Centres of Excellence; 500 Inventors and Original thinkers; as well as 250 Editors-in-Chief of major media.

The views presented by individual contributors are not necessarily representative of the views of ATCA, which is neutral. Please do not forward or use the material circulated without permission and full attribution.



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