Subprime: “Deeper, darker, scarier”

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Conflicting signals today on the mortgage mess and whether it is deepening.

From Reuters via CNBC: Blackstone Group President Hamilton James said on Monday that the sub-prime mess ... appears to be getting worse. ‘The sub-prime black hole is appearing deeper, darker and scarier than they thought,’ James said on a conference call.’ He was referring to investment banks.

Here’s the conflicting part: James also said Blackstone is starting to ‘go long’ in the sub-prime market, which could indicate securities backed by sub-prime loans are now accurately, and perhaps even attractively, priced.

More trouble: E-Trade Financial shares sold off sharply this morning after a Citigroup analyst downgraded the stock, noting ‘a significant deterioration in the value of its holdings of securities backed by home mortgages.’ The analyst, Prashant A. Bhatia, said there was a 15% chance the company would declare bankruptcy.

Potential trouble: Business Week reports, ‘In its quarterly filing to the Securities and Exchange Commission, Countrywide Financial warned that its cost of debt would increase if its credit ratings are downgraded to junk.’

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Photo Credit: AP