RBS Takes $12B Hit; Rumors Swamp Sub

Royal Bank of Scotland -- the parent of Greenwich Capital, for years a major player in subprime asset-backed securities -- early Tuesday morning said it would take almost $12 billion in mortgage-related writedowns and raise $24 billion in new capital. Great Britain's second-largest bank blamed its problems on the U.S. subprime mess and the spreading credit crunch that is now affecting many sectors of the financial services industry. Based in Connecticut, Greenwich has been a major securitizer of subprime mortgages. Its client list once included some of the largest subprime funders in the United States, including Ameriquest Mortgage of California. Sources say Greenwich has slashed its warehouse lending business to the bone and is even margin-calling investors in delinquent mortgages. One investment banker who visited Greenwich recently described the atmosphere in Connecticut as "a lot of traders sitting around gabbing" and "people going home early." Greenwich has not responded to telephone calls from National Mortgage News.