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Woes Afflicting Mortgage Giants Raise Loan Rates
By VIKAS BAJAJ
The New York Times
July 23, 2008
Mortgage rates are rising because of the troubles at the loan finance giants Fannie Mae and Freddie Mac, threatening to deal another blow to the faltering housing market.
Even as policy makers rushed to support the two companies, home loan rates approached their highest levels in five years.
The average interest rate for 30-year fixed-rate mortgages rose to 6.71 percent on Tuesday, from 6.44 percent on Friday, according to HSH Associates, a publisher of consumer rates. The average rate for so-called jumbo loans, which cannot be sold to Fannie Mae and Freddie Mac, was 7.8 percent, the highest since December 2000.
Loan rates are rising because of concern in the financial markets about the future of Fannie Mae and Freddie Mac, which own or guarantee nearly half of the nation’s $12 trillion mortgage market.
Worried that the companies may not be as big a support to the market as they have been, bond investors are driving up interest rates on securities backed by home loans. That added cost is being passed on to consumers through the mortgage markets. For a $400,000 loan, the increase in 30-year rates in the last few days would add $71 to a monthly bill, or $852 a year.
The rise in rates is of greatest concern for homeowners whose mortgages required them to pay only the interest on their loans for the first few years. If such borrowers are unable to refinance into lower-cost loans, many of them will face the prospect of having to pay both interest and principal at higher, adjustable rates.
For borrowers with a $400,000 loan, such a jump could send their monthly payments to $2,338 from $1,417, estimates Louis S. Barnes, a mortgage broker at Boulder West Financial in Boulder, Colo.
While mortgage rates approached these levels earlier this year and in 2007 during times of stress in the financial markets, the latest move adds urgency to the government’s efforts to restore confidence in Fannie Mae and Freddie Mac. Lawmakers are expected to vote this week on a measure that would give the Treasury Department authority to lend more money to the companies and buy shares in them if they falter.
The uncertainty surrounding the two companies is the latest in a series of pressures bearing down on the housing market and the broader economy. Higher interest rates make it harder and more expensive to refinance existing debts and to buy homes.
“When we get to rate levels like this, the market just shuts down,” Mr. Barnes said.
While mortgage rates remain relatively low by historical standards, they are higher than what homeowners and the economy became accustomed to during the recent housing boom. Lending standards have also tightened significantly in the last 12 months, and many popular loans are no longer available.
A government report based on data on Fannie Mae and Freddie Mac loans said on Tuesday that home prices fell 4.8 percent in May from a year earlier. That compared to a 4.6 percent decline in April. Other home price indexes that track a broader set of loans show much bigger declines.
The worries about Fannie Mae and Freddie Mac have led to weaker demand for securities backed by home mortgages, analysts say. Inflation, which tends to send bond prices down and bond rates up, is another concern.
In a securities filing released on Friday, Freddie Mac suggested that it might have to pare back or slow the growth of its mortgage portfolio to bolster its capital.
Freddie and Fannie together own about $1.5 trillion in mortgage securities and home loans, and they guarantee an additional $3.7 trillion in securities held by other investors. The companies had a combined net worth of $55 billion as of March. Analysts and critics say the companies need significantly more capital to cushion the blow of growing losses on the more-risky mortgages made during the boom.
Important players in the mortgage market for decades, the two companies have become even more vital in the last year as several large lenders have gone out of business and investors have lost confidence in mortgage securities that are not backed by the government, or by Fannie or Freddie.
This year, the regulator overseeing the companies gave them more leeway to use their capital and the companies responded by increasing their portfolios. Freddie’s holdings grew 6.9 percent in the first five months of the year from the end of 2007; Fannie’s portfolio increased 1.8 percent.
But now it appears the companies, particularly Freddie Mac, might have to slow their purchases of mortgage securities. In its filing, Freddie Mac said it aims to increase its portfolio by a total of 10 percent in 2008. A spokeswoman for Fannie Mae declined to comment on its plans.
“That’s one of the ways in which the agencies can increase capital, by slowing down their purchases,” said Derrick Wulf, a bond portfolio manager at Dwight Asset Management. “I don’t think the market expects a dramatic slowdown in purchases but there clearly is uncertainty about that.”
Mortgage rates have been driven up in part by a rise in the yield on Treasury notes and bonds. On Tuesday, bond prices, which move in the opposite direction of the yields, slumped after the president of the Federal Reserve Bank of Philadelphia, Charles I. Plosser, said the central bank might need to raise interest rates to combat inflation “sooner rather than later.”
Some analysts say the rise in mortgage rates can be explained by technical factors in the bond market that are forcing mortgage companies and banks to sell securities to manage their portfolios. These analysts add that at current prices the mortgage securities guaranteed by Fannie and Freddie should be attractive to investors. Mortgage bonds backed by Fannie Mae, for instance, are trading at a 2.1 percentage point premium to the 10-year Treasury note, up from 1.8 points on July 14.
“I don’t see how anyone could argue that the fundamentals of mortgages are not attractive,” said Matthew J. Jozoff, an analyst at JPMorgan.
In March, for instance, mortgage rates surged after some big investors were forced to sell billions in mortgage bonds. But rates fell back slowly in the spring after the selling pressure eased and other investors, including Freddie Mac and Fannie Mae, made big purchases.
This time, the coming Congressional vote on the Treasury plan to support the companies could help allay investors’ fears, said W. Scott Simon, a managing director at Pimco Advisors, the giant bond fund firm, which owns mortgage securities. “It will go a long way toward reviving demand.”
http://www.nytimes.com/2008/07/23/business/23rates.html
Posting Huge Loss, Wachovia Tries to Purge Lending Woes
New York Times
By ERIC DASH
Published: July 23, 2008
Moving quickly to put an end to the constant spill of red ink, the Wachovia Corporation, the banking giant, booked an $8.9 billion loss and slashed its dividend its first quarter under new leadership.
Investors had been bracing for large losses since the bank named Robert K. Steel, a former Treasury under secretary, as chief executive, to help steer it through the housing crisis. At the time, the bank said that it anticipated a loss of $2.6 billion to $2.8 billion on top of an unspecified merger-accounting charge.
But Mr. Steel had every incentive to kick off his tenure with a “kitchen sink” quarter as he tries to clean up the bank’s problems.
Wachovia reported a second-quarter loss of $8.9 billion, including a $6.1 billion write-off that is tied to overpaying for several deals. The bank set aside another $5.6 billion to cover current and future losses. It also cut its quarterly dividend by 87 percent, to 5 cents a share, in order to conserve about $2.8 billion a year.
“These bottom-line results are disappointing and unacceptable,” said Lanty L. Smith, Wachovia’s chairman who orchestrated the ouster of the bank’s former chief executive, G. Kennedy Thompson, in early June. “While to some degree they reflect industry headwinds and weaker macroeconomic conditions, they also reflect performance for which we at Wachovia also accept responsibility.”
Wachovia has faced staggering losses from its ill-timed acquisition of Golden West Financial, a large California lender that specialized in so-called pay-option mortgages. Loans made to builders and commercial real estate developers have started to sour. With the credit markets frozen, it has been forced to take steep markdowns on billions of dollars of unsold buyout loans and complex mortgage investments it holds on its books.
The bank’s results were much worse than Wall Street anticipated, a stark contrast to its big bank rivals that handily bested the low targets analysts set. In premarket trading, its shares fell more than 10 percent.
Wachovia’s revenue fell 14 percent, to $7.5 billion. The bank reported a $4.20 a share loss in the second quarter, compared with a profit of $2.34 billion, or $1.22 a share, in the period a year ago. That figure, excluding the big accounting charge, was in line with the bank’s July 9 guidance, but analysts previously had been expecting better results.
Thomson Financial says analysts had predicted a loss of 78 cents a share on revenue of almost $8.4 billion.
Last week, Wells Fargo & Company, JPMorgan Chase and Citigroup reported better-than-expected earnings, causing financial stocks to rally. On Monday, Bank of America also posted stronger-than-expected results. But investors had a gloomier mindset on Tuesday morning, as they digested the Wachovia’s dismal performance as well as poor results from American Express. The credit card company, which caters to wealthier customers, reported a surge in losses and a slowdown in consumer spending.
Wachovia’s numbers, however, were much worse. The bank’s revenue was essentially wiped out a laundry-list of charges. The bank set aside an additional $5.6 billion to raise reserves and cover losses, including about $3.3 billion, stemming from its portfolio of Golden West pay-option loans. It booked a $936 million loss tied to markdowns on complex mortgage-related investments and the bailout of certain Evergreen money funds. It also booked a $391 million loss in anticipation of unloading certain investments at steep discounts and recorded a $975 million non-cash charge related to potential tax liabilities of certain leasing transactions. The bank added $590 million to bolster its legal reserves from shareholder lawsuits.
At Wachovia, Mr. Steel succeeded Mr. Thompson, who was ousted June 2. Mr. Steel has vowed to keep the bank independent and put it back on track.
“In the short term, the entire organization is focused on protecting, preserving, and generating capital,” Mr. Steel said in a statement. He said that it was “clearly prudent and necessary” to further reduce it bank’s dividend and said the bank was looking to trim expenses, sell assets and reduce its credit-only commercial borrowers to reduce risk.
http://www.nytimes.com/2008/07/23/business/23bank.html
Trouble at Fannie Mae and Freddie Mac Stirs Concern Abroad
By HEATHER TIMMONS
Published: July 21, 2008
For more than a decade, Fannie Mae and Freddie Mac, the housing giants that make the American mortgage market run, have attracted overseas investors with a simple pitch: the securities they issue are just as good as the United States government’s, and they usually pay better.
The marketing plan worked. About one-fifth of securities issued by Fannie, Freddie and a handful of much smaller quasi-governmental agencies, some $1.5 trillion worth, were held by foreign investors at the end of March. One out of 10 American mortgages is, in effect, in the hands of institutions and governments outside the United States.
Now that the two companies are at risk, how their rescue is handled will ultimately test the world’s faith in American markets. It could also influence the level of interest rates and weigh on the strength of the dollar for years to come, analysts say.
“No less than the international perception of the credit quality of the U.S. government is at stake,” said Richard Hofmann, an analyst with CreditSights, an independent research house with offices in London and New York.
Also at stake is Americans’ future ability to gain access to credit. If foreign companies and governments abandon United States investments, home, auto and credit card loans will be much more difficult to come by.
That helps explain why Treasury Secretary Henry M. Paulson Jr. is pressing American lawmakers for the authority to inject unspecified billions in cash into either company or both. The “blank check” nature of his request has raised concerns on Capitol Hill, but Mr. Paulson is betting that Congress is even more fearful of the consequences of doing nothing to rescue Fannie and Freddie.
On Sunday, in an appearance on the television program “Face the Nation,” Mr. Paulson said he was “very optimistic that we’re going to get what we need from Congress.”
“Congress understands how important these institutions are,” Mr. Paulson said.
Asian institutions and investors hold some $800 billion in securities issued by Fannie and Freddie, the bulk of that in China and Japan. China held $376 billion and Japan $228 billion as of June 2007, the most recent country-specific Treasury figures.
In Europe, roughly $39 billion in Fannie and Freddie debt is held in Luxembourg and $33 billion more in Belgium, countries that are home to large investment management firms. Investors in Britain hold $28 billion, and Russian buyers hold $75 billion. Sovereign wealth funds in the Middle East are also believed to be big investors in Fannie and Freddie debt.
The trillions in securities issued by Fannie and Freddie and backed by American mortgages were never explicitly guaranteed by the United States government, but foreign and domestic investors alike have always believed, because of the companies’ integral role in the housing market and their marketing pitch, that the guarantee would be backed up if it were tested.
As the United States government’s debt, and the corresponding amount of Treasury securities, shrank in the late 1990s, foreign investors with currency reserves needed a safe alternative to park their cash. Fannie and Freddie stepped up their overseas marketing efforts and, with the help of Wall Street banks, sold billions of dollars in securities overseas.
Asian banks and insurers bought Fannie’s and Freddie’s paper because it gave a little more yield than a straight Treasury note — “the same risk at a better price,” said Deborah Schuler, an analyst with Moody’s Investors Service in Singapore.
Investment managers at Asian banks and central governments are “very comfortable with the idea of implied government support” because it is so prevalent in Asia, Ms. Schuler said.
Still, this week’s Congressional debate on the issue “is going to worry people,” Ms. Schuler said, though she, like most analysts, is confident that Washington will deliver, just as it has in past financial crises like the savings and loan industry bailout of the late 1980s and early 1990s.
Because America’s relations with a host of countries are intricately tied to Fannie and Freddie, the only realistic option open to lawmakers may be to hand the Treasury Department that blank check, analysts say.
The two housing agencies have always been fierce competitors, and they made no exception in their expansion into international markets. Top executives wooed governments, banks and insurance companies in Asia and Europe, and lent executives to help foreign governments, including Russia and Hong Kong, set up their own American-style mortgage markets.
Both companies often compared their product to United States Treasuries when they talked to international investors, and adjusted the way that bonds matured and were priced so they looked and acted more like Treasury bonds.
In an interview with a London financial trade paper in 1999, Jerome T. Lienhard, Freddie Mac’s senior vice president of investment funding, said, “Investors that make the transition from U.S. Treasuries to our securities will be pleased with the performance.” Freddie Mac’s program is “designed to mirror that already used by the United States government,” he said.
The Treasury will not comment on Fannie and Freddie’s international marketing pitches, but in the past it has tried to rein in the two institutions.
In March 2000, Gary Gensler, then Treasury under secretary, proposed more oversight of Fannie and Freddie, testifying to Congress that the two agencies “receive no funds from the federal government, and the government does not guarantee their securities.”
The companies “have been promoting their debt securities as an alternative market benchmark” to Treasuries, he noted, particularly as the amount of Treasuries issued by the government shrank with the deficit. Mr. Gensler’s comments roiled mortgage markets, sending prices down sharply on traded Fannie- and Freddie-backed securities and on both companies’ stock. Ultimately, the controls he proposed were softened.
The bulk of investments related to Fannie and Freddie are in the form of mortgage-backed securities, often called agency securities or agency paper. This agency paper is considered of much higher quality than securities backed by subprime loans because Fannie and Freddie generally lend to borrowers with good credit histories and require higher down payments.
Prices on senior Fannie and Freddie securities, the highest quality, have not changed significantly since the end of last year, even as the two companies’ stock prices have plummeted, Moody’s noted. As of June 30, 2008, prices on a typical Fannie or Freddie security maturing in 10 years were off only about 2 percent from December 2007.
Questions about Fannie and Freddie have prompted individual institutions and governments in Asia and Europe to specify their exposure in recent days, but so far international concern has been limited. Ingo Buse, a spokesman for Zurich Financial Services, Switzerland’s largest insurer, said it held $8.3 billion in mortgage securities backed by Freddie Mac or Fannie Mae, and felt “comfortable with our position and asset allocation.”
Swiss Reinsurance, Switzerland’s largest reinsurer, said on Wednesday that it held $9.6 billion of corporate debt from Freddie Mac and Fannie Mae and $12 billion in mortgage securities backed by the two companies. Swiss Re’s holding of Freddie Mac and Fannie Mae shares is minimal, it said.
Hannover Re, Germany’s second-largest reinsurer after Munich Re, said it held 125 million euros, or $199 million, in securities issued by Freddie Mac and Fannie Mae. “We are not worried about the exposure,” said Stefan Schulz, a spokesman for the company, “because we expect the U.S. government to step in if there is any problem.”
http://www.nytimes.com/2008/07/21/business/21bank.html
Rogers Calls Fannie, Freddie Rescue 'Disaster' (Transcript)
July 14 (Bloomberg) -- Jim Rogers, chairman of Rogers Holdings, talks with Bloomberg's Carol Massar and Ellen Braitman from Singapore about the U.S. government's efforts to bolster Fannie Mae and Freddie Mae, the outlook for financial stocks, the dollar and commodities, and his investment strategy.
(This is not a legal transcript. Bloomberg LP cannot guarantee its accuracy.)
CAROL MASSAR, BLOOMBERG NEWS: Our next guest is the man who correctly predicted oil would reach $100 and gold $1,000. Here to join us with his outlook on energy, commodities, the dollar, the credit crisis, everything under the sun, including Fannie and Freddie, Jim Rogers, Chairman of Rogers Holdings. He comes to us from Singapore this morning.
Jim, good morning. So, what do you think about what the government is doing or proposing to do with Fannie and Freddie?
JIM ROGERS, CHAIRMAN OF ROGERS HOLDINGS: It's an unmitigated disaster. I don't know where these guys get the audacity to take our money, taxpayer money, and buy stock in Fannie Mae. I mean, what is this?
If that is what they are doing with our tax money, why don't they ask us? I didn't say, take my money, my tax money, and buy Fannie Mae. Give it back to us if that's what they are going to do with it.
And what are they doing guaranteeing their debt? The people who bought debt in Fannie Mae and Freddie Mac can read a prospectus. They can read it. It says it is not guaranteed by the government. Anybody who can read a balance sheet knew that both of those companies were a sham and they had problems.
Now, we have to bail out the Japanese? The Japanese owe hundreds of millions of dollars of this stuff and so we are going to bail out the Japanese and the Chinese and everybody else in the world? What is this?
And it ruins the Federal Reserve's balance sheet, and it makes the dollar more vulnerable, and it increases inflation, and it drives down the dollar. Other than that, good morning.
MASSAR: Good morning. All right, so where do you think - all right. You have been very critical of the Fed and certainly some of the government moves here, Jim. So where do you think this is all leading us to?
ROGERS: It is leading to more and more rampant inflation. It is leading to a decline and the eventual demise of the United States dollar. And the FDIC this weekend used 10 percent of its assets to bail out a bank.
Anybody who has got money at Bank of America better make sure they don't have over $100,000, because 10 percent of the FDIC's assets just went there this morning.
MASSAR: Jim, a viewer e-mailed me last night, actually e-mailed Bloomberg, happens to be a mortgage banker and his question was for you. He is wondering if you covered your shorts Friday, especially in Fannie Mae and Freddie Mac?
ROGERS: No, I have not covered my shorts. Obviously I should have, because you know they already are up 50 percent or something since then. If they go up a whole lot more, I will short more. They are basically insolvent. There is no question about that.
The government itself last week said the extra, the pool last week said that they are insolvent. Anybody who can read a balance sheet knows they are insolvent. So if they go up a lot, I will short more. If they go down, I will probably cover.
ELLEN BREITMAN, BLOOMBERG NEWS: Jim, it is Ellen Breitman here. I am looking at the Treasuries, which were little changed this morning. Now you have got the 10-year down 9/32s. Why are we not seeing more of a move in the Treasury market this morning? What should the investor reaction be on that front?
ROGERS: Well, I am short U.S. government bonds and I am short the long Treasuries, so for full disclosure, I think that most people are just sitting here confused and probably relieved at the moment and trying to figure out how this is going to work out.
But let me tell you how it is going to work out. It is going to mean the debt of the United States is going to be downgraded over the next few years. It means that U.S. government bonds are now going to become suspect down the line.
MASSAR: I want to go back to financials. So you mentioned Fannie and Freddie. Are you shorting most of the big names, be it Citigroup, Merrill Lynch? I mean, a lot of them are going to be reporting earnings this week or starting to, Jim. Do you not like any of the names here?
ROGERS: Carol, since I have been coming on your program, I have been short all the investment banks. I have been short Citibank, I have been short Fannie Mae, I am still short every one of them. I will cover them all some day, but some day is a long way from now.
If they rally, I will short some more. But no, why would anybody cover any of these stocks? They are all essentially in terrible, terrible financial shape.
MASSAR: You don't think we are getting to the end of this mess?
ROGERS: Well, Mr. Paulson said we have been coming to the end of it every month for the last year. I don't happen to agree with him.
MASSAR: What is your -
ROGERS: And Mr. Bernanke has also said we are coming to the end of it. Mr. Bernanke under oath told us before Congress that the housing crisis, that there was no problem in housing two years ago and three years ago. Mr. Bernanke under oath has been telling us for a while that everything is okay.
MASSAR: Jim, did we - I want to go back to Fannie and Freddie, if I may. I know I am jumping around here because there is a lot going on. I mean, did we have a choice though with Fannie and Freddie? I mean, they are responsible for what happened, the mortgages that are out there. I mean, could we have let them fail?
ROGERS: Carol, I know you always like to print money, you always like to bail out everybody in sight. But that is not the way capitalism is supposed to work. That is socialism for the rich. That is what that is. Welfare for the rich. Of course not.
Now, if we don't let Fannie Mae go broke and we are not, obviously, what is going to happen when you Band-Aid and put some Band-Aids on it for another year or two or three? What is going to happen three years from now when the situation is much, much, much worse? Then somewhere along the line, the market is going to hit us and we are not going to be able to do anything if we keep bailing out everybody in sight.
The Federal Reserve has already extended its balance sheet so desperately that they have trouble.
MASSAR: So very critical, Jim, of what the government is proposing to do with Fannie and Freddie. But yet, investors seem to like it and you have got the dollar moving up, so there seems to be a lot of support out there.
ROGERS: Well, of course investors in Fannie Mae and Freddie Mac like it. The companies were going to go bankrupt if they hadn't stepped in to do something and they should have gone bankrupt, all the mistakes they made.
I would like to know why the people at Fannie Mae aren't in jail right now, the people at Freddie Mac aren't in jail.
MASSAR: But why is - Jim, why is the -
ROGERS: You know, a lot of people have gone to jail for fraud and scams.
MASSAR: Jim, why is the dollar up, though, this morning?
ROGERS: Well, I suspect it is because there is so many shorts. Everybody is negative on the dollar, including me, and whenever you have everybody on the same side of a trade, something comes along and you have a big rally. The shorts are covered. It is the way markets have worked for a few hundred years.
MASSAR: Are you still negative on the dollar at this point?
ROGERS: I just said everybody in the world is negative on the dollar, including me. So it is bound to rally, it could rally for another few weeks, few months. How do I know? I hope that if it does rally more this year that I will use that rally to get out of the rest of my U.S. dollars. The dollar is a terribly flawed currency, Carol.
MASSAR: Yes. And that is based on what - what about your expectations for interest rates around the world? I mean, there has been a bit of a debate now about what the Fed may do, but you have certainly seen governments around the globe raising rates to combat inflation. What is your outlook there?
ROGERS: Well, you are going to see higher rates. I am short United States government bonds, long bonds, because rates are going to go higher. The U.S. government says there is no inflation, but the rest - everybody else in the world knows there is inflation.
Most governments don't lie about it any more. They know they cannot lie about them. Inflation - the U.K. just a few minutes ago said they have the highest rate of inflation since 1986. Everybody does, and the U.K. is one of the governments that usually lies about it. So if they are saying it is that bad, you know it is really bad.
MASSAR: So, Jim, how do you think this is all going to be playing out? I mean, you are over there in Singapore, you are watching this. I mean, what is your expectations, first of all, for the U.S. and the economy here in the next, what, six to 12 months - and the markets, if you will?
ROGERS: Well, the United States is in a recession. It is going to be the worst recession we have had in a long time, perhaps since the Second World War, because the federal government keeps making mistakes. The central bank makes mistakes, the Treasury makes mistakes. Everybody keeps making mistakes.
It is going to be one of the worst. It is like Arthur Burns in the 1970s, he kept making mistakes and he had a horrible time. It's like the Bank of Japan in the 1990s, they kept making mistakes and in Japan, they still call up the '90s the ?Lost Decade.?
BREITMAN: Jim, it is Ellen Breitman again. I want to ask you a question I asked an earlier guest today, which is, when you look back over your entire career, how do this play out in terms of the level of history that is being made, Friday, Sunday, and today?
ROGERS: Well, it's a very good question and the answer, I don't think I want to give you the answer because you will probably cut me off the air. What is happening here is they are ruining the value of the U.S. dollar. They are ruining the Federal Reserve. They are ruining what has been one of the greatest economies in the world, bailing out everybody in sight.
This is a disaster for America. This is a disaster for the world. Ben Bernanke and Paulson are bailing out their friends on Wall Street, but there are 300 million of us Americans who are going to have to pay for this and there are six billion people in the world who are going to have to pay for this. And they are doing it with no authorization from anybody.
Paul Volcker said a couple of weeks ago that perhaps what the Federal Reserve has done is illegal. I would submit it is illegal what they have done and what they are doing. They are saddling all of us with hundreds of billions of dollars of debt that they have no authorization to do.
MASSAR: So, Jim, if this had been another industry, take your pick, I mean, look at the woes that we have seen in the housing industry, you don't think the government would have jumped in so quickly to help out?
ROGERS: Well, I have no idea. They jumped in once before and helped out Pfizer 25 years ago, 30 years ago. Who knows? Conceivably, it depends on how many votes they think they can get. If they can buy some votes and right now, they are trying to make all their friends on Wall Street happy. But that is not good for anybody else but Wall Street.
Ben Bernanke picks up the phone every time Wall Street calls. Paulson picks up the phone every time Wall Street calls. You don't see any firemen out there in Nebraska calling him up. You don't see anybody out there with a real job. You don't see any schoolteachers in Oregon calling him up. If they did, they wouldn't take the call.
But all the schoolteachers in Oregon know that prices are going through the roof. It is very difficult for them to stay alive these days and hold body and soul together. They don't care. They take the calls from Bear Stearns. They take the call from Lehman Brothers.
MASSAR: Jim, you know, you sound so negative here. I mean, in terms of the U.S., anything you like within the U.S. market?
ROGERS: Sure. There are plenty of things that you can like in the United States market. I own - I have been buying airline stocks recently. I haven't bought any in the U.S. at the moment, but I have been buying airlines around the world. I have been buying agriculture.
I mean, America is the largest producer of agricultural goods in the world. I love agriculture, I love farmers. I wish everybody else did too.
MASSAR: Speaking of farmers, we know you love commodities. What about this commodity boom? I think recently we talked to you and or I was reading something and it said that we are in the fourth inning of a baseball game. Still there, in your view?
ROGERS: Probably around the fourth inning, that sounds good enough. Maybe the fourth and a half, maybe the top or the bottom of the fifth, something like that. The commodities bull market has a long way to go.
There are going to be corrections along the way, Carol, there always are, but no, nobody has discovered any major oil field in over 40 years. There just aren't any supplies of anything.
MASSAR: Jim, what do you make though of the arguments out there about demand destruction, about a weakening global economy and that is going to start to bring down commodities. I know you talk about some near-term corrections.
So, anything out there though that will substantially drag down commodities, in your view?
ROGERS: Well, recession, if the world goes into recession, of course it is going to drag down the demand. But remember, Carol, in the 1970s we had one of the worst decades in a long time for the economy. And oil went up ten times, the oil commodity, we had one of the great bull markets of all time in commodities because supply went down faster than demand and that is what is happening now too.
Oil can go down - you know the bull market in oil started in 1999. Three times since 1999, oil has gone down over 40 percent. It wasn't the end of the bull market. It just scared the socks off everybody, including me. That can happen again, but it is not the end of the bull market.
MASSAR: So, any pullbacks for a buying opportunity, in your view, whether it is oil, whether it is grains, whether it is base metals?
ROGERS: Yes, of course. Everything. Base metals have already corrected a lot. Wheat has corrected a lot. Sugar has corrected a lot. Get yourself some sugar, take it home, take it home from your Bloomberg.
MASSAR: Let's get back to our guest, Jim Rogers, chairman of Rogers Holdings. So, Jim, got a favorite commodity at this point?
ROGERS: No, nothing really pops into my mind. Agriculture still, some of the base metals I am looking at. Some of the base metals, Dr. Nickel and Dr. Zinc saw the recession coming long before Dr. Bernanke did and they realized that there was problems. They are down 60 percent or something.
So, I am contemplating, only contemplating and only noticing that they are down. Some of these things are down a good amount.
MASSAR: What are you waiting for to buy in?
ROGERS: I don't know, some kind of signal that they have made a bottom. Some kind of panic selling, for instance. And also watching Taiwan and China on the same basis, if we could have panic selling in an old-fashioned selling climax in Taiwan or China, I would buy both of them as well.
MASSAR: You know, the CSI 300 is down 45 percent this year, the second worst performing major benchmark tracked by Bloomberg. Why are we seeing such a pullback?
ROGERS: Well, the market went up a huge amount in the previous two years and the Chinese government acknowledges that there is terrible inflation in China. They are doing their best to cut it back. They have raised interest rates seven times in the last year. They have raised reserve requirements 15 times.
The United States central bank has cut interest rates seven times. They have thrown gasoline onto a raging inflationary fire.
MASSAR: Are you selling any of your Chinese holdings?
ROGERS: No, never sold any Chinese shares. Own them all. I hope that my daughters own them some day. I think China has got a fabulous future. Selling China in 2008 would be like selling America in 1908, just as we were on the verge of becoming a fantastic, great success story.
MASSAR: So, Jim, I am guessing, and tell me if I am wrong, though, as a pullback in Chinese shares, do you see that as a buying opportunity?
ROGERS: Well, if they have a selling climax, yes. And probably the best opportunity will be Taiwan, because for the first time in my life, there is going to be peace in Taiwan. And so that whole economy, that whole nation is now going to have a dramatic change and it will be great for the world, but certainly for Taiwan.
BREITMAN: Jim, it is Ellen again. I am curious in terms of commodities, just switching back there. So much government intervention when it comes to the financials, do you think we could see any kind of government intervention when it comes to commodities or trying to talk down some of these prices?
ROGERS: Of course we can. Do you remember 1929? They passed the Smoot-Hawley Act, which led to the Great Depression, even though 1,000 economists went on record as saying you are making a terrible mistake. Politicians did it anyway.
Remember the weapons of mass destruction? We invaded Iraq because of weapons of mass destruction. Of course, politicians can do all kinds of simple, stupid things.
The IPO market has been driven out of America now because American politicians passed some absurd laws. They will probably do something. It will drive the commodities trade outside the U.S.
You know, the United States has dominated the commodities business for over 100 years. If the Congress of the United States is about to give the world on a silver platter and say; ?Here, take what you want. We are going to give you the commodities-trading business, it is going to leave America.?
At the same time, the politicians are saying pension funds can't invest in commodities. University endowments cannot invest in commodities. At a time where there is terrible inflation, they are going to say to the pension plans, you cannot protect yourselves from inflation, too bad. And I'd do that.
MASSAR: Jim, just 30-
ROGERS: It is insane, but they will do it.
MASSAR: 30 seconds left here. I know you mentioned you are kind of looking, eyeing at base metals. Anything else you think investors should be looking at, just kind of keeping on their radar, just quickly if you could?
ROGERS: Agriculture, agriculture. You should be buying agriculture. I am buying agriculture.
MASSAR: All right. We are going to leave it on that note. Jim, as always, good to get some time with you. Have a great day. Jim Rogers of Rogers Holdings.
***END OF TRANSCRIPT***
-0- Jul/14/2008 20:30 GMT
Last Updated: July 14, 2008 16:30 EDT
Citigroup Posts $2.5 Billion Loss on Fresh Write-Downs
By LOUISE STORY
Published: July 19, 2008
A year into the tight credit market, and the losses keep coming.
Citigroup said Friday morning that it lost $2.5 billion, or 54 cents a share, in the second quarter.
The loss was largely caused by $7.2 billion of write-downs of Citigroup’s investments in mortgages and other loans and by a weakness in the consumer market, which cost Citigroup $4.4 billion in credit losses and $2.5 billion to increase reserves. Analysts had expected a loss of 66 cent a share.
But the chief executive, Vikram Pandit, positioned the $2.5 billion loss as progress. Last quarter, the financial conglomerate lost $5.1 billion.
“We cut our second-quarter losses in half compared to the first quarter,” Mr. Pandit said in a statement. “While there is still much to do, we are encouraged by our progress.”
Citigroup is a barometer of the pain felt in all parts of the financial industry, and the company’s results show the downturn spreading from the credit markets to the real economy. Consumers — stung by high oil and food prices — are falling behind on their mortgages, auto loans and credit cards. Increasingly, that pain is being felt beyond the United States.
The bank has recorded more than $56 billion in credit losses and write-downs in the last four quarters. Citigroup lost more than $17 billion in that time. And its share price has fallen nearly 70 percent since the credit market began to tighten.
In premarket trading, Citigroup shares rose as high as $19.27, after closing Thursday at $17.97.
Mr. Pandit has overseen sweeping asset sales to try to shore up the company’s balance sheet and free the bank of its riskiest assets. Citigroup said on Friday that it sold an additional $99 billion of assets in the quarter, and two-thirds of them were investments made under his predecessor, Charles O. Prince III, who was ousted last fall. The bank is also selling businesses like CitiCapital Diners Club International and its German retail banking unit. Those companies will bring in billions of dollars.
Citigroup’s revenue was $18.7 billion, down 29 percent, mostly because of its write-downs. In addition to mortgage bond deteriorating, Citigroup was hurt by a drop in the credit quality of companies that reinsure its bonds.
Operating expenses were up 9 percent at $15.9 billion, in part because of charges taken while the bank lays off thousands. So far this year, the bank has reduced its work force by 11,000.
Citigroup’s credit card income fell around the world, with North America the hardest hit but growing problems evident elsewhere. Troubled spots included Brazil, India and Mexico where there was a rise in past-due payments and credit costs.
Citigroup continued to be stung by lower securitization revenues, as the pipeline for repackaging loans into bonds remained frozen.
Bank executives said a recovery would take two to three years.
“This isn’t like a sprint. This really is a marathon,” Gary L. Crittenden, Citigroup’s finance chief, said last week.
On Thursday, Merrill Lynch announced a loss of $4.8 billion, surprising even the most pessimistic analysts. The loss was largely caused by another $9.7 billion in write-downs in mortgage investments. Merrill was forced to raise capital by selling assets like its 20 percent stake in Bloomberg, the financial data service mostly owned by Mayor Michael R. Bloomberg of New York.
Also on Thursday, JPMorgan Chase said its quarterly income fell 53 percent from the second quarter last year.
http://www.nytimes.com/2008/07/19/business/19citi.html
Loan Losses Weigh on JPMorgan; Income Falls 53%
By ERIC DASH
Published: July 18, 2008
JPMorgan Chase said Thursday that its second-quarter income dropped 53 percent, pulled down by markdowns in its investment bank and spiraling credit card and home loan losses.
The bank set aside another $1.3 billion in the quarter to cover future loan losses as the housing market and the economy worsen. JPMorgan said it would also take a charge of about $540 million to cover the first wave of losses and litigation costs related to its acquisition of a rival bank Bear Stearns in March.
So far, <b.JPMorgan has weathered the tight credit market better than most of its peers, though its shares have been battered along with the rest of the financial sector. But as confidence rebounded on Wednesday, JPMorgan shares jumped 15.86 percent as nearly all bank stocks rallied.
Still, the rising number of defaults in mortgages, home equity loans and credit cards suggested that the worst was not over. Chase, the bank’s big consumer arm, set aside $3.8 billion in reserves, about twice the amount from the previous year, to cushion its expected losses. Yet it (chase) caters to some of the industry’s most creditworthy borrowers.
Although the bank is widely praised for its strong balance sheet and management under its chief executive, James Dimon, Thursday’s results show that it is not immune to economic and competitive pressure. The bank loosened lending standards and was caught off-guard by the severe downturn in home prices along with many of its rivals.
And Mr. Dimon cautioned that conditions could get worse.
“Our expectation is for the economic environment to continue to be weak — and to likely get weaker — and for the capital markets to remain under stress,” Mr. Dimon said in a statement. “We remain conscious that since substantial risks still remain on our balance sheet, these factors will likely affect our business for the remainder of the year or longer.”
Net income fell more than half to $2 billion, or 54 cents a share, compared with $4.2 billion, or $1.20 share, a year earlier. Analysts surveyed by Thomson Financial had expected 44 cents share. Revenue dipped 1 percent, to $19.7 billion.
The second quarter was difficult for JPMorgan, with challenges in each of the bank’s six main businesses on top of the Bear Stearns acquisition.
On Thursday, Mr. Dimon said that the “highly complex” acquisition was going as planned. “In extremely difficult times,” he said, “we made great progress toward full integration, while significantly reducing our risk positions.”
JPMorgan took about a $540 million charge to reflect losses from about a two-month period ended May 30. But that was partially offset by a gain on the sale of MasterCard shares, which been among the industry’s highest flyers.
The finance chief, Michael J. Cavanagh, said the bank expected to take a total charge “a touch higher” than the $9 billion to clean up Bear Stearn’s balance sheet and pay for litigation and other merger expenses.
JPMorgan scooped up the investment bank two months earlier, when Bear Stearns was pushed into its arms to avoid the possibility of bankruptcy and widespread financial panic. The Federal Reserve helped engineer the takeover by guaranteeing a $29 billion loan to facilitate the transaction.
Still, the bank raised about $6 billion in fresh capital that insiders say could be used to plug the losses. Others suggested it could be to add provide layer of protection for its “fortress balance sheet” — or perhaps another acquisition.
Mr. Dimon and his lieutenants have been eyeing troubled retail banks for months, and most analysts believe he is searching for another deal.
The commercial bank and treasury services division delivered record revenue and earnings in the second quarter from double-digit growth in loans and deposits.
But its much larger consumer franchise and investment bank faced another tougher quarter as the downfall amid highly volatile markets.
Investment banking profit swung to a $785 million loss, dropping 67 percent after it (chase) wrote down $1.1 billion in unsold buyout loans and complex mortgage related securities.
Trading revenue was weak in both the equities and fixed income division despite some brighter spots in currency, emerging markets, interest rates units. The bank (chase) also highlighted its commodities trading business, currently the hottest area of the markets. But investment banking fees were the second highest ever as its participation in several big fund-raising efforts buffeted from the industrywide decline in deal-making.
Chase Card Services, the bank’s big credit card arm, saw second-quarter profit fall 67 percent, to a $509 million loss as charge-offs continued rising. Its loss rate climbed to about 5 percent in the second quarter.
Mr. Dimon warned in May that charge-offs could top 6 percent in 2009. Many of the losses were concentrated in areas where home values fell the most. But the problems are spreading.
Chase Retail Services, the bank’s consumer unit, reported a $179 million loss after a 23 percent drop in profit. The division was mired by losses on home equity loans as well as mortgages as more borrowers stopped making their monthly payments.
“It continues to deteriorate and we expect it to continue to weaken in the near term,” Mr. Cavanagh said. “There is some slowdown in the pace of deterioration of home equity.”
Chase’s auto finance arm also experienced higher loan losses, as more consumers find their budgets stretched by higher gas and food prices.
The asset management division booked a $395 million profit, down 20 percent from last year, despite a large influx of new money. Revenue of $2.1 billion was down 3 percent because of lower performance.
Investors on Wednesday cheered the results of other banks, whose earnings were bad but not as bad as they anticipated. Despite mixed economic news, financial stocks posted their biggest-gain ever, following a big drop in oil prices and Wells Fargo’s better-than-expected earnings. The Standard & Poor’s 500 Financials Index rose 12 percent, with every bank stock trading at least 10 percent higher.
Wells Fargo said its second-quarter profit fell 23 percent as quadrupled the amount it set aside for credit losses. Nevertheless, its shares soared nearly 33 percent when the bank, in a show of its financial strength, announced it would raise its dividend. State Street, a trust bank, and First Horizon, a Midwest regional lender, also reported better-than-expected earnings.
Merrill Lynch reports its earnings after Thursday’s market close, followed by Citigroup on Friday. The Wachovia Corporation and Bank of America report their results next week.
BlackRock Earnings Rise Sharply
The investment management firm BlackRock said on Thursday said that its profit rose 23 percent in the second quarter on a sharp increase in assets under management, including deals to liquidate troubled investment portfolios for others.
BlackRock reported net income of $274.1 million, or $2.05 a share, compared with $222.2 million or $1.69 a share a year earlier. Revenue rose to $1.39 billion from $1.10 billion a year earlier.
Analysts polled by Thomson Financial expected earnings per share of $1.97 for the quarter on revenue of $1.32 billion.
BlackRock said assets under management rose 5 percent in the quarter to $1.43 trillion.
The firm has been tapped by the Federal Reserve to manage and liquidate a portfolio of Bear Stearns securities, among other such deals.
http://www.nytimes.com/2008/07/18/business/18bank.html
Merrill Lynch owns approximately half of BlackRock, one of the world's largest publicly traded investment management companies, with more than $1 trillion in assets under management.
Solar Stocks #board-11148
Peak Oil #board-6609
Coal #board-2809
Real Estate Bubble #board-7285
Lender Implosion #board-10076
HomeBuilders #board-1680
Your Economy #board-1948
Global Warming #board-11877
Fannie, Freddie breakup, consolidation floated
By ALAN ZIBEL
WASHINGTON July 14, 2008, 4:19PM ET
The troubles at Fannie Mae and Freddie Mac could herald major changes for the two giant mortgage finance companies, and for the entire U.S. mortgage funding system.
As Fannie and Freddie stumble, financial analysts and public policy experts alike are flush with talk about whether they should be merged, broken up, scaled back or taken over by the government. All of these possibilities highlight an important -- and unanswered -- question: What's the best way to provide cash for the strapped U.S. mortgage market?
"They cannot continue in their current form," said Armando Falcon, who served for six years as the companies' chief government regulator and frequently clashed with the companies. "It's going to either have to be a wholly government function or the government will have to develop a market...that is much more competitive."
One idea, floated by Ladenburg Thalmann analyst Richard X. Bove, is for the government should create a new agency to buy both Fannie Mae and Freddie Mac, and then distribute their holdings to 12 government-created banks around the country.
Those regional banks would be owned by thousands of local lenders, much like the 8,100 member Federal Home Loan Bank system, which also provides money for mortgage lending. The federal government would set standards for loans made under the new system.
However, a government takeover would be a tremendous hit to shareholders, who have seen the value of their shares sink more than 60 percent since the start of the month. The companies also have long had powerful allies in Congress, and top Democrats appear more likely to keep Fannie and Freddie in their current form.
"The path of least resistance in Washington will be to keep them intact and put a tighter rein on them," said Edward Yardeni, an economist who runs Yardeni Research in Great Neck, N.Y.
Fannie and Freddie were created by the government to provide more Americans the chance to own a home. The companies buy mortgage loans from banks, thereby increasing the cash banks have on hand to lend to other borrowers. While the companies operate under a government charter, both are owned by shareholders.
They are tremendously important to the housing market and overall economy, because they either hold or guarantee $5.3 trillion of mortgage debt, or about half the outstanding mortgages in the United States.
Testifying on Capitol Hill on Tuesday, Treasury Secretary Henry Paulson said the Bush administration has no immediate plans to extend emergency loans to Fannie Mae and Freddie Mac or to purchase the stock of the two companies, though it is seeking the power to do so if necessary.
Any government financial backing of the two institutions would be done "under terms and conditions that protect the U.S. taxpayer," Paulson said. But Sen. Jim Bunning, R-Ky. was upset with the rescue package unveiled Sunday, saying Paulson "is asking for a blank check to buy as much Fannie and Freddie debt as he wants -- for this unprecedented intervention in our free markets."
The administration is hoping that Congress will quickly pass legislation needed to put parts of its rescue proposal into effect.
Shares of Fannie and Freddie tumbled again Tuesday as investors began to accept their holdings might be wiped out by the government's plans.
Fannie Mae shares fell $2.66, or nearly 27.3 percent, to $7.07, while Freddie Mac shares declined nearly $1.85, or 26 percent, to $5.26 amid continuing fears that investors will be wiped out by the companies' woes, or by a federal bailout. Stock market investors "don't know where they fit anymore," Friedman, Billings, Ramsey & Co. analyst Paul Miller said.
Bert Ely, an Alexandria, Va., banking industry consultant and longtime critic of the two companies, said Fannie and Freddie could well see their mortgage activities severely restricted. That's bad news for Fannie and Freddie executives who have long pushed to expand the companies' mortgage holdings.
"They have lost hugely," Ely said. "I'm not sure how well that's fully sunk in with people."
Meanwhile, the Federal Deposit Insurance Corp. on Tuesday approved new regulations as part of a government effort to jump-start a U.S. market for "covered bonds," a way of packaging mortgage investments that is designed to encourage more responsible lending practices.
Those bonds are issued by banks and backed by mortgages or cash flows from other debt. Under this concept, widely used in Europe, banks guarantee the bonds if too many borrowers default, thus providing an incentive for less risky lending practices.
Plus, unlike formerly popular subprime mortgage securities backed by loans made to borrowers with weak credit records, the mortgages remain on the balance sheet of the bank that sells the bonds.
Encouraging such a market to grow could be one way to decrease the dominance Fannie and Freddie wield in the U.S. mortgage market.
Their role in the U.S. mortgage market, has grown dramatically over the past year after the subprime mortgage market's collapse. The companies issued about three-quarters of all new mortgage-backed securities in the second quarter of 2008, up from under 40 percent in 2006, according to trade publication Inside Mortgage Finance.
http://www.businessweek.com/ap/financialnews/D91UHR4G0.htm
US bail-out fails to calm nerves
By FT reporters
Published: July 14 2008 20:07 | Last updated: July 14 2008 23:51
Confidence in some of the largest regional US banks buckled on Monday as the government’s rescue plan for mortgage giants Fannie Mae and Freddie Mac failed to allay equity markets’ fears over the stability of the broader financial sector.
Stocks in banks including Washington Mutual, the seventh-largest US bank by assets, and Cleveland’s National City, plunged as investors reacted to Friday’s collapse of IndyMac, a smaller lender.
The sell-off dragged down the stock market and took the shine off the government backing of Fannie and Freddie.
The US Treasury’s plan to bolster the two mortgage giants with extra liquidity and the pledge to buy a stake if needed, announced on Sunday, helped to steady the nerves of bond investors who queued up to buy Freddie debt.
But equity investors remained unsettled amid concerns that the two companies, which guarantee $5,300bn in mortgages – almost half the US home loans market – were still vulnerable. Fannie and Freddie shares saw early gains wiped out and ended 7.6 per cent and 8.4 per cent lower, respectively.
The rout in regional banks sent the Standard & Poor’s 500 banks index to its worst daily decline since it was created in 1989. Analysts said the failure of IndyMac, the California lender taken over by the Federal Deposit Insurance Corporation, weighed heavily on investors’ minds.
Alan Ruskin, chief international strategist at RBS Greenwich said: “The weekend convinced the market of something we all really knew: that [Fannie and Freddie] debt was safe, while IndyMac did the reverse for smaller financial institutions, by highlighting the risk of mass consolidation among those institutions who are not too big to fail.”
WaMu, in which a consortium led by the private equity group TPG recently bought a $7bn stake at around $8.75 per share, fell 35 per cent to $3.23. Investors signalled their fears by driving the cost of one year of credit insurance on WaMu to 13 percentage points over Libor, compared with 8 points for five years of protection.
The cost of credit protection for Wall Street banks such as Lehman Brothers and Merrill Lynch also increased, but at a less dramatic rate than for deposit-taking institutions, suggesting growing fears about Main Street banks. After the market close, WaMu issued a statement saying it was “well capitalised”.
Shares in National City plunged 28 per cent to $3.20, their lowest point in more than 20 years, even though the bank said it retained ample regulatory capital and had seen no unusual depositor or creditor activity. “The reality is that a bank can fail and IndyMac will not be the last one,” said Kevin Fitzsimmons, analyst at Sandler O’Neill.
However, bond market reactions suggested the rescue plan for Fannie and Freddie had succeeded in its immediate objective, which a senior official characterised late on Sunday night as an attempt to “stabilise the current situation”.
http://www.ft.com/cms/s/0/6a662e74-51cf-11dd-a97c-000077b07658.html
Email from friend...
... A customer came into the bank last week. He has 5 other projects financed via M&I. All are going very slow, but are not past due, nor have they reached the maturity date. M&I called them into the Bank and offered they a “buyout”, whereby the builder pays off the M&I loan(s) at 60% of the loan balance. M&I is desperate for liquidity, and is making this offer to several local builders and residential developers. Can you imagine . . . the builder has $28,000,000 in loan balances, and M&I will take only $17 million as a payoff if they can refi/payoff the loans quickly. My customer just eliminated $9 million of debt and added $9 million in equity to their company . . . assuming they can refi the loans....
I must admit this is scary....
http://www.indymac.com/
Notice the middle of the page... Directs you to the FDCI... Hummm
U.S. bank shares plummet amid stability fears
Monday July 14, 7:08 pm ET
By Dan Wilchins
NEW YORK (Reuters) - The shares of major U.S. banks plunged on Monday amid fears about the sector's stability following Friday's seizure by regulators of IndyMac Bancorp Inc (NYSE:IMB - News) as withdrawals by panicked depositors led to the third- largest U.S. banking failure.
"It's the cockroach theory. You don't just have one bank failure -- when you have a big bank go under, there's always more than one," said James Ellman, president of hedge fund Seacliff Capital, who is short some financial stocks, but also owns some shares of trust banks and asset managers.
The shares of Washington Mutual Inc (NYSE:WM - News) and National City Corp (NYSE:NCC - News), which have significant exposure to mortgages, plummeted, leading both to issue statements intended to reassure investors and depositors.
Also hurting Washington Mutual shares, Lehman Brothers Inc analyst Bruce Harting wrote that the largest U.S. savings and loan could face $26 billion in losses, with $21 billion from mortgages.
Monday's declines also came a day after the U.S. government pledged emergency support for mortgage finance companies Fannie Mae (NYSE:FNM - News) and Freddie Mac (NYSE:FRE - News).
Washington Mutual shares closed down $1.72, or 34.7 percent, at $3.23, while National City fell 65 cents, or 14.7 percent, to $3.77.
The broader Standard & Poor's Financials Index (^GSPF - News) fell 5 percent, dropping to its lowest since October 1998.
As the credit crunch wears on, companies previously seen as strong are looking increasingly frail, investors said.
"The fear factor is in play," said Michael Nix, portfolio manager Greenwood Capital Associates, whose fund owns shares in Wachovia Corp (NYSE:WB - News) and regional bank BB&T Corp (NYSE:BBT - News).
Monday's rout in banking stocks also hurt investment banks. Lehman Brothers Holdings Inc (NYSE:LEH - News) declined 14.1 percent to $12.40 and Merrill Lynch & Co (NYSE:MER - News) lost 6.3 percent to $25.88.
The collapse of IndyMac, one of the largest U.S. banking failures ever, was particularly sobering to investors, analysts said. Hundreds of worried customers lined up outside IndyMac branches in California on Monday to withdraw their money.
"We have money we are afraid we are going to lose," said Jitesh Patel, a doctor from Burbank, who took a day off from work to withdraw his money from IndyMac. "I wish we were a little more savvy."
Regulators said the renamed IndyMac Federal Bank will cover insured deposits, mostly up to $100,000, and initially cover 50 percent of uninsured deposits. But that left people with more than $100,000 in the bank particularly anxious.
"I have $360,000 in this bank and I was misled by this bank," said Robert Clark, a Glendale resident. "I gave the names of my mother, my sister and my brother on the account so I thought I would be insured. I don't know what to do. I really don't know what to do."
Gerard Cassidy, an analyst at RBC Capital Markets, said on Sunday that 300 U.S. banks might fail over the next three years because of credit losses and tight capital markets.
WRITE-DOWNS
In his report on Washington Mutual, Lehman analyst Harting said the thrift will be unprofitable until credit costs normalize, around the second half of 2009.
Harting said write-downs on bad loans could force the thrift to set aside another $4 billion for the second quarter, creating a loss for the period of $1.48 per share.
Washington Mutual, in a statement following the market close, said its capital level "significantly exceeds" regulator minimums and that it has more than $40 billion excess liquidity.
National City, meanwhile, said it was experiencing no unusual activity by depositors or creditors.
The large U.S. Midwest regional bank and one of the nation's 10 largest banks, no longer offers many kinds of home loans now considered too risky, but has been saddled with billions of dollars of such loans on its balance sheet.
"Investors are out there saying, if this happened to IndyMac, why not Nat City?" said Matt McCormick, a stock analyst at Bahl & Gaynor Investment Counsel in Cincinnati.
The Cleveland-based bank put out a statement assuring the public it was fine.
"Clearly there is a lot of market speculation broadly today," National City spokeswoman Kristen Baird Adams said. "We are experiencing no unusual depositor or creditor activity."
The largest bank in Tennessee, First Horizon National Corp (NYSE:FHN - News), said it will announce its second-quarter results on Tuesday, earlier than planned due to increased market speculation. Its shares dropped 25 percent on Monday.
Adding to concerns about the banking sector, mid-Atlantic regional bank M&T Bank Corp (NYSE:MTB - News) said on Monday that rising credit losses from residential real estate pulled second- quarter profit down 25 percent.
The shares of the Buffalo, New York-based bank closed down $10.88, or 15.6 percent, at $58.82.
http://biz.yahoo.com/rb/080714/financial_shares.html?.v=6
Treasury Acts to Save Mortgage Giants
Treasury Secretary Henry M. Paulson Jr. announced a plan Sunday to help shore up Fannie Mae and Freddie Mac.
New York Times
By STEPHEN LABATON
Published: July 14, 2008
WASHINGTON — Alarmed by the sharply eroding confidence in the nation’s two largest mortgage finance companies, the Bush administration on Sunday asked Congress to approve a sweeping rescue package that would give officials the power to inject billions of federal dollars into the beleaguered companies through investments and loans.
Protected by Washington, Companies Ballooned (July 13, 2008)
Worst Fears Ease, for Now, on Mortgage Giants (July 12, 2008)
U.S. Weighs Takeover of Two Mortgage Giants (July 11, 2008)
In a separate announcement, the Federal Reserve said that it would make one of its short-term lending programs available to the two companies, Fannie Mae and Freddie Mac. The Fed said that it had made its decision “to promote the availability of home mortgage credit during a period of stress in financial markets.”
An official said the Fed’s lending program was approved at the request of the Treasury, but that it was temporary and would probably end once Congress approved Treasury’s plan. Some officials briefed on the plan said Congress could be asked to extend the total line of credit to the institutions to $300 billion.
The actions, which taken together could provide an overwhelming surge of capital to the companies, were the second time in four months that the housing crisis had prompted the government to scramble over a weekend to rescue a major financial institution. Last March, the Treasury Department engineered the sale of Bear Stearns to prevent it from going into bankruptcy and cause a shock to the financial system.
The plan was disclosed on Sunday evening to calm jittery markets overseas and on Wall Street in advance of a debt sale by Freddie Mac on Monday morning. Officials said that after talking to senior lawmakers through the weekend, they expected that Congress would attach the proposals to a housing bill that could be completed and sent to the White House for approval as early as this week.
“The president has asked me to work with Congress to act on this plan immediately,” the Treasury secretary, Henry M. Paulson Jr., said Sunday on the steps of the Treasury building. “Fannie Mae and Freddie Mac play a central role in our housing finance system and must continue to do so in their current form as shareholder-owned companies. Their support for the housing market is particularly important as we work through the current housing correction.”
While senior Democratic and Republican officials in successive administrations have for many years repeatedly denied that the trillions of dollars of debt the companies issued is guaranteed, the package, if adopted, would bring the Treasury closer than ever to exposing taxpayers to potentially huge new liabilities. The two companies could face significant new losses this year as the wave of housing foreclosures continues.
Officials seemed to suggest, however, that they had little choice. Over the weekend, Treasury officials sought assurances from Wall Street firms that a $3 billion auction by Freddie Mac of short-term debt would go off without a hitch. While $3 billion is a relatively small sum for an institution of Freddie’s size officials said they did not want to risk that even a small misstep that could set off a new round of problems.
The government officials said that the more drastic alternative that has been considered — placing one or both companies under the control of a government-appointed conservator — would be done only as a last-ditch measure if the intermediate steps failed to restore confidence.
They said they were prompted to act because, despite repeated assurances by top officials that the companies had adequate cash to weather the current financial storm, Fannie and Freddie suffered a withering blow of confidence last week when their stocks plummeted on the New York Stock Exchange. As a result, Freddie Mac faced an uncertain debt offering on Monday.
The failure of just one of the companies could be catastrophic for economies around the world. The companies, known as government-sponsored enterprises, or G.S.E.’s, touch nearly half of the nation’s mortgages by either owning or guaranteeing them, and the debt securities they issue to finance their operations are widely owned by foreign governments, pension funds, mutual funds, big companies and other large institutional investors.
“G.S.E. debt is held by financial institutions around the world,” Mr. Paulson said in his statement. “Its continued strength is important to maintaining confidence and stability in our financial system and our financial markets. Therefore we must take steps to address the current situation as we move to a stronger regulatory structure.”
The proposal would give the Treasury secretary authority to determine when to invest in the companies or extend loans to them. Those purchases would be made with the agreement of the companies.
Officials said the proposed investment and lending elements of the plan were to last two years.
While the Treasury did not specify the size of the packages, officials briefed on the plan said they were told by administration officials that, to be meaningful, Congress should consider extending the line of credit to the two institutions to $300 billion.
Each company now has a $2.25 billion credit line, set nearly 40 years ago by Congress. At the time, Fannie had only about $15 billion in outstanding debt. It now has total debt of about $800 billion, while Freddie has about $740 billion. Today the two companies also hold or guarantee mortgages valued at more than $5 trillion, roughly half of the nation’s mortgages.
Lawmakers said that as part of the plan, the administration called on Congress to raise the national debt limit. And it asked Congress to give the Federal Reserve a role in setting the rules for how big a capital cushion each company must hold. Giving the Fed a consulting role in the companies’ oversight is seen as yet another way to reassure nervous markets.
Initial reaction to the plan by some Congressional Democrats was positive.
An early endorsement came from Senator Charles E. Schumer, the New York Democrat who is also a senior member of the banking committee.
“The Treasury’s plan is surgical and carefully thought out and will maximize confidence in Fannie and Freddie while minimizing potential costs to U.S. taxpayers,” Mr. Schumer said. “While Fannie and Freddie still have solid fundamentals, it will be reassuring to investors, bondholders and mortgage-holders that the federal government will be behind these agencies should it be needed.”
Representative Barney Frank, Democrat of Massachusetts, and one of the authors of the housing legislation, said he supported the Treasury proposal. He said he expected the plan would be included in the housing bill, which he said would be approved, sent back to the Senate and likely land on the president’s desk by the end of the week.
“The general thrust of what they’re doing is right,” said Mr. Frank, the chairman of the House Financial Services Committee.
Senator Barack Obama of Illinois, the presumptive Democratic presidential nominee, told reporters in San Diego on Sunday that any government action to rescue the two mortgage companies should be done from the perspective of homeowners, “not just shareholders and investors and C.E.O.’s of companies.”
His presumed Republican opponent, Senator John McCain of Arizona, said last week that he expected the government would do everything in its power to prevent the failure of either company.
The administration’s announcement was made after senior officials from the Treasury and the Federal Reserve spent Saturday and Sunday closely monitoring preparations by Freddie Mac to raise money to help meet its short-term financing needs. Officials said they were watching to see if the steep declines last week of Freddie and Fannie stock would spill into the debt market and undermine the confidence of lenders.
A senior official said that the administration had been receiving mixed signals from Wall Street about the Monday auction. But other officials denied that the prospect of a weak debt offering had motivated the Treasury to rush out its rescue plan.
“There is nothing that motivated us to act tonight that changed from Friday night,” said a Treasury official. “There has been no further deterioration in the markets.”
Daniel H. Mudd, the president and chief executive of Fannie Mae, said the company “appreciates today’s announcements and the expressions of support.”
“We continue to hold more than adequate capital reserves and maintain access to liquidity from the capital markets,” Mr. Mudd said. “Given the market turmoil, having options to access provisional sources of liquidity if needed will help to strengthen overall confidence in the market.”
Richard F. Syron, chief executive of Freddie Mac, said, “This affirmation of the important role of the G.S.E.’s, and that we should continue to operate as shareholder-owned companies, should go a long way toward reassuring world markets that Freddie Mac and Fannie Mae will continue to support America’s homebuyers and renters.”
On the prospect that the government could buy shares in the companies, Sharon J. McHale, a spokeswoman for Freddie Mac, said, “It’s important to note that our understanding with Treasury is that any agreement to purchase equity can only occur with the mutual agreement of both parties.”
http://www.nytimes.com/2008/07/14/washington/14fannie.html?_r=1&hp&oref=slogin
US spells out Fannie-Freddie backstop plan
By JEANNINE AVERSA 07.13.08, 8:59 PM ET
Related Quotes
FNM 10.25 - 2.95
FRE 7.75 - 0.25
WASHINGTON - The Federal Reserve and the Treasury announced steps Sunday to shore up mortgage giants Fannie Mae and Freddie Mac, whose shares have plunged as losses from their mortgage holdings threatened their financial survival.
The steps are also intended to send a signal to nervous investors worldwide that the government is prepared to take all necessary steps to prevent the credit market troubles that started last year from engulfing financial markets and further weakening the economy and housing markets.
The Fed said it granted the Federal Reserve Bank of New York authority to lend to the two companies "should such lending prove necessary." They would pay 2.25 percent for any borrowed funds - the same rate given to commercial banks and Big Wall Street firms.
The Fed said this should help the companies' ability to "promote the availability of home mortgage credit during a period of stress in financial markets."
Secretary Henry Paulson said the Treasury is seeking expedited authority from Congress to expand its current $2.25 billion line of credit to each company should they need to tap it and to make an equity investment in the companies - if needed.
"Fannie Mae (nyse: FNM) and Freddie Mac (nyse: FRE) play a central role in our housing finance system and must continue to do so in their current form as shareholder-owned companies," Paulson said Sunday. "Their support for the housing market is particularly important as we work through the current housing correction."
The Treasury's plan also seeks a "consultative role" for the Fed in any new regulatory framework eventually decided by Congress for Fannie and Freddie. The Fed's role would be to weigh in on setting capital requirements for the companies.
The White House, in a statement, said President Bush directed Paulson to "immediately work with Congress" to get the plan enacted. It also said it believed the plan outlined by Paulson "will help add stability during this period."
Investors may not be as sanguine, however, according to Chris Johnson, an investment manager and president of Johnson Research Group in Cleveland. Stocks of financial institutions "are going to get clobbered," he predicted. "It is a situation where regulators and the government are trying to play catch up, and that means everything is not discounted in the stock prices yet."
The Dow Jones industrials on Friday briefly fell below 11,000 for the first time in two years and Johnson expects shares of investment banks and regional banks could fall even lower as investors react to this weekend's developments.
Fannie Mae and Freddie Mac either hold or back $5.3 trillion of mortgage debt. That's about half the outstanding mortgages in the United States.
The announcement marked the latest move by the government to bolster confidence in the mortgage companies. A critical test of confidence will come Monday morning, when Freddie Mac is slated to auction a combined $3 billion in three- and six-month securities.
Fannie was created by the government in 1938 to provide more Americans the chance to own a home by giving financial institutions an outlet to sell mortgage loans they originated, freeing more cash to make more home loans. It moved from government to public ownership in 1968 and Freddie was started two years later.
Sunday's announcements are likely to raise anew criticism that the government should have moved sooner to rein in the two companies, especially since investors widely assumed they would be bailed out if they got into trouble.
The government denied it, but what was seen by investors as an implicit guarantee of support allowed Fannie and Freddie to borrow at rates only slightly higher than the Treasury - and lower than what their banking competitors had to pay.
"This really blows away the notion of an implicit guarantee," independent banking consultant Bert Ely said of the Treasury's plan to ask Congress to allow it to make equity investments in Fannie Mae and Freddie Mac. "It suggests a greater concern about how these companies are doing. It says the problems are deeper. It gets to the solvency of the companies, not just the liquidity."
Paulson's goal is to get his plan attached to a sweeping housing-rescue package. The Senate and House have each passed bills and a final package has to be hammered out. The centerpiece of the legislation is to help strapped homeowners avoid foreclosure legislation but it also contains provisions to revamp oversight of Fannie Mae and Freddie Mac.
Senate Majority Leader Harry Reid, D-Nev., said "Senate Democrats stand ready to work with the administration to quickly and effectively address the situation currently facing these institution."
Democratic presidential contender Barack Obama, speaking with reporters before the plan was announced, said he favored congressional action to shore up the housing market, as well as legislative consultation about any taxpayer dollars used to support the mortgage companies.
House GOP leader John Boehner, R-Ohio, and Republican Whip Roy Blunt, R-Mo., said they "stand ready to work with Secretary Paulson and congressional Democrats to take appropriate steps to ensure the soundness of our mortgage markets."
Officials from Treasury, the Fed and other regulators worked in close consultation throughout the weekend after growing investor fears about the companies' finances sent their shares and the overall market plummeting last week.
Shares of Fannie Mae plunged 45 percent last week and are down 74 percent since the beginning of the year. Freddie Mac shares fell 47 percent last week, and have fallen 77 percent so far this year.
A senior Treasury official said any increase in the line of credit - now at $2.25 billion for each company_ would be at the Treasury secretary's discretion. The same would apply to any equity investment made by the government.
The official, who spoke on condition of anonymity, also sought to send a calming message about Fannie's and Freddie's financial shape, saying: "There's been no deterioration of the situation since Friday."
The Fed's offer of funds is viewed as a temporary backstop until Treasury can get its plan in place. The collateral they would have to pledge - Treasury securities and federal agency securities - is more narrow than the collateral commercial banks and Wall Street firms must pledge for emergency lending privileges.
Freddie Mac Chairman Richard Syron said Sunday that preliminary second-quarter results show that his company had "a substantial capital cushion" above the 20 percent minimum surplus it is required to maintain.
Fannie Mae President and CEO Daniel Mudd said he believes the steps could send a calming message. "Given the market turmoil, having options to access provisional sources of liquidity if needed will help to strengthen overall confidence in the market. We will continue to do our part to provide liquidity, stability and affordability to the housing market now and in the future."
Last week Fed Chairman Ben Bernanke and Paulson, appearing before the House Financial Services Committee, made a point of saying that the regulator of Fannie and Freddie, the Office of Federal Housing Enterprise Oversight, has found both companies adequately capitalized.
http://www.forbes.com/feeds/ap/2008/07/13/ap5209517.html
I'm fixing the charts in the ibox. You know people are making a killing shorting these companies right out of existence (ie, they'll never have to cover!). look at the insurance charts at the bottom. This is worse than the dot com bust as real companies are being wiped out.
Even if 10% of all mortgages go bust they still make money! Someone with a $300,000 5% 30yr loan will pay $300,000 in interest! $400,000 on 6.5% - mortgages are the best money making racket in existence. (and the banks have the payments rigged so they are 90% interest, 10% principle - the homeowner still owes all the principle and keeps forking over interest (free money)
thanks for the link, I'll listen this evening as i have to run soon
Up-Down- If you really want to get pissed off, listen to this. It is an hour long and deals mostly with Naked Shorting. It also has some interesting things about the housing market 3/4 of the way through.
http://www.netcastdaily.com/broadcast/fsn2008-0712-2.asx
wallstreet = the greed machine
Wallstreet exists for the sole purpose of pocketing investor money!
Weather they wreck civilization (or just the lives of a few million people)
in the process or not, is of no consequence to them.
[
Long Protected by Washington, Fannie and Freddie Ballooned
The New York Times
By JULIE CRESWELL
Published: July 13, 2008
As the Bush administration scrambles to address the sudden decline of the country’s two largest mortgage finance companies, some of their longtime critics say the crisis has been building for years.
Among them is Jim Leach, a Republican former representative from Iowa, who began arguing two decades ago in Congress that the government-chartered mortgage companies, Fannie Mae and Freddie Mac, were unfairly insulated from the real world.
]
They were not subject to the same financial standards and tax burdens as their competitors, he warned, and if they ran into trouble, an implicit government guarantee to back them up meant taxpayers would be left with the losses.
“There are times in public policy making that one can feel like Don Quixote,” Mr. Leach said of his repeated legislative battles to rein in the two companies’ growth.
Congress established Fannie Mae during the New Deal to make homes more affordable for lower- and middle-income Americans, and Freddie Mac was established later with a similar purpose. Neither provides home loans. Instead, the companies buy mortgages from banks and take on the risks of possible defaults — allowing banks to make even more mortgages.
Today they own or guarantee about half of the country’s $12 trillion in mortgage debt, so the free fall of their share prices last week amid concerns that they were undercapitalized has created chaos for Wall Street and Washington.
The dominant role Fannie and Freddie play today is no accident. The companies, Wall Street firms, mortgage bankers, real estate agents and Washington lawmakers have built up an unusual and mutually beneficial co-dependency, helped along by robust lobbying efforts and campaign contributions.
In Washington, Fannie and Freddie’s sprawling lobbying machine hired family and friends of politicians in their efforts to quickly sideline any regulations that might slow their growth or invite greater oversight of their business practices. Indeed, their rapid expansion was, at least in part, the result of such artful lobbying over the years.
And as Fannie and Freddie grew, so did the fortunes of Wall Street, which reaped rich fees from issuing debt for the two companies, as well as the mortgage and housing industries, which banked billions of dollars as the housing market boomed.
Even after accounting scandals arose at the two companies a few years ago, attempts to push through stronger oversight were stymied because few politicians, particularly Democrats, wanted to be perceived as hindering the American dream of homeownership for the masses.
Lots of perks came with Fannie and Freddie’s charters and government backing: exemptions from state and federal taxes, relatively meager capital requirements, and an ability to borrow money at rock-bottom rates.
James A. Johnson, a longtime member of the Washington establishment who previously worked as a campaign adviser to former Vice President Walter F. Mondale, ran Fannie for most of the 1990s.
“Jim Johnson was the architect of Fannie’s lobbying strategy. He was the muscle guy, if you will. The guy who would walk the halls of Congress,” said Bert Ely, a banking consultant in Arlington, Va., and longtime critic of the companies. Freddie, Mr. Ely said, soon copied Fannie’s playbook.
Mr. Johnson could not be reached for comment. Fannie declined to comment; Freddie did not respond to an interview request.
An early, and for some analysts, seminal attempt to overhaul regulation of Fannie and Freddie occurred in the early 1990s when the country was still licking its wounds from the savings and loan debacle.
As legislators debated who would regulate Fannie and Freddie and what sort of capital cushions should be established for the entities, the companies enlisted a bipartisan mix of Washington insiders to represent them.
Fannie and Freddie were careful to include powerful Democrats and Republicans as executives, board members and lobbyists to make sure they had access to top government officials and clout on Capitol Hill, no matter which party was in power.
The strategy that started two decades ago continues. They have hired many officials who have worked for the last two administrations alone. Fannie hired Jamie Gorelick, a former deputy attorney general in the Clinton administration; Thomas E. Donilon, who was that administration’s chief of staff to the secretary of state; and Franklin D. Raines, who was President Clinton’s budget chief.
Among Republicans, Fannie hired Robert B. Zoellick, now the head of the World Bank and a former official in both Bush administrations; Stephen Friedman, the onetime top economic adviser to the current President Bush; and Michele Davis, now an assistant secretary of the Treasury under Henry M. Paulson Jr.
Fannie’s board once included Frederic V. Malek, a longtime friend of the Bush family and a former business partner of the current President Bush.
The outcome of the regulatory tussle in the early 1990s did little to change things. Fannie and Freddie got a new but fairly weak regulator, the Office of Federal Housing Enterprise Oversight, while still having to meet less onerous capital requirements than some lawmakers wanted. The companies also stymied efforts to get the Securities and Exchange Commission more actively involved in regulating them.
Later on, Mr. Johnson ramped up the influence of its charitable arm, the Fannie Mae Foundation, by doling out money to thousands of nonprofit groups and similar organizations. (Mr. Johnson was compelled to step down as the head of Senator Barack Obama’s vice-presidential search team last month after he was criticized for receiving mortgages on favorable terms from Countrywide Financial.)
Fannie and Freddie also forged alliances with various interest groups, including affordable-housing advocates that previously criticized the companies for not doing enough for low- and middle-income homeowners.
Mr. Leach, the Iowa representative, later accused Fannie and Freddie of effectively buying off activist groups by making charitable contributions to them. By providing much-needed grant money to the nonprofit groups, it made it hard for them to criticize the mortgage titans, said Jonathan GS Koppell, an associate professor at the Yale School of Management.
“Likewise, there were another set of entities, essentially a huge industry, that profits from every additional loan that Fannie or Freddie can buy,” Mr. Koppell said. “The more loans they purchase, the more business there is for them and so they’re willing to work with the enterprises.”
Fannie also opened up what it called Partnership Offices. They were billed as regional oversight offices for various housing projects financed by Fannie. In reality, critics, including the Department of Housing and Urban Development, said they were used primarily to influence Congress by providing local politicians and business leaders with ample ribbon-cutting ceremonies and photo opportunities.
The offices were often run by and populated with former Congressional staff members. Several of those offices were staffed by family members of legislators, said Joshua Rosner, an analyst at Graham-Fisher in New York.
Of course, foes of Fannie and Freddie began their own lobbying efforts, the most muscular of which had the backing of banks eager to get their own piece of the companies’ lucrative mortgage business.
Some Wall Street firms joined these efforts, but they typically did not push too hard over fears that Fannie might retaliate by withholding business — and the rich fees associated with it.
From 1990 to 2000, as each company’s stock grew more than 500 percent and top executives earned tens of millions of dollars, much criticism appeared on opinion pages of newspapers, in reports by free-market research groups and in Congressional testimony. Much of it was sponsored by a loose coalition of Washington lobbyists and consultants who were paid to portray Fannie and Freddie as too big and risky.
Ultimately, what most hurt the companies was the failure of home buyers to pay off subprime and other risky mortgages that were packaged into bonds and sold to investors by Wall Street banks like Bear Stearns, Lehman Brothers and Citigroup, with Fannie and Freddie playing a lesser role. But they are suffering from the reverberations of the foreclosure wave, as the value of their mortgage assets declines along with home prices everywhere.
Supporters of Fannie and Freddie say the companies’ lobbying machines have largely been taken apart in the wake of the accounting scandals, which resulted in billions of dollars of financial restatements and the ouster of major executives. Fannie’s Partnership Offices have been closed and its charitable foundation shut down.
Critics say that current housing legislation before Congress could give even more power to Fannie and Freddie by allowing them to venture into new mortgage-related businesses. That, they say, is evidence enough that the companies have not been fully defanged.
At the same time, the Senate version of that legislation, which was passed overwhelmingly on Friday, would also create an independent regulator to oversee Fannie and Freddie.
“For sure, the political machine has not been dismantled,” said Thomas H. Stanton, a finance professor at Johns Hopkins University. “For every interest that might lose if Fannie and Freddie expands into what it does, you have someone else who wants to do business with them.”
http://www.nytimes.com/2008/07/13/business/13lend.html
There will be plenty more coming- FRE and FNM stocks are getting murdered. The mortgage insurers stocks are getting murdered. One has already shut down. Will the Countrywide merger take down B OF A? There is so much hidden beneath the surface with Countrywide. I heard their servicing portfolio was 37% delinquent. How will the 180 billion in option arms that Wachovia got when they acquired Golden West perform? ResCap/GMAC is living month to month. The bloodbath is not nearly over. I think it should shakeout over the next 2 quarters. When it is over, if the US Government ever lets Wall Street in the mortgage business again I will be shocked.
Last night, my banker buddy says expect more...
Banking regulators close IndyMac
The Office of Thrift Supervision shuts down mortgage lender IndyMac and transfers the operations to the Federal Deposit Insurance Corporation.
By Catherine Clifford, CNNMoney.com staff writer and Roddy Boyd, Fortune writer
Last Updated: July 11, 2008: 8:59 PM EDT
Mortgage backers get whacked
Senate passes housing bill amid turmoil
You're already paying for Fannie and Freddie
Fed in tug of war over mortgage rules
Financials' foul Friday
NEW YORK (CNNMoney.com) -- In the second largest bank failure in U.S. history, Pasdena, Calif.- based IndyMac was closed down on Friday, according to a press release on the FDIC's website.
The bank's operations will be transferred to the Federal Deposit Insurance Corporation.
According to the FDIC, IndyMac's failure will mean about $1 billion in lost deposits held by approximately 10,000 customers. The agency says the failure will cost it between $4 and $8 billion, based on preliminary estimates.
In a conference call late Friday night, FDIC Chairman Sheila Bair said "it's possible this will be the most costly bank failure in history, but it's too soon to say." The failure "could also affect premiums paid by all banks for deposit insurance," she said.
Customers who bank at IndyMac Bank will automatically have their funds transferred over to the IndyMac Federal, FSB, which will be controlled by the FDIC. They will have uninterrupted customer service and access to their funds by ATM, debit cards and checks, in the same way as before.
However, customers will have no access to on-line and phone banking services this weekend, according to the FDIC, but services will resume on Monday. Loan customers should continue making loan payments as usual.
IndyMac, with total assets of $32.01 billion and total deposits of $19.06 billion, is the fifth bank to have failed this year. Between 2005 and 2007, there had been only three bank failures. The 104 banks that FDIC has taken over in the last 15 years have combined assets of $14.2 billion, according to FDIC annual reports.
Continental Illinois was the largest bank failure ever, with $40B in assets when it failed, in 1984 according to FDIC archives.
When a bank shuts down, all accounts are insured to at least $100,000. Certain accounts can be insured in excess of the $100,000, but customers with more than $100,000 in their account may require review by an FDIC Claim Agent according to an FDIC factsheet.
"Those with uninsured deposits will get at least half that money back, and they could get more back, depending on what the FDIC gets when it sells off the bank assets," said Bair.
On the conference call, Bair said, "there will be increased failures, but it will be within range of what we can handle. People should not worry."
The head of the FDIC is looking to hire 25 staffers to deal with an anticipated increase in failures, a move that would increase its staff by 11%. Among those it hopes to hire are recent retirees who worked through the S&L crisis.
IndyMac specialized in what it had long argued were minimally risky: low documentation loans to residential mortgage borrowers.
On Tuesday, IndyMac - which has 33 branches and $18 billion in saving deposits in addition to its mortgage-lending franchise - announced that it was firing 53% of its workforce and exiting its retail and wholesale lending units. Last year, prior to the collapse, the lender was ranked eleventh in residential mortgage origination, according to trade publication Inside Mortgage Finance.
More importantly, the Pasadena-based IndyMac also disclosed that regulators from the Office of Thrift Supervision no longer consider it "Well capitalized." As a result, since Tuesday, the bank hasn't been able to accept brokered deposits, or short-term investments in large dollar amounts from brokers seeking the highest return on certificates of deposit.
Over the past two years,<,b>IndyMac has dropped over 95% in stock price, or about $3.5 billion in market capitalization. Shares traded down nearly 10% on Friday to close at 28 cents.
IndyMac lost $184.2 million in the first quarter and announced on Monday that it was expecting a wider loss for the second quarter. It lost $614 million last year stemming from its focus on the Alt-A mortgage sector, where it originates loans to borrowers who fall between prime (or conforming) and sub-prime on the credit spectrum. The lender's chief executive, Michael Perry, had long argued that it was being unfairly punished given its relatively paltry exposure to sub-prime mortgages.
Rising Alt-A and prime mortgage delinquencies likely were enough indication for investors, however, that the housing crisis had moved beyond the weakest borrowers. Even worse, with the securitization markets in collapse, IndyMac has no way to get new loans off its books. As it turns out, IndyMac was a leader in loans requiring little income and asset documentation, a category that has had disastrous levels of delinquencies at other troubled lenders. What loans the bank had made recently were to borrowers with well-documented assets and income, but those are sharply less profitable with respect to fees and interest income.
Instead of mortgage origination, IndyMac's filing on Monday said it will focus on its reverse mortgage, its retail branch network and its mortgage servicing operations. But as a practical matter, the growth restrictions placed on IndyMac by regulators and the banks and brokerages it does business with, as well as the sharply higher borrowing costs, place the profitability of even its non-mortgage-related banking efforts in doubt.
Even efforts to prop up the bank hurt it. Last month, Senator Charles Schumer (D-NY) wrote a series of letters to bank regulators in Washington D.C. and California asking them to take steps to prevent the bank's "likely collapse." In response, about $100 million in customer deposits has been withdrawn from the bank, according to one of its filings.
For additional information, the FDIC has established a toll-free number for customers of IndyMac Federal Bank, FSB. The toll-free number is 1-866-806-5919 and will operate today from 3:00 p.m. to 9:00 p.m. (PDT), and then daily from 8:00 a.m. to 8:00 p.m. thereafter, except Sunday, July 13, when the hours will be 8:00 a.m. to 6:00 p.m. Customers also may visit the FDIC's Web site at http://www.fdic.gov/bank/individual/failed/IndyMac.html for further information.
CNNMoney.com Sr. Writer Chris Isidore contributed to this report
First Published: July 11, 2008: 8:55 PM EDT
Fannie and Freddie: A wild ride
http://money.cnn.com/2008/07/11/news/companies/indymac_fdic/?postversion=2008071120
It's pps type program....
OK I think you need to go to it this way... Cut an paste in your browser... it's 2.4 meg
http://giffe00.tripod. com/Presentation1.pps
It's kinda silly...
By CHARLES DUHIGG and DAVID JOLLY
Published: July 9, 2008
NEW YORK — As U.S. home prices decline and Washington struggles to end the economic malaise, Wall Street is starting to send a sobering message: The worst is yet to come.
One of the strongest warning signs came as the week began, when shares of the most important U.S. mortgage companies, Fannie Mae and Freddie Mac, plummeted. After falling almost continuously over the past month, in just one day Freddie Mac tumbled another 18 percent and Fannie Mae lost 16 percent amid concerns that the companies would need to raise billions of dollars in fresh capital.
With renewed prospects for turmoil in the financial markets, global stocks fell Tuesday from Sydney to Stockholm.
“Across the board, there are probably more write-downs to come,” Florian Esterer, a fund manager at Swisscanto Asset Management in Zurich, said. Investors need to look beyond the subprime problems, he said, and consider the decline in the quality of home-equity loans, credit card debt and commercial real estate — problems associated with the end of a “traditional credit cycle.”
Banks seem to be “in denial”about the degree of problems, he said: “I think there is much more pain to come than they are telling you.”
Fannie Mae and Freddie Mac are the largest U.S. buyers of home mortgages, and traditionally the government’s backstop for the housing economy. But with the plunge Monday, each of these “government-sponsored enterprises” has now lost more than 60 percent of its market value this year. The declines, along with a falling stock market and growing unease about the possibility of more losses at big banks, reflect a growing consensus among investors that the current housing slump will last longer, and prove more severe, than initially feared.
As a result, investors are signaling that they are far from convinced that any enterprise — even ones with the strongest backing — can successfully navigate these choppy waters, and that those who do survive will pay dearly.
In Asia, the Tokyo benchmark Nikkei 225 stock average fell 2.5 percent. The Hang Seng index in Hong Kong fell 3.3 percent, and the S&P/ASX 200 index in Sydney fell 1.4 percent.
Mitsubishi UFJ Financial, the largest publicly traded Japanese bank, fell 3.4 percent in Tokyo, while its rival Mizuho Financial fell 3.7 percent.
In London morning trading, the FTSE 100 index was down 2.7 percent, while the DJ Euro Stoxx 50 index, a barometer of euro zone blue chips, was down 2.3 percent. The DAX in Frankfurt fell 2.4 percent, while the CAC 40 in Paris also fell 2.4 percent.
UBS, the Swiss banking giant whose shares have fallen 58 percent this year, fell 4.5 percent in Zurich. Its crosstown rival, Credit Suisse fell 4.8 percent. HSBC Holdings, the biggest European bank, fell 2.6 percent in London.
Oil company shares fell as crude oil slipped. Royal Dutch Shell, the largest European oil company, fell 2.6 percent in London. BP dropped 2.7 percent.
“Everything points to a lot more bad news to come,” said Paul Miller of the Friedman, Billings, Ramsey Group in Arlington, Virginia. “If Fannie and Freddie are vulnerable, it means no one is absolutely safe.”
Representatives of Freddie Mac and Fannie Mae declined to comment on their stocks’ performances Monday. Freddie Mac closed at $11.91, the company’s lowest price since 1994. Fannie fell to $15.74, its lowest level since 1992.
The stocks’ dips were part of a broad decline in U.S. financial shares. Shares of Bank of America and JPMorgan Chase fell more than 3 percent.
The decline in Freddie Mac and Fannie Mae comes at a delicate time for the financial markets. In coming weeks, many of the world’s largest financial institutions — including Citigroup and Merrill Lynch — will report results that investors worry will be disappointing.
Lehman Brothers, which some on Wall Street worry might run into trouble like Bear Stearns, continues to struggle to restore confidence among investors. Lehman’s share price fell almost 8 percent Monday.
If banks’ results are as gloomy as anticipated, the news could depress other sectors of the stock market and further sap consumer confidence, which is already battered by rising oil costs, mounting credit-card defaults and prices that are rising due to spiraling energy fees and a weakening dollar.
Worldwide, banks and brokerage have written down the value of the assets they hold, notably those linked to mortgages, by more than $400 billion since the beginning of last year. In April, the International Monetary Fund said total losses for banks, insurance companies and investment funds may reach $945 billion, and some forecasters say they bill could be even higher.
“The economic story has gotten worse and worse and worse, and every financial institution seems like its in free fall,” said Steve Persky, chief executive at Dalton Investments in Los Angeles. “It’s not clear at all when this ends.”
The gloomy news also threatens to further shrink Washington’s influence over the economy. Legislators are widely expected to approve a housing rescue bill by the end of the month. That legislation will overhaul the regulatory structure for Freddie Mac and Fannie Mae, which are government chartered enterprises, and will force the two companies to hand over hundreds of millions of dollars each year to refinance troubled home loans.
But the reform legislation will also likely bolster the odds that taxpayers will foot the bill if either company falters.
“If Fannie or Freddie ever became critically undercapitalized, their regulator would have no choice but to put in place a taxpayer rescue,” said Karen Shaw Petrou, managing partner of Federal Financial Analytics, a consulting company.
To ward off that possibility, in recent weeks, the U.S. Federal Reserve chairman, Ben Bernanke, and Treasury Secretary Henry Paulson Jr. have both urged Freddie Mac and Fannie Mae to raise additional capital from investors.
But as share prices at the companies have declined, raising new funds has become increasingly difficult. Freddie Mac, for instance, said May 14 that it intended to sell $2.75 billion in new common stock to investors. Since then, the company’s stock price has declined by 56 percent.
As a result, Freddie Mac will have to issue more than twice as many shares to raise the new funds. When those new shares hit the market, they are likely to further push the company’s stock price down, and make it even harder for Freddie Mac to recover when the market eventually rebounds.
Similar problems are likely to plague investment banks and other financial firms also hoping to raise new money. So, as the housing market declines, there are new concerns that the financial spigot that keeps Wall Street and the economy afloat may be closing.
It is unclear precisely why Fannie Mae and Freddie Mac suffered so greatly Monday. Early in the day, analysts at Lehman Brothers estimated that a proposed change in accounting rules would require the companies to raise about $75 billion in additional capital — an enormous sum for two companies that have already asked investors for $25 billion since December.
But other analysts disputed Lehman’s conclusions, and even the Lehman report predicted the proposed rule changes would not be enacted, or that the two mortgage companies would be exempt.
Additionally, Freddie Mac and Fannie Mae were battered by news Monday that their cost of borrowing, when compared to what the government pays, had increased to their widest spread since March, when it set a 22-year record. And some analysts raised fears that the companies would suffer from chaos in the private mortgage insurance market, where Fannie Mae and Freddie Mac have sought protections from the risk of borrower defaults.
“These companies, and the economy in general, are fighting a lot of demons right now,” said Sean Egan, managing director of Egan-Jones Ratings, an independent credit ratings firm. “If things don’t get turned around, you’re going to see more downward pressure on home-building, on financial institutions, on spending. There’s not a lot of places that will be protected.”
http://www.nytimes.com/2008/07/09/business/worldbusiness/09markets.html
would love to see it.
Any chance of breaking it into smaller sections or just copying and pasting some text?
A banker friend forward this to me... says this is what happened...
opps.. Sorry... file too big for my upload...
Fannie Mae and Freddie Mac Shares Plunge
By CHARLES DUHIGG
Published: July 8, 2008
As home prices decline and Washington struggles to end the economic malaise, Wall Street is starting to send a sobering message: The worst is yet to come.
Fannie Mae | Freddie MacOne of the strongest warning signs came Monday, when shares of the nation’s most important mortgage companies, Fannie Mae and Freddie Mac, plummeted. After falling almost continuously over the past month, in just one day Freddie Mac tumbled another 18 percent, and Fannie Mae lost 16 percent amid concerns that the companies would need to raise billions of dollars in fresh capital.
Fannie Mae and Freddie Mac are the nation’s largest buyers of home mortgages, and traditionally the government’s backstop for the housing economy. But with Monday’s plunge, each of these giants has now lost more than 60 percent of its market value this year. The declines, along with a falling stock market and growing unease about the possibility of more red ink at big banks, reflect a growing conviction consensus among investors that the current housing slump will last longer, and prove more severe, than initially feared.
As a result, investors are signaling that they are far from convinced that any enterprise — even ones with the strongest backing — can successfully navigate these choppy waters, and that those who do survive will pay dearly.
“Everything points to a lot more bad news to come,” said Paul Miller of the Friedman, Billings, Ramsey Group in Arlington, Va. “If Fannie and Freddie are vulnerable, it means no one is absolutely safe.”
Representatives of Freddie Mac and Fannie Mae declined to comment on their stocks’ performances on Monday. Freddie Mac closed at $11.91, the company’s lowest price since 1994. Fannie fell $28.16, its lowest level since 1992.
The stocks’ dips were part of a broad decline in financial shares. Shares of Bank of America and JPMorgan Chase fell more than 3 percent, and the Dow Jones industrial average ended a tumultuous day down half a percent.
The decline in Freddie Mac and Fannie Mae comes at a delicate time for the financial markets. In coming weeks, many of the nation’s largest financial institutions — including Citigroup and Merrill Lynch — will report results that investors worry will be disappointing. Lehman Brothers, which some on Wall Street worry might run into trouble similar to that at Bear Stearns, continues to struggle to restore confidence among investors. Lehman’s share price fell almost 8 percent on Monday.
If banks’ results are as gloomy as anticipated, the news could depress other sectors of the stock market and further sap consumer confidence, which is already battered by rising oil costs, mounting credit card defaults and prices that are rising because of spiraling energy costs and a weakening dollar.
Worldwide, banks and brokerages have written down the value of the assets they hold, notably those linked to mortgages, by more than $400 billion since the beginning of last year. In April, the International Monetary Fund said total losses for banks, insurance companies and investment funds may reach $945 billion, and some forecasters say the bill could be even higher.
“The economic story has gotten worse and worse and worse, and every financial institution seems like it’s in freefall,” said Steven D. Persky, chief executive at Dalton Investments in Los Angeles, which manages about $1 billion. “It’s not clear at all when this ends.”
The gloomy news also threatens to further shrink Washington’s influence has over the economy. Legislators are widely expected to approve a housing rescue bill by the end of the month. That legislation will overhaul the regulatory structure for Freddie Mac and Fannie Mae, which are government chartered enterprises, and will force the two companies to hand over hundreds of millions of dollars each year to refinance troubled home loans.
But the reform legislation will also likely bolster the odds that taxpayers will foot the bill if either company falters.
“If Fannie or Freddie ever became critically undercapitalized, their regulator would have no choice but to put in place a taxpayer rescue,” said Karen Shaw Petrou, managing partner of Federal Financial Analytics, a consulting company.
To ward off that possibility, in recent weeks Federal Reserve Chairman Ben S. Bernanke and Treasury Secretary Henry M. Paulson Jr. have both urged Freddie Mac and Fannie Mae to raise additional capital from investors.
But as share prices at the companies have declined, raising new funds has become increasingly difficult. Freddie Mac, for instance, announced on May 14 that it intended to sell $2.75 billion in new common stock to investors. Since then, the company’s stock price has declined by 56 percent.
As a result, Freddie Mac will have to issue more than twice as many shares to raise the new funds. When those new shares hit the market, they are likely to further push the company’s stock price down, and make it even harder for Freddie Mac to recover when the market eventually rebounds.
Similar problems are likely to plague investment banks and other financial firms also hoping to raise new money. So, as the housing market declines, there are new concerns that the financial spigot that keeps Wall Street and the economy afloat may be closing.
It is unclear precisely why Fannie Mae and Freddie Mac suffered so greatly on Monday. Early in the day, analysts at Lehman Brothers estimated that a proposed change in accounting rules would require the companies to raise about $75 billion in additional capital — an enormous sum for two firms that have already asked investors for $25 billion since last December.
But other analysts disputed Lehman’s conclusions, and even the Lehman report predicted the proposed rule changes would not be enacted, or that the two mortgage companies would be exempt.
Additionally, Freddie Mac and Fannie Mae were battered by news on Monday that their cost of borrowing, when compared to what the government pays, had increased to their widest spread since March, when it set a 22-year record. And some analysts raised fears that the companies would suffer from chaos in the private mortgage insurance market, where Fannie Mae and Freddie Mac have sought protections from the risk of borrower defaults.
“These companies, and the economy in general, are fighting a lot of demons right now,” said Sean J. Egan, managing director of Egan-Jones Ratings, an independent credit ratings firm. “If things don’t get turned around, you’re going to see more downward pressure on homebuilding, on financial institutions, on spending. There’s not a lot of places that will be protected.”
http://www.nytimes.com/2008/07/08/business/08fannie.html
Citigroup sinks to 10-year low, Goldman urges short sale
Thu Jun 26, 2008
By Neha Singh
BANGALORE (Reuters) - Citigroup Inc shares fell to their lowest level in nearly a decade after a Goldman Sachs & Co analyst said investors should sell the largest U.S. bank's stock short as losses mount from troubled debt.
In morning trading, the shares were down $1.03, or 5.5 percent, at $17.82 on the New York Stock Exchange. The shares were among the biggest drags on the Dow Jones industrial average and Standard & Poor's 500, which both fell more than 1 percent.
They also touched their lowest level since October 1998, the month that Sanford "Sandy" Weill merged his Travelers Group with Citicorp to create Citigroup.
William Tanona, the Goldman analyst, added Citigroup to Goldman's "Americas conviction sell" list and cut his price target on the stock to $16 from $20.
He recommended a "paired" trade in which investors sell Citigroup shares short, betting on a decline, and buy Morgan Stanley shares. (LOL)
The analyst said Citigroup might take $8.9 billion of write-downs for the April-to-June period, leading to its third straight quarterly loss. He also said the bank might need to cut its quarterly dividend for a second time this year, after lowering it 41 percent to 32 cents per share in January.
Tanona's forecast suggests deeper problems for Citigroup Chief Executive Vikram Pandit, who is trying to turn the bank around after nearly $15 billion of losses in the last two quarters, and more than $46 billion of credit losses and write-downs since the middle of 2007.
"We see multiple headwinds for Citigroup including additional write-downs, higher consumer provisions as a result of rapidly deteriorating consumer credit trends, and the potential for additional capital raises, dividend cuts, or asset sales," the analyst wrote.
Pandit became chief executive in December, replacing Charles Prince, who resigned under pressure the previous month. Weill had hand-picked Prince as his replacement when he gave up the top job in 2003.
Last week, Chief Financial Officer Gary Crittenden said on a Deutsche Bank conference call that Citigroup could take substantial write-downs this quarter.
DIVIDEND CUT MAY BE NEEDED
Tanona said Citigroup might write off $7.1 billion related to collateralized debt obligations and associated hedges related to monoline insurers, $1.2 billion for other asset classes and $600 million for structured note liabilities.
He now expects Citigroup to lose 75 cents a share this quarter, compared with his earlier forecast of a profit of 25 cents. He also expects a full-year loss of $1.20 a share, compared with his prior view for a profit of 30 cents.
As of May, Citigroup had raised some $42 billion since last fall, including injections from sovereign wealth funds, data compiled by Reuters News show.
Tanona said the bank may now need to issue common stock or sell assets to raise capital, because regulators may forbid it from issuing more preferred or convertible securities. He also said halving the dividend could preserve $3.5 billion a year.
"Given the firm's current level of earnings power, we do not believe the dividend is safe," Tanona wrote.
A Citigroup spokeswoman declined to comment.
On June 24, Merrill Lynch analyst Guy Moszkowski projected $8 billion of write-downs for Citigroup.
Tanona also downgraded the U.S. brokerage sector to "neutral" from "attractive," saying deteriorating fundamentals will likely prolong any recovery from the credit crunch.
He projected a $4.2 billion second-quarter write-down for Merrill Lynch & Co, leading to a quarterly loss for the largest U.S. brokerage.
"We expect write-downs for Citigroup and Merrill to outpace what we saw from Morgan Stanley and Lehman Brothers Holdings recently, due to Citigroup's and Merrill's large exposures to ABS CDOs (asset-backed security CDOs) and associated hedges with the monolines," Tanona wrote.
Brad Hintz, a Sanford C. Bernstein & Co analyst, on Thursday projected a $3.5 billion second-quarter write-down for Merrill. Banc of America Securities analyst Michael Hecht made the same forecast earlier this month.
On June 17, Goldman analysts led by Richard Ramsden said U.S. banks may need $65 billion more capital to cope with a global credit crisis that will not peak until 2009.
http://www.reuters.com/article/newsOne/idUSWNA730720080626?pageNumber=1&virtualBrandChannel=0
Wachovia shares slump on Prudential sale report
NEW YORK, June 30 (Reuters) - Wachovia Corp (WB) shares fell as much as 9 percent on Monday after the New York Post reported that Prudential Financial Inc (PRU.N: Quote, Profile, Research) could force the bank to buy its stake in a brokerage joint venture.
The report was a latest blow to Wachovia, which was the biggest decliner among large banks, and is trading at a 16-1/2-year low.
The fourth-largest U.S. bank has already been throttled by concern that it might have to again cut its dividend and potentially raise more capital after raising $8.05 billion in April.
Many of Wachovia's problems stem from losses on mortgages taken on through its October 2006, $24.2 billion buyout of Golden West Financial Corp.
Wachovia said on Monday it was putting an end to adjustable-rate mortgages that let borrowers pay less than the interest due, a type of so-called "option ARMs" that caused amounts owed on some mortgages to rise even as home prices fell. In addition, it would waive all prepayment fees associated with such mortgages.
The New York Post said that Prudential, starting on Tuesday, could force Wachovia to buy the insurer's 23 percent stake in the Wachovia Securities partnership, which it said some analysts value at around $5 billion.
"Another headache the financials don't need today is a media report that Wachovia might be forced to purchase over 20 percent stake in a partnership from Prudential," said William Lefkowitz, options strategist at brokerage firm vFinance Investments in New York. "That report has led to selling in the Wachovia shares and the buying of Wachovia puts."
According to option analytics firm Trade Alert, roughly 481,000 puts, which give the right to sell the stock, compared to 62,000 calls, changed hands in Wachovia, 5 times the normal volume.
Wachovia spokeswoman Christy Phillips-Brown said the bank was declining to comment "on what Prudential may or may not do," adding that the underlying brokerage business was strong.
Phillips-Brown also said that even if Prudential does exercise the option "it wouldn't take effect for another year."
Prudential spokesman Bob DeFillippo also declined comment on whether the insurer would exercise its option to force Wachovia to buy its roughly 23 percent stake in the Wachovia Securities joint venture.
He noted that Prudential has an outstanding option to boost its investment in Wachovia Securities to make up for the dilution -- from an initial 38 percent -- that occurred when the wealth management unit bought rival brokerage A.G. Edwards.
"Everything we've ever said about the Wachovia venture is that we're pleased with it," he said, adding that even if Prudential exercised the right to make Wachovia buy back the stake, the bank would have a year to come up with a stock or cash payment.
Wachovia shares closed down 4.3 percent at $15.53 after going as low as $14.70 earlier Monday. So far this year, the shares are down more than 60 percent.
http://uk.reuters.com/article/newsOne/idUKN3043826320080630
Mortgage ruling could shock U.S. banking industry
Mon Jun 30, 2008
LOS ANGELES (Reuters) - A lawsuit filed by a Wisconsin couple against their mortgage lender could have major implications for banks should a U.S. appeals court agree that borrowers can cancel their loans en masse when their lenders violate a federal lending disclosure law.
The case began like hundreds of others filed since the U.S. housing boom spawned a rise in sales of adjustable rate loans. Susan and Bryan Andrews of Cedarburg, Wisconsin, claimed that lender Chevy Chase Bank FSB had hidden the true terms of what they believed was a good deal on a low-interest loan.
In their 2005 lawsuit, the couple said the loan's interest rate had more than doubled by their second monthly payment from the 1.95 percent rate they thought was locked in for five years. The interest rate rose well above the 5.75 percent fixed-rate loan they had refinanced to pay their children's college tuition.
The Andrews filed the case seeking class action status; and in early 2007, U.S. District Judge Lynn Adelman ruled that the bank had violated the Truth in Lending Act, or TILA, and that thousands of other Chevy Chase borrowers could join them as plaintiffs.
The judge transformed the case from a run-of-the-mill class action to a potential nightmare for the U.S. banking industry by also finding that the borrowers could force the bank to cancel, or rescind, their loans. That decision was stayed pending an appeal to the 7th U.S. Circuit Court of Appeals, which is expected to rule any day.
The idea of canceling tainted loans to stem a tide of foreclosures has caught hold in other quarters; a lawsuit filed last week by the Illinois attorney general asks a court to rescind or reform Countrywide Financial Corp (CFC) mortgages originated under "unfair or deceptive practices."
'MASSIVE CLASS SUITS'
The mortgage banking industry already faces pressure from state and federal regulators, who have accused banks of lowering underwriting standards and forcing some borrowers, through fraud, into costly adjustable loans that the banks later bundled and sold as high-interest investment vehicles.
The loans have caused serious instability in the financial sector, as mortgage interest rates adjusted upward and borrowers began defaulting at a significant rate starting in 2007, drawing lawsuits from investors and homeowners.
Federal appeals courts disagree over whether class-wide rescission under the Truth in Lending Act is available, said attorney Christine Scheuneman, whose firm represented Chevy Chase at the district court.
"If class treatment is found to be available for rescission ..., given the current crisis not predicted in 2005, the result all over the country could be massive class suits," said Scheuneman, a partner at Pillsbury Winthrop Shaw Pittman LLP.
The Truth in Lending Act, a 1968 federal law designed to protect consumers against lending fraud by requiring clear disclosure of loan terms and costs, lets consumers seek rescission, or termination, of a loan and the return of all interest and fees when a lender is found in violation.
Should the 7th U.S. Circuit Court of Appeals agree with Judge Adelman, banking industry associations predict "confusion and market disruption" as banks curtail lending further.
"Class certification of rescission claims would saddle the mortgage lending industry and secondary market with billions of dollars of class action exposure for supposed violations of TILA that do not give rise to any actual damages," the financial services associations wrote in an amicus brief.
But the Andrews' attorney, Kevin Demet, said lenders want to scare the judiciary into banning class action rescissions because they were unable to convince Congress to do so in the 1990s.
"If (banks) get relief (from the appeals court), it's activist judges trying to give them what they could not get legislatively," said Demet, of Demet & Demet of Milwaukee, Wisconsin.
Consumer advocates said the banks would have "no more or no less" liability for the tainted mortgages if the court found in favor of the Andrews plaintiffs.
But an adverse ruling for borrowers would cut off an important remedy. Borrowers would "lose the opportunity to use rescission to save their homes from foreclosure or to rescind their mortgages and refinance into affordable ones," the Center for Responsible Lending, the National Consumer Law Center, Public Citizen and AARP Foundation Litigation wrote in an amicus brief filed in the case.
Both sides said the case will likely be decided by the U.S. Supreme Court.
http://uk.reuters.com/article/newsOne/idUKN2634924420080630
US STOCKS-S&P downgrades of major banks slam Wall Street
Mon Jun 2, 2008 6:56pm BST
* Financials tumble on S&P downgrades, Lehman hardest-hit
* Market decline breaks 4-day winning streak
* Carmaker GM rises, bucking downward trend
By Walker Simon
NEW YORK, June 2 (Reuters) - U.S. stocks slid on Monday on renewed fears the credit crunch has yet to run its course after Standard & Poor's cut its ratings on three big securities firms, Wachovia ousted its chief executive, and a British mortgage lender said the UK home market was in dire straits.
All three major indexes fell more than 1 percent, with the Dow skidding almost 200 points, breaking a four-day winning streak as mounting signs that the credit crisis sparked by the U.S. subprime mortgage woes showed no signs of easing hit financial stocks.
Shares of Lehman Brothers (LEH), Morgan Stanley (MS) and Merrill Lynch (MER) fell sharply after S&P cut its credit ratings of the three banks and said its outlook on large U.S. financial institutions is predominantly negative.
"Basically we went into the session with very negative sentiment coming from Europe due to a British mortgage lender," said David Katz, chief investment officer at Matrix Asset Advisors in New York
"Then that was compounded by the management changes at Wachovia and Washington Mutual," he added. "Obviously the last leg down was the S&P action on the brokerage firms, which increases the cost of capital."
The Dow Jones industrial average .DJI was down 183.60 points, or 1.45 percent, at 12,454.72. The Standard & Poor's 500 Index .SPX was down 20.13 points, or 1.44 percent, at 1,380.25. The Nasdaq Composite Index .IXIC was down 46.94 points, or 1.86 percent, at 2,475.72
In announcing its credit actions, S&P said in a statement: "The negative actions reflect prospects of continued weakness in the investment banking business and the potential for more write-offs, though not of the magnitude of those of the past few quarters."
Among financial shares, Lehman fell the most, tumbling 7.9 percent to $33.90. Morgan Stanley fell 3.7 percent to $42.60 and Merrill Lynch lost 4.9 percent to $41.78.
S&P also said it may downgrade Wachovia Corp and revised outlooks to negative on Bank of America Corp and JPMorgan Chase. The outlook indicates the likely direction of the rating over the next two years.
JPMorgan Chase (JPM) fell 1.7 percent to $42.25 and Bank of America (BAC) was off 1.5 percent to $33.51. Wachovia fell 3.3 percent to $22.96.
Wachovia on Monday said it ousted its chief executive over what it termed "disappointments," including the purchase of a big mortgage lender at the height of the U.S. housing boom.
"The news of a major bank dismissing its chief sent an already jittery market lower," said Brian Gendreau, investment strategist at ING Investment Management in New York. "For months the market has been hypersensitive about any adverse news about the financial sector."
IN addition, Washington Mutual (WM), the largest U.S. savings and loan, which has been slammed by the mortgage slump, said on Monday that it would strip Chief Executive Kerry Killinger of his title of chairman starting next month. Its shares fell 1 percent ot $8.93.
Also on Monday British mortgage lender Bradford & Bingley (BB). reported losses and said the UK mortgage market was sharply deteriorating. Its shares fell 24 percent.
General Motors (GM.N: Quote, Profile, Research) bucked the trend in U.S. stocks, gaining 1.4 percent to $17.33 after the weekly business newspaper Barron's said shares of the U.S. automaker could triple over the next few years.
http://uk.reuters.com/article/usMktRpt/idUKN0228535020080602?pageNumber=3&virtualBrandChannel=0
Fannie Mae scraps higher down-payment requirements
May 16, 2008, 6:03PM ET
By ALAN ZIBEL
WASHINGTON
By relaxing down-payment requirements for borrowers in markets where home prices are falling, Fannie Mae aims to both resuscitate the flagging housing market and respond to pressure from industry groups, consumer advocates and lawmakers.
It's a balancing act that critics and investors worry exposes the company to more risk, as foreclosure rates spike and home prices keep falling.
Washington-based Fannie Mae said Friday it will require minimum down payments of 3 percent for loans made through its computerized underwriting system.
The new policy, effective June 1, replaces a December one that required a 5 percent down payment for home loans in areas with declining real estate prices. Fannie Mae predicts U.S. home prices will drop 7 percent to 9 percent on average this year.
A Freddie Mac spokesman said the McLean, Va.-based company earlier this month adjusted its policies to make 5 percent down payments available in declining markets.
The reversal on down payments come as fears heighten, especially among Republicans on Capitol Hill, that the government will end up bailing out Fannie and its government-sponsored sibling, Freddie Mac, whose share prices have been cut in half over the past year.
While the government is relying on the two mortgage finance titans to stabilize the battered mortgage market, the companies "need to be very careful to manage their risk...that's a a tight rope for them to walk," said mortgage industry consultant Howard Glaser.
Bert Ely, a banking industry consultant in Alexandria, Va. and a longtime critic of Fannie and Freddie, said they were likely under pressure from lawmakers to change their policy in areas with falling home prices. "They caught a lot of flack on this," he said.
Fannie's announcement that it was easing financial requirements for some homebuyers comes just as lawmakers are considering tougher ones for both it and Freddie. The Bush administration has long pushed for stricter regulation.
As senators try to put together a bipartisan housing package, they've proposed tapping a fund drawn from Fannie and Freddie's profits to pay for a new foreclosure-prevention program. Community groups want that money directed to a low-income housing fund.
Congress created Fannie and Freddie to pump money into the home-mortgage market by buying home loans from banks and other lenders and bundling them into securities for sale on Wall Street. Together they hold or guarantee about $5.3 trillion in home-mortgage debt.
Their formidable size helps them support the mortgage market in times of trouble. But critics fear that these troubled times are too much for the companies to handle the losses, making a federal bailout inevitable.
"These guys are real close to being part of the problem, rather than part of the solution," said Thomas Stanton, a fellow at Johns Hopkins University's Center for the Study of American Government.
While the Treasury Department isn't obligated to assist Fannie or Freddie in a financial emergency, there is a perception notion on Wall Street that the government would bail them out if there is a collapse. Critics say the government's implicit backing allows the companies to take on far more debt than a bank.
James Lockhart, director of the federal Office of Housing Enterprise Oversight, said in a speech Friday the companies' high level of debt relative to assets "could pose significant risk to taxpayers ... financial institutions and other investors."
More evidence of their increased vulnerability, Lockhart said, are three straight quarters of losses for both, totaling nearly $11 billion.
Fannie had been under intense pressure from real estate agents, homebuilders and consumer advocates to relax what they saw as rigid policies that shut out borrowers with good credit.
"From the time it was announced, we've been asking them to reconsider," said Jerry Howard, president of the National Association of Home Builders, said in an interview.
Mortgage brokers welcomed the news. Alan Rosenbaum, chief executive of mortgage banker and broker GuardHill Financial Corp. in New York, said the change "is probably the first step in turning things around" as the mortgage industry has tightened its lending practices too much, leaving many borrowers out in the cold.
While the change is positive, Karen Cooper, a mortgage broker and owner of Quality Home Loans in Ashland, Ore., said borrowers face numerous other obstacles,
For example, mortgage insurers, whose backing is required for borrowers who can't afford the traditional 20 percent down payment on a home, have already flagged ZIP codes around the country where they refuse to insure some home loans.
In working with first-time homebuyers, she said, "we just keep sorting through guidelines until we find what works,"
Fannie Mae shares fell 34 cents to close at $28.89, while shares of Freddie Mac fell 30 cents to close at $26.97.
http://www.businessweek.com/ap/financialnews/D90N0B180.htm
Thornburg Mortgage stock set a new low at the end of trading Wednesday, closing at 67 cents per share.
Wednesday, May 14, 2008 - 2:51 PM
The stock, which took a one day dip below $1 in March following a rush of margin calls, has been in a steady decline in anticipation of a shareholder vote that will either massively dilute the value of Thornburg Mortgage stock (NYSE:TMA) or, if the vote should fail, put the continued existence of the company in jeopardy.
The stock's previous low had been 71 cents on March 10 and again at Tuesday's close.
The company is based in Santa Fe.
http://albuquerque.bizjournals.com/albuquerque/stories/2008/05/12/daily21.html?ana=yfcpc
U.S. Senators reach deal on housing rescue
Thu May 15, 2008 3:44pm EDT
WASHINGTON, May 15 (Reuters) - Key members of the U.S. Senate have reached a deal on a sweeping housing rescue plan that would see Fannie Mae (FNM.N) and Freddie Mac (FRE.N) backstop a government mortgage insurance fund, two industry sources said on Thursday.
Sen. Christopher Dodd, chairman of the banking committee, said that a deal had not been finalized. But the plan outlined by the sources says the two mortgage finance giants would offer the funds to cover the costs of a $300 billion mortgage rescue fund.
Reform legislation for Fannie Mae and Freddie Mac envisioned a housing fund sponsored by the two government-sponsored enterprises and the deal will send those funds to the new mortgage refinance project.
http://www.reuters.com/article/marketsNews/idINWBT00901120080515?rpc=44
Wouldn't you know it, I just bought some on Friday. See what happens and hope for the best, I've made some money on it short term before. Maybe Karma wants it back. Ho! Ho!
Thanks up-down, I will check it out.
IndyMac Bancorp swings to 1st-qtr loss, sees 2008 loss
Monday May 12, 9:38 am ET
By Alex Veiga, AP Business Writer
IndyMac Bancorp posts 1st-qtr loss; expects no quarterly profits in 2008
LOS ANGELES (AP) -- IndyMac Bancorp Inc. said Monday it swung to a loss in the first quarter as deteriorating credit markets forced the mortgage lender to lower the value of mortgage-backed securities, and warned it would not post a profitable quarter in 2008.
"With respect to profitability, we do not expect that Indymac will be able to return to overall profitability until the current decline in home prices decelerates," Chief Executive Michael Perry said in a statement.
IndyMac shares fell 3.8 percent, or 13 cents, to $3.30 at the open of trade Monday.
The Pasadena, Calif.-based holding company for IndyMac Bank reported a loss of $184.2 million, or $2.27 per share, for the quarter ended March 31.
That compares with a profit of $52.4 million, or 70 cents per share, in the same period a year earlier.
Analysts polled by Thomson Financial expected a loss of $1.92 per share.
The latest results included credit costs and losses of $249 million related to declining values of mortgage-backed securities. The company more than tripled its credit reserves to $2.7 billion from a year earlier.
The company said 24 percent of its losses during the quarter stemmed from severance payments and costs related to office closings. Discontinued businesses, including its homebuilder and home equity lending divisions, accounted for another 22 percent of the period's losses, IndyMac said.
The lender stopped making new loans via its construction lending division in the fourth quarter, as the housing downturn left home builders in California and Florida stuck with new units they couldn't sell.
The company originated $9.6 billion in new mortgage loans during the quarter, with 88 percent of the volume representing loans that can be sold to government-sponsored mortgage companies.
Perry forecast that the company would post smaller quarterly losses through the end of the year as its restructuring and credit provision costs and losses from discontinued operations decline.
"In this respect, I believe that we have turned a corner and that our business is improving," Perry said in a statement.
Perry projected a $20 million loss for the fourth quarter, but noted some of the company's business segments would be profitable as early as the second quarter.
To help generate capital, IndyMac said it will stop paying a dividend on preferred shares. The move is expected to save $7.4 million each quarter.
IndyMac noted its capital levels exceed regulators' requirements.
The lender saw higher loan default and foreclosure rates during the quarter as falling housing prices and tighter mortgage lending standards continued to pressure many borrowers.
As a percentage of unpaid principal balance, about 8.3 percent of the loans in IndyMac's mortgage servicing portfolio were at least 30 days late as of March 31. That's up from 5.4 percent a year earlier and up from 7.3 percent on Dec. 31, IndyMac said.
Loans 90 days past due or in foreclosure represented 6.5 percent of total assets, up from 1.1 percent in the year-ago period and up from 4.6 percent as of the close of the fourth quarter.
Some 43 percent of the home loans in IndyMac's portfolio were made to borrowers in California.
IndyMac noted the percentage of loans going through foreclosure rose during the quarter as more borrowers failed to keep up with payments, sell their home or find alternative financing.
The number of homes repossessed by the bank after they failed to sell at auction rose to 257, up from 33 a year earlier and 196 in the fourth quarter.
http://biz.yahoo.com/ap/080512/earns_indymac.html
jimmy, I moved my BOA balances over to
http://www.firstnational.com/001/html/en/personal/personal.html
4.99% for life on balance transfers!
They did the same thing to me about 4 or 5 years ago. Gave me an opening rate at 7.99% let me use that for a couple of years until I acquired a nice balance then for no apparent reason other than profit raised my rate to 13.48%. I didn't even call because I new I would get the song and dance routine. But I am with you about throwing out the B.O.A. card.
Fremont General says may file for bankruptcy
Reuters, Friday May 9 2008
By Jonathan Stempel
NEW YORK, May 9 (Reuters) - Fremont General Corp, which was one of the largest U.S. providers of subprime mortgages before regulators ordered it to stop making the loans, said on Friday it may file for bankruptcy protection.
The Brea, California-based company announced its intentions a day after disclosing plans to sell some mortgage servicing rights to Litton Loan Servicing LP, an affiliate of Goldman Sachs Group Inc. Last month, it agreed to sell bank branches and deposits to CapitalSource Inc.
Fremont said these sales covered substantially all assets of its Fremont Investment & Loan thrift unit.
The company said, though, that unless it enters a "viable transaction" for its remaining assets, it expects to file for Chapter 11 protection because it cannot comply with regulatory rules to solicit shareholder approval for the CapitalSource transaction. Fremont said the transaction could thereafter be approved in accordance with U.S. bankruptcy laws.
If the asset sales to CapitalSource and Litton take place, Fremont said it then plans to complete an "orderly liquidation" of Fremont Investment & Loan.
By filing for bankruptcy, Fremont would join a growing list of subprime lenders, including New Century Financial Corp, to seek court protection since the U.S. housing slump began more than a year ago.
Well over 100 mortgage lenders have quit lending or sold their businesses since the downturn began.
Fremont had been one of the nation's 10 largest subprime lenders until the Federal Deposit Insurance Corp in March 2007 ordered it to stop risky lending.
The company had made nearly $32 billion of subprime mortgages in 2006, according to National Mortgage News.
In March, the FDIC declared Fremont undercapitalized and ordered it to raise money or find a buyer by May 26.
Fremont shares fell 8.3 cents to 9.2 cents in afternoon trading on the Pink Sheets. They traded as high as $13.80 last May 31.
http://www.guardian.co.uk/business/feedarticle/7509189
Fannie Mae Wins Cheers Despite Loss
www.nytimes.com
By CHARLES DUHIGG
Published: May 7, 2008
Fannie Mae, the nation’s largest buyer of home loans, gave investors little reason to cheer Tuesday, announcing a $2.2 billion quarterly loss and a dividend cut, and warning of steeper losses ahead.
But investors celebrated anyway, bidding up the stock 9 percent, to close at $30.81.
Their optimism stemmed from the belief that Fannie Mae was in a position to pick and choose among the best and safest loans currently in the marketplace. The company, which buys mortgages from banks and other lenders, announced it would raise $6 billion in new funds to purchase additional loans and shore up a listing balance sheet.
“As the market recovers, we will be a prime beneficiary,” Fannie Mae’s president, Daniel C. Mudd, said in a conference call with analysts Tuesday morning. When the housing market finally stabilizes, the company will “feast” on the mortgages it is currently buying, he added.
Those sentiments were bolstered by Fannie Mae’s regulator, the Office of Federal Housing Enterprise Oversight, which announced Tuesday that the company had been released from growth limits put in place in 2006 when audits showed that the company had been manipulating its books.
The regulator also cut the capital reserves that Fannie Mae must hold, in essence betting that the safest course, for both the company and the housing marketplace, is for Fannie Mae to invest more aggressively and with a thinner cash cushion.
But some lawmakers continue to express long-held concerns about Fannie Mae’s financial health.
“Regulators need all the tools they can get to make sure these companies don’t fail, especially since we’re talking about entities that have over $5 trillion in financial commitments and debt,” said Senator Richard C. Shelby of Alabama, the senior Republican on the Senate Banking Committee. “Six billion dollars looks like a pretty paltry sum, and if we get into a further housing downturn, that capital can go pretty fast.”
Fannie Mae, along with Freddie Mac, are essential lubricants in today’s housing marketplace. The companies buy more than 80 percent of all home loans made by banks and lenders, providing fresh financing for more home mortgages. At the end of 2007, the firms had a combined cushion of $83 billion, underpinning a colossal $5 trillion in debt and other financial commitments.
But the companies are being pushed in opposite directions. Some regulators and lawmakers want them to buy more and riskier loans to jump-start a revival in the housing market. Others worry that if the companies spend too freely, they will suffer even greater losses, which could require a taxpayer-financed bailout.
If that were to occur, it could ripple through the entire stock market and economy, creating a crisis of confidence about the trillions in mortgages the company owns and has guaranteed.
To offset those concerns, regulators and lawmakers have pushed the companies to raise additional capital. Last year, both companies raised $13 billion from investors. Regulators have pushed them to go even further this year, but some shareholders have complained that raising too much additional money will drive down stock prices and dilute investors’ stakes.
Those complaints come as the companies also face a worsening housing marketplace. Mr. Mudd, Fannie Mae’s president, said in Tuesday’s call with analysts that home prices might fall by 7 to 9 percent this year, and that the company would experience losses of as much as $4.4 billion.
Mr. Mudd said that as the company takes losses on bad loans made in previous years, however, it is also buying new loans held by borrowers with much better credit. And because Wall Street has largely abandoned the mortgage marketplace, Fannie Mae and Freddie Mac can charge higher fees because of decreased competition.
Some analysts, however, are less optimistic.
“These guys have been confident on their conference calls for the last couple of quarters, but then they come up with bigger and bigger losses,” said Paul Miller of the Friedman, Billings, Ramsey Group in Arlington, Va. “Wall Street wants to be bullish about something, and they think Freddie and Fannie are going to lead the way. But at some point, investors are going to wake up and realize these guys are losing real money.”
As part of Tuesday’s conference call, Mr. Mudd disclosed that the falling home prices and rising foreclosures that started in the subprime marketplace had spread to the higher-quality loans that Fannie Mae and Freddie Mac traditionally buy.
And though Fannie Mae expects profits down the road, the loss announced on Tuesday follows a record $3.6 billion loss in the fourth quarter of last year.
In an effort to preserve cash, Fannie Mae said on Tuesday that it would cut its common stock dividend to 25 cents a share, from 35 cents.
That announcement, however, did not dissuade Moody’s Investors Service from downgrading the company’s financial strength by one notch. Other ratings agencies have warned they may follow suit.
Freddie Mac is also expected to post a significant loss when it reports its first-quarter results next week. The company will have to answer questions regarding its accounting, which its regulator has said shows “internal control weaknesses.”
And both firms still face Congressional scrutiny, which is increasing as lawmakers consider proposals to increase regulators’ powers over the companies.
A bill changing how Fannie Mae and Freddie Mac are policed has passed the House, and negotiations over the legislation are continuing in the Senate, according to Democratic and Republican staff members. Lawmakers say they believe a bill may pass as soon as in the next two months.
http://www.nytimes.com/2008/05/07/business/07fannie.html?_r=1&adxnnl=1&oref=slogin&ref=business&adxnnlx=1210127289-RFHvH5HZEkLROe/yAXOltA
U.S. Said to Open Criminal Inquiry of Countrywide
nytimes.com
By RAYMOND HERNANDEZ
Published: March 9, 2008
WASHINGTON — The federal authorities have opened a criminal inquiry into Countrywide Financial for suspected securities fraud as part of the continuing fallout over the mortgage crisis, government officials with knowledge of the case said on Saturday.
The Justice Department and the Federal Bureau of Investigation are looking at whether officials at Countrywide, the nation’s largest mortgage lender, misrepresented its financial condition and the soundness of its loans in security filings, the officials said.
The investigation — first reported on Saturday in The Wall Street Journal — is at an early stage, said the officials, who spoke on the condition of anonymity because they were not authorized to discuss ongoing criminal matters. It is unclear whether anyone will ultimately be charged with a crime.
Richard Kolko, a spokesman for the F.B.I., declined on Saturday to confirm whether the agency had started an investigation of Countrywide related to its securities filings.
A Countrywide spokeswoman, Susan Martin, said, “We are not aware of any such investigation.”
The inquiry comes as the F.B.I. investigates 14 companies as part of a wide-ranging review of business practices in the troubled mortgage industry.
In that broader investigation, the F.B.I. is looking into possible accounting fraud, insider trading or other violations in connection with loans made to borrowers with weak, or subprime, credit.
The inquiry into the companies began last spring. It involves companies across the financial industry, including mortgage lenders, loan brokers and Wall Street banks that packaged home loans into securities. It is unclear when charges, if any, might be filed.
As part of that investigation, the F.B.I. is cooperating with the Securities and Exchange Commission, which is conducting about three dozen civil investigations into how subprime loans were made and packaged and how securities backed by those loans were valued. Several state prosecutors are also investigating mortgage industry practices.
For years, the F.B.I. has been warning that mortgage fraud is a significant and growing problem. In the 2006 fiscal year, it documented 35,600 reports of suspected mortgage fraud, up from 22,000 the year before and 7,000 in 2003.
For the most part, the cases the F.B.I. has brought so far have focused on local or regional mortgage fraud rings that involve speculators, loan officers, brokers and other housing professionals.
State officials have been active in bringing mortgage cases. The New York attorney general, Andrew M. Cuomo, is investigating whether Wall Street banks withheld damaging information about the loans they were packaging. Prosecutors in Connecticut, Illinois, Massachusetts and Ohio have also been looking into the industry.
Countrywide, beleaguered by bad home loans, is in the process of selling itself to Bank of America for about $4 billion. It reported a loss of $422 million for the fourth quarter of 2007.
The company was forced in August to draw down its entire $11.5 billion credit line from a consortium of banks because it could no longer sell or borrow against home loans it had made. It has laid off about 11,000 employees since last summer.
http://www.nytimes.com/2008/03/09/business/09lend.html?hp
F.B.I. Opens Criminal Inquiry Into Countrywide
By RAYMOND HERNANDEZ
Published: March 8, 2008
WASHINGTON — Federal agencies have opened a criminal inquiry into Countrywide Financial for suspected securities fraud as part of the continuing fallout over the mortgage crisis, government officials with knowledge of the case said on Saturday.
The Justice Department and the Federal Bureau of Investigation are looking at whether officials at Countrywide, the nation’s largest mortgage lender, misrepresented its financial condition and the soundness of its loans in security filings, the officials said.
The investigation — first reported on Saturday in The Wall Street Journal — is at an early stage, said the officials, who spoke on the condition of anonymity because they were not authorized to discuss ongoing criminal matters. It is unclear whether anyone will ultimately be charged with a crime.
Richard Kolko, a spokesman for the F.B.I., declined on Saturday to confirm whether the agency had started an investigation of Countrywide related to its securities filings.
A Countrywide spokeswoman, Susan Martin, said, “We are not aware of any such investigation.”
The inquiry comes as the F.B.I. investigates 14 companies as part of a wide-ranging review of business practices in the troubled mortgage industry.
In that broader investigation, the F.B.I. is looking into possible accounting fraud, insider trading or other violations in connection with loans made to borrowers with weak, or subprime, credit.
The inquiry into the companies began last spring. It involves companies across the financial industry, including mortgage lenders, loan brokers and Wall Street banks that packaged home loans into securities. It is unclear when charges, if any, might be filed.
As part of that investigation, the F.B.I. is cooperating with the Securities and Exchange Commission, which is conducting about three dozen civil investigations into how subprime loans were made and packaged and how securities backed by those loans were valued. Several state prosecutors are also investigating mortgage industry practices.
For years, the F.B.I. has been warning that mortgage fraud is a significant and growing problem. In the 2006 fiscal year, it documented 35,600 reports of suspected mortgage fraud, up from 22,000 the year before and 7,000 in 2003.
For the most part, the cases the F.B.I. has brought so far have focused on local or regional mortgage fraud rings that involve speculators, loan officers, brokers and other housing professionals.
State officials have been active in bringing mortgage cases.
The New York attorney general, Andrew M. Cuomo, is investigating whether Wall Street banks withheld damaging information about the loans they were packaging. Prosecutors in Connecticut, Illinois, Massachusetts and Ohio have also been looking into the industry.
Countrywide, beleaguered by bad home loans, is in the process of selling itself to Bank of America for about $4 billion. It reported a loss of $422 million for the fourth quarter of 2007.
The company was forced in August to draw down its entire $11.5 billion credit line from a consortium of banks because it could no longer sell or borrow against home loans it had made. It has laid off about 11,000 employees since last summer.
http://www.nytimes.com/2008/03/08/business/08cnd-lend.html?ex=1362718800&en=3682ff5b2979717a&ei=5088&partner=rssnyt&emc=rss
Ambac tumbles on $1.5bn stock plan
By Aline van Duyn, Francesco Guerrera and Ben White in New York
Published: March 5 2008 20:02 | Last updated: March 6 2008 01:03
Ambac, the troubled bond insurer, lost nearly a fifth of its stock market value on Wednesday after revealing a $1.5bn recapitalisation plan that disappointed investors hoping for a bigger rescue effort.
Investors anticipated Ambac would receive a cash injection of up to $2bn from a group of banks. Instead, Ambac said it would sell at least $1bn of common stock and $500m of other equity instruments in an offer to be priced today, substantially diluting its existing shareholders.
Ambac has been racing to find fresh capital because its triple-A credit ratings have been threatened by losses on guarantees it made on securities backed by subprime mortgages and other assets.
Efforts to prevent ratings cuts at Ambac and MBIA, the biggest bond insurer, were stepped up in January after Eric Dinallo, New York insurance superintendent, held a meeting with banks, urging them to consider shoring up the bond insurers to prevent market turmoil.
Eight banks led by Citigroup and UBS – which between them bought the most guarantees from Ambac – had been prepared to inject up to $2bn into the insurer under a plan that would have split its operations into a triple-A rated municipal bond insurance business and a lower-rated structured finance business.
However, the complexity of the scheme led to its rejection by credit ratings agencies and Ambac, people involved in the negotiations said.
A lower rating on Ambac’s structured business could lead to billions of dollars of write-offs at banks, which would be forced to cut the value of guarantees on complex debt securities and derivatives.
Ambac’s share price fell 19 per cent after the company, in revealing the share offer, said it could not rule out future pressure on its ratings or further capital raising. However, the $1.5bn offer appeared to stave off the possibility of a imminent ratings cut by Moody’s Investors Service and Standard & Poors.
S&P said it was likely to confirm Ambac’s triple-A credit rating once new equity was raised. But it said its outlook would remain negative, reflecting the “potential for further mortgage market deterioration” that would challenge bond insurers’ ability to “gauge their ongoing capital needs accurately in the near term”.
Fitch, which has cut its ratings for Ambac to AA, said it did not think it would be possible for for Ambac to regain its triple-A rating until “its subprime risk can be effectively contained”. Moody’s said it planned to affirm Ambac’s triple-A rating.
Eliot Spitzer, governor of New York, and Mr Dinallo’s boss, said: “Combined with the prior affirmation of MBIA’s credit ratings, eliminating concerns about Ambac’s ratings should have broad benefits for the financial markets and provide stability for the municipal bond market.”
http://www.ft.com/cms/s/0/347cbfce-eaed-11dc-a5f4-0000779fd2ac.html
Countrywide Sees Pay-Option Loan Risk
By ALEX VEIGA 03.03.08, 9:13 PM ET
LOS ANGELES - Countrywide Financial Corp. has seen mortgage defaults rise as the housing market went from boom to bust, but the nation's largest home loan provider says it could have more trouble ahead with a particularly risky slate of loans - pay-option adjustable rate mortgages.
Pay-option loans give borrowers the option to make a lower payment but can result in the unpaid portion being added to the principal balance. They also have the potential to provide high yields to investors who purchased the loans from lenders during the housing boom.
As of the end of December, Countrywide had nearly $29 billion in pay-option loans, with about $26 billion of the total having grown beyond their original loan amount, the company said in a filing late Friday with the Securities and Exchange Commission.
"Our borrowers' ability to defer portions of the interest accruing on their loans may expose us to increased credit risk," the company said. It added that its risk could be greater because the amount of deferred interest on pay-option loans was on the upswing.
The company noted some 81 percent of the loans were made out to borrowers who provided little or no documentation on their income. As of the end of December, 71 percent of borrowers with pay-option loans were electing to make less than full interest payments.
Even though borrowers with such loans had the option to just make interest payments, many were increasingly missing payments, the company said.
Some 5.71 percent of the loans based on unpaid principal balance were at least 90 days late as of Dec. 31, up from 0.65 percent a year earlier.
Like other lenders, Countrywide has since tightened its lending criteria and curtailed lending of so-called no documentation loans. It has also ramped up programs aimed at modifying loans for borrowers before their loans reset to higher rates.
At the close of last year, Countrywide's total loan servicing portfolio was valued at about $1.5 trillion.
Total delinquencies as a percentage of the number of loans was 6.96 percent, up from 5.02 percent at the end of the prior year. Some 1.04 percent of loans were facing foreclosure, up from 0.65 percent a year earlier.
California accounted for the highest portion of Countrywide loans, according to unpaid principal balance, of any state, the lender said.
The state had around $389 billion in loans, followed by Florida, with loans totaling around $113 billion.
Texas, New York and New Jersey rounded out the list.
The company's banking unit, which also funds some of Countrywide's home loans, had $87.1 billion loans held for investment on its books at the end of the year.
A large portion of that stemmed from loans made in California and Florida, once-hot housing markets that have now been battered by falling prices and rising mortgage defaults and foreclosures.
About $37 billion in loans were made to borrowers in California. Another roughly $6 billion pertained to loans in Florida.
Virginia accounted for about $3 billion of the total, the company said.
In January, Bank of America Corp. (nyse: BAC) agreed to purchase Countrywide for about $4 billion in stock. The transaction is projected to close in the third quarter.
Countrywide previously reported a loss of $422 million in 2007's fourth quarter and a loss of $1.2 billion in the third quarter, as higher defaults forced the lender to boost its provisions for anticipated losses.
Shares of Countrywide slipped 14 cents, or 2.2 percent, to $6.17 on Monday.
http://www.bloomberg.com/apps/news?pid=20601109&sid=aHV3_NAGObAQ&refer=news
Old fashioned banking is not the answer
Tuesday March 4 2008
-- James Saft is a Reuters columnist. The opinions expressed are his own --
By James Saft
LONDON, March 4 (Reuters) - A return to "good old-fashioned banking" sounds nice, but we may live to regret going back to a system that implies less credit available at a higher cost and lower overall economic growth.
The wreckage of the burst credit bubble has prompted a fair amount of talk about banks returning to basics, really getting to know their borrowers, doing plain old lending and hanging on to much of the risk themselves.
Notably Hector Sants, the head of Financial Services Authority, the British financial watchdog, last week said the fallout "will put some pressure on this originate and distribute model and force banks to behave, as it were, more like banks behaved in the past."
"I don't think markets are ever going to return to the way they were," Sants told BBC radio."
He may well be right, and it would certainly make life easier for regulators if so, but if he is, it will have some serious and not necessarily good implications for the cost of credit for everyone, from households to the largest corporations.
The "originate and distribute" model Sants is talking about grew up because the banks worked out it could make them a lot more profitable. Rather than holding on to the loans they made, they "originated" them and then "distributed" them on to someone else.
And this was more than just a "greater fool" theory of banking, at least in the beginning.
Banks made loans, for mortgages or leveraged buyouts, using their credit expertise and knowledge of the borrower, and then packaged them up into a securitisation, onto which the ratings agencies put their imprimatur. That allowed hedge funds and pension funds and whoever else to concentrate on other things and to buy loans or deals that best fit the risks and rewards they sought. In theory, at least.
In practice it went off the rails, which is not entirely surprising given banks were paid to get deals done, and ratings agencies were paid by issuers. As we've seen, many foolish loans were made, it all came unstuck and now very few loans indeed are coming through, and there are virtually no buyers for complex securitised products.
In sum, the system was characterised by a large amount of greed, miscalculation and perverse incentives, and there is plenty of blame to be shared round between the banks, ratings agencies, investors and regulators.
But I have a horrible feeling we are going to miss "originate and distribute".
THE 3-6-3 SOLUTION?
Its great virtue was efficiency.
A move away from it could work a number of ways but all of them would seem to carry with them permanently higher costs of borrowing. If it is just banks doing the lending, there will be a long period, as we are now seeing, of them charging higher rates to build back up their own capital.
If securitisation comes back, but is simpler and based on a "buyer beware" system, that too will have higher costs.
If faith in the role of the ratings agencies and banks can't be rebuilt, two things will happen. Some deep-pocketed investors will employ many more people to do credit research, which will be a cost borne by borrowers and investors. These investors would also likely paste a sizeable additional spread onto deals to compensate for what they don't know about the borrowers.
"The result of a longer term switch away from originate and distribute is that the banks will have to carry more stuff on their books and they will be able to lend less," said Richard Portes, a professor at London Business School and the president of think tank the Centre for Economic Policy Research.
"There is no rocket science here. The process of lending will on balance be less efficient."
And less efficient lending should lead to lower economic growth than would otherwise be the case, and higher volatility of growth, hardly a recipe for strong growth in asset prices. So what are the alternatives?
Portes was one of the authors of a report on international financial stability that suggested moving to a system whereby ratings houses were paid by investors, as well as taking steps to encourage originators to retain more of the loans they write, though by no means all.
But turning the clock back to old fashioned banking, once known as "3-6-3" for "borrow at three percent, lend at six percent and be on the golf course by 3 p.m.", is not what we should wish for.
That would imply not just more expensive loans and less economic growth, but more plaid trousers too.
-- At the time of publication James Saft did not own any direct investments in securities mentioned in this article. He may be an owner indirectly as an investor in a fund.
http://www.guardian.co.uk/feedarticle?id=7357428
Fremont gets default notices, survival threatened
Reuters Tuesday March 4 2008
(Adds details on tangible net worth; senior debt downgrade; updates shares)
NEW YORK, March 4 (Reuters) - Fremont General Corp said on Tuesday it has received default notices related to $3.15 billion of subprime mortgages it sold last March and said its survival could be threatened if it were sued.
The Brea, California-based parent of Fremont Investment & Loan said the notices from the mortgage purchasers concern its failure to maintain a $250 million tangible net worth.
Tangible net worth equals total assets minus liabilities and intangible assets such as goodwill, copyrights, patents and trademarks.
Fremont said that because of "limited available liquidity," it can neither deposit cash into a reserve account, nor provide a letter of credit to satisfy a tangible net worth covenant associated with guarantees it provided in the loan sale. It said it is in talks for a waiver.
"To the extent that litigation is pursued and the company was not successful in defending any such lawsuit, its ability to continue to conduct business as a going concern would be called into question," Fremont said.
Standard & Poor's downgraded Fremont's senior debt one notch to "CC," its second lowest grade other than default.
Last Thursday, Fremont deferred an interest payment and reported "significant" liquidity risk and capital needs. It also said it hired Credit Suisse and Sandler O'Neill & Partners LP to explore options, including a sale of the company.
Fremont had been one of the 10 largest U.S. subprime mortgage lenders until regulators, including the Federal Deposit Insurance Corp ordered it last March to stop risky lending.
More than 100 mortgage lenders have quit the industry since the current U.S. housing crisis began, and many have gone bankrupt. Subprime mortgages go to people with poor credit.
Fremont made nearly $32 billion of subprime mortgages in 2006, the last full calendar year it offered the product, according to National Mortgage News.
Fremont shares fell 30 cents, or 42.9 percent, to 40 cents in afternoon electronic trading. The shares had traded at $2.36 as recently as Thursday, and as high as $13.41 last June 1.
http://www.guardian.co.uk/feedarticle?id=7357427
Citigroup Falls to Lowest Since '98 on Loss Estimates (Update2)
By Bradley Keoun
March 4 (Bloomberg) -- Citigroup Inc. dropped to the lowest in nine years in New York trading after two analysts predicted a first-quarter loss and a Middle Eastern investment fund said the biggest U.S. bank needs more capital.
The shares fell 99 cents, or 4.3 percent, to $22.10 as of 4 p.m., the lowest price since 1998. They have tumbled 25 percent this year, the second-worst performance among the 30 members of the Dow Jones Industrial Average after Intel Corp. New York-based Citigroup was the worst performer last year, when it fell 47 percent.
Citigroup may have $15 billion of writedowns this quarter tied to subprime mortgages and so-called collateralized debt obligations, leaving the bank with a net loss of $1.66 a share, Merrill Lynch & Co. analyst Guy Moszkowski said today in a note. Moszkowski, ranked the No. 1 bank analyst by Institutional Investor magazine, was followed by a Goldman Sachs Group Inc. analyst who said the bank would lose $1 per share.
``We remain concerned'' about the potential for loan losses, Moszkowski said. ``The company still has quite a way to go'' before its $37 billion of holdings of subprime loans and related bonds are written down to the current market value.
Bank spokesman Michael Hanretta declined to comment on the analysts' reports. Asked whether the bank needs to raise more capital, Hanretta referred to comments by Chief Financial Officer Gary Crittenden on a Jan. 15 conference call with analysts. Crittenden said then that the bank had raised enough from outside investors to address any shortfall that resulted from additional writedowns.
Analysts' Estimates
Citigroup is expected to have a first-quarter profit of 34 cents a share based on the average of 13 analysts' estimates compiled by Bloomberg.
Goldman analyst William Tanona issued a note correcting his previous estimate for a profit of 15 cents a share. The earlier projection was based on a ``miscalculation in our model,'' he said. Tanona's office referred questions to Ed Canaday, a Goldman spokesman, who declined to comment beyond the note.
Moszkowski previously estimated a first-quarter profit of 55 cents a share. His new prediction approaches the record $1.99 a share loss that the bank reported for the fourth quarter of last year.
Oppenheimer & Co. analyst Meredith Whitney, who correctly predicted last year that Citigroup would have to cut its dividend, said in February that the bank's losses may force it to reduce the dividend again or sell assets to shore up capital. In January, Citigroup lowered its dividend by 41 percent, the first reduction since the modern company was formed from the 1998 merger of Citicorp and Travelers Group Inc.
Abu Dhabi
Citigroup raised $7.5 billion in November from Dubai's neighboring emirate, Abu Dhabi, after record mortgage losses wiped out almost half the company's market value and led to the departure of Chief Executive Officer Charles Prince. The company said in January it was getting another $14.5 billion from investors, including the governments of Singapore and Kuwait.
``It will take a lot more than that to rescue Citi and other financial institutions,'' Sameer al-Ansari, the chief executive officer of Dubai International LLC, said today at an investment conference in the Middle Eastern emirate. The fund is one of several controlled by Dubai ruler Sheikh Mohammed bin Rashid al- Maktoum.
Merrill's Moszkowski said he believes Citigroup has a capital cushion of about $17 billion ``above and beyond'' what was needed to offset writedowns recorded last year.
During the January conference call, Crittenden said the bank had ``stress-tested'' projections for its capital needs against a range of economic conditions, including ``multiple recessionary scenarios.''
``We have quantified what we believe the most significant risk exposures are for the company,'' Crittenden said. They include declines in prices for subprime mortgages, loans to companies with credit ratings below investment grade and the bankruptcies of bond insurers.
http://www.bloomberg.com/apps/news?pid=20601087&sid=afhyOQcsgJM4&refer=home
Ambac unlikely to announce deal Tuesday: source
Tue Mar 4, 2008 5:37pm EST
NEW YORK (Reuters) - Bond insurer Ambac Financial Group Inc (ABK) is unlikely to announce a capital raising deal on Tuesday, a person briefed on the matter said.
The second largest U.S. bond insurer is looking to raise capital to maintain top credit ratings at its main unit. Talks on finding a solution are continuing, but will not likely be concluded on Tuesday, the person briefed on the matter said.
Both Moody's Investors Service and Standard & Poor's are considering stripping Ambac Assurance Corp, Ambac's main insurance unit, of its top ratings.
Moody's said last week that Ambac's capital levels meet minimum requirements for a top "triple-A" rating, but are below "target" levels by $2 billion. S&P said it views Ambac as about $400 million short of where it ought to be.
The Financial Times reported on Tuesday that Ambac was not planning to split up its bond insurance businesses. Many bond insurers are thinking about dividing up the relatively risky structured finance guarantee business from the safe municipal bond insurance business.
CNBC reported on Tuesday that Ambac was progressing toward a deal, but had not yet reached an agreement.
Paul Burke, head of fixed-income investor relations at Ambac, declined to discuss the timing of any possible deal, but repeated the company's earlier statements that it is actively working to raise capital.
http://www.reuters.com/article/bondsNews/idUSN0450404020080304
PFG Discloses Bond Insurer Exposure
Principal Financial Had $996.5M of Exposure to Bond and Mortgage Insurers at Year End
March 04, 2008: 02:11 PM EST
NEW YORK (Associated Press) - Principal Financial Group Inc.'s (PFG) life insurance business had $996.5 million of exposure to bond insurers and mortgage insurance companies at the end of 2007, according to a Securities and Exchange Commission filing Tuesday.
Of the total exposure by Principal Life Insurance Co., bond and mortgage insurers provided guarantees on $774.1 million of underlying municipal bonds, corporate credit, or asset backed securities.
Principal Life Insurance owned securities issued by bond and mortgage insurers totaling $222.4 million, including $50.5 million by bond insurer Financial Guaranty Insurance Co.
According to the filing, the company's total exposure to bond insurer MBIA Inc. totals $375.5 million. It has total exposure of $234.1 million to Ambac Financial Group Inc. and $193.7 million to FGIC.
Principal Financial said it provided the information in response to inquiries by investors.
Principal Financial shares fell $1.37, or 2.5 percent, to $53.21 in afternoon trading. The stock has traded between $51 and $70.85 during the past 52 weeks.
Mortgage insurer PMI falls after loss warning
Tue Mar 4, 2008 10:25am EST
NEW YORK (Reuters) - Shares of PMI Group (PMI) fell 6 percent on Tuesday, a day after the mortgage insurer warned of a substantial quarterly loss from its financial guaranty segment.
Late on Monday, the company said several of its units reported fourth-quarter losses on a preliminary basis. It has delayed its final results until it receives financial data from bond insurer FGIC, a company it partly owns.
PMI said it needs FGIC's results to calculate its 2007 results, and was assessing whether its investment in the bond insurer was impaired at the end of the year.
PMI said it expects a significant fourth-quarter net loss from its financial guaranty segment, and reported a net loss of $236 million in its U.S. mortgage insurance operation for the same period. PMI's international operations reported a preliminary net loss of $10.1 million.
PMI, which sells insurance protecting mortgage lenders in the event of defaults, said it was facing challenging market conditions, particularly in the United States.
UBS on Tuesday cut its price target for PMI to $7 from $19, citing an increased likelihood of impairment in the FGIC investment.
PMI shares were down 42 cents to $6.36 in morning trade on the New York Stock Exchange. The shares have fallen 88 percent since last May.
PMI said it will not make any further investments in FGIC or another bond insurer that it has a stake in, Bermuda-based Ram Re (RAMR).
FGIC, which has lost its top credit ratings, has told New York regulators it wants to split itself in two.
http://www.reuters.com/article/hotStocksNews/idUSN0446389120080304
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Living in a Bubble? a massive housing bubble: #msg-26227381 Subprime lenders have been both blessing and bane in the housing industry for many years, enabling lenders to rake in huge profits while saddling consumers with exorbitant loan terms and high interest rates. Now, as the housing market slows to a crawl, many subprime lenders are collapsing faster than homes made of substandard materials, and the signs point to even more pain in the housing market as a result
AHMIQ AMOA ANH C CFC DFCLQ ETFC FBC FHN FMNT FMT FRE HCM IDMCQ IMB IMPM KFN LUMCQ MTB NOVS RAMR SLM SOV TARRQ THMR WB WAMUQ WFC
AHMIQ - American Home Mortgage #board-9990 http://www.americanhm.com
AMC - American Mortgage Acceptance http://www.americanmortgageco.com
ANH - Anworth Mortgage Asset Corp. http://www.anworth.com
BAC - #board-6675 Bank of America, "...the second-largest U.S. bank..." http://www.BankofAmerica.com "...the nation's biggest credit card business..."
C - Citigroup Inc. #board-428 "Citigroup, the biggest bank in the United States" http://www.citigroup.com
CFC - Countrywide Financial Corp. #board-9998 ".. the biggest U.S. mortgage lender..."
http://www.countrywide.com "...originated one out of every six residential mortgages..."
DFCLQ - Delta Financial Corp. #board-1894 http://www.deltafinancial.com
ETFC - E TRADE Financial Corp. #board-10096 http://www.etrade.com
FBC Flagstar Bancorp Inc.
FHN First Horizon National Corp
FMNT - Fremont General Corporation #board-10062 http://www.fremontgeneral.com
FNM - Fannie Mae "Together Fannie Mae and Freddie Mac own or guarantee about 40 percent of the $11.5 trillion US home loan market." "Fannie, the No. 1 financer and guarantor of U.S. home loans"
FRE - Freddie Mac "Freddie Mac, the second-largest source of money for U.S. home loans behind Fannie Mae"
HCM - Hanover Capital Mortgage Holdings Inc. #board-10080 http://www.hanovercapital.com
IMB - IndyMac Bancorp Inc. #board-10092 http://www.indymacbank.com "IndyMac, the nation's ninth largest originator of mortgages" "the second-biggest independent mortgage company"
IMH - Impac Mortgage Holdings #board-10019 http://www.impaccompanies.com
KFN - KKR Financial Corp. #board-10088 http://www.kkrfinancial.com
LEND - Accredited Home Lenders Holding Co #board-8673 http://www.accredhome.com
LUM - Luminent Mortgage Capital Inc. #board-9991 http://www.luminentcapital.com
MTB - M&T Bank Corp . http://www.mandtbank.com
NCC - National City Corp. http://www.nationalcity.com
NOVS - NovaStar Financial Inc. #board-6258 http://www.novastaris.com
RAMR - RAM Holdings Ltd. #board-10081 http://www.ramre.bm
SLM - Sallie Mae
SOV - Sovereign Bancorp
Banco Santander, S.A. (NYSE: STD) and Sovereign Bancorp Inc., ("Sovereign") (NYSE: SOV), parent company of Sovereign Bank ("Bank"),
announced today that Banco Santander will acquire Sovereign in a stock-for-stock transaction. Santander currently owns 24.35% of Sovereign's
ordinary outstanding shares.
TARR - Tarragon Corp. #board-5951 http://www.tarragoncorp.com
TMA - Thornburg Mortgage Inc. #board-10082 http://www.thornburgmortgage.com
WB - Wachovia Corp. #board-6206 "...the nation's fourth-largest bank..." http://www.wachovia.com
WM - Washington Mutual Inc. #board-11133 "..the largest U.S. savings and loan.."
"...The nation's second-largest mortgage lender in 2003, WaMu dropped to sixth place last year..." http://www.wamu.com
WFC - Wells Fargo & Company #board-6335 "...the nation's fifth largest bank..." "...Wells Fargo made more than $200 billion in home loans from January to September in 2007, making it the second largest home loan lender, following Countrywide Financial, which is cutting 12,000 jobs after losing $1.2 billion in the third quarter..."http://www.wellsfargo.com
[ [ ] ][] ]
A dollar crisis leading to a depression... http://www.youtube.com/v/HTkPYnNmOBM
Mortgage Meltdown of 2007 - The Perfect storm http://www.youtube.com/watch?v=oGQT9LGL6u0
SIV's explained, lol http://www.youtube.com/watch?v=SJ_qK4g6ntM
http://housingpanic.blogspot.com
Bond (CDO) insurance companies (ABK MBI ACAH SCA)
] ] ]
Solar Stocks #board-11148
Peak Oil #board-6609
Real Estate Bubble #board-7285
Subprime Fallout #board-10886
HomeBuilders #board-1680
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