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Subject:  Re: HFC-B Date:  5/13/2010  1:19 AM
Author:  joelcorley Number:  30842 of 36384


You wrote One concern might be defaulting mortgages. Did they participate in subprime mortgages or offer second mortgages? ...

HFC-B was originally a preferred issue of Household Finance Corporation - the bank holding company also known as Household bank. Household bank was a very predatory sub-prime lender that specialized in consolidation loans, high-rate sub-prime credit cards and second mortgages - mostly for people that thought they couldn't afford to go anywhere else.

The quality of HFC's assets were really quite poor; but fortunately for HFC management, they sold out to HSBC before the **** hit the fan. The HFC acquisition is largely responsible for HSBC's write-downs for the past two years. Think something along the lines of Countrywide + much of Merrill, without much of the upside potential.

Fortunately HSBC's huge interational operations should be profitable enough to pick up the slack. But HSBC's acquisition of HFC was a bad decision on their part.

- Joel
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