Paris, February 1, 2008 (LPAC)--The subprime crisis was only the tip of the iceberg and now the securitization machine has exploded, according to a Jan. 30 article by Emmanuel Garessus in Le Temps, the financial paper of record in the French-speaking part of Switzerland. He noted that securitization had helped the banks triple their profits, as a percentage of GDP, as compared to the 1947-1996 period, and without it they face uncertainty. A new wave of devaluations is expected, beginning with Société Générale, where the "nightmare" is not over. The French bank still has a portfolio of 4.9 billion euros of CDOs and 4.3 billion euros of securities linked to bond insurers, he said.

A "good candidate" for the next shock, Garessus says, is Germany. Commerzbank holds 12 billion euros in credit derivatives, and the Landesbanken (a form of savings bank) also have problems. LBBW and WestLB have already posted losses, and more losses can be expected from HSH Nordbank, Bayern LB and NordLB. Postbank, owned by the German postal system, still has 6.3 billion euros in credit derivatives (2.6 billion in American CDOs) of which it has written down only 1%. Postbank's president has indicated its willingness to sell 50.1% of the bank, but, Garessus asks, "who wants to buy a bank with a Sword of Damocles of 6.3 billion over its head?" One of the most important financiers in the real estate commercial credit sector in Germany, Hypo Real Estate from Munich, is also very bad off, he said, noting that it just wrote off 390 million of a 1.5 billion euro exposure to CDOs, and its stock is now trading at half the value of its own capital. The German banks are also heavily exposed to bonds backed by U.S. bond insurers, he added.