Posted on 14 February 2011
Financial Market Hurricane Misses Turkey
Turkish banks and home lenders have not experienced the same credit woes as many U.S. and European lenders. This is due to the low market penetration and low debt to equity ratios that exist in Turkey. Freddie and Fannie routinely provided 90 percent to 95 percent loans for home purchases. Such a thing is virtually unimaginable here in Turkey where even an 80 percent mortgage loan is not an everyday occurrence.
The investment community’s appetite for the relatively high yield collateralized debt securities (the main offering of Freddie and Fannie as well as the sub-prime funds) was the trough that fed the hogs before their slaughter. Such a thing did not exist in Turkey before 2007, when the law was amended to allow the collateralization and sale of shares of debt instruments or pools of mortgages in a secondary market. Ironically, not long before the sub-prime collapse there were those (myself included) who rued the fact that this opportunity did not present itself here. Fortunately progress towards securitization of debt was made only lately, just before the global sub-prime disaster. Sometimes the markets survive despite themselves. If pride goeth before the fall, thank God that the modesty of the Turkish financial markets and the hesitancy of Parliament saved Turkey’s system from sharing the pain experienced by the more sophisticated economies of the world. © Gary S. Lachman 2008
Turkish Daily News 20 September 2008 (Abridged)