The credit squeeze stemming from the US sub-prime meltdown has crunched non-bank lenders as money markets shut down, a financial services entrepreneur John Kinghorn says.
The RAMS Home Loans and Allco founder told The Australian newspaper the sale of RAMS to Westpac was a fait accompli after funding dried up late last year.
“We could no longer fund our business,” Kinghorn says. “The capital markets just closed. They didn’t just slow down, they just shut.”
Like most market players, Kinghorn didn’t see the credit crunch coming, but he had the good fortune to float the RAMS business just weeks before turmoil began in earnest, achieving a market cap of $858 million and netting him some $650 million.
“This is the first time ever, I believe, that there is just no money. In the mortgage-backed securities, which is about $50 trillion, there is not one transaction in the world being done.”
Kinghorn’s comments have significance far beyond RAMS, with many small non-bank lenders such as Bluestone Group and Macquarie Finance that have relied heavily on mortgage securitisation facing tough times.
>> For more on who is winning and losing in the current financial market turbulence, don’t miss tomorrow’s SmartCompany Dun & Bradstreet Industry Growth List for the banking and finance sector.